Punjab-Haryana High Court
Niky Tasha (India) Pvt. Ltd. vs Regional P.F. Commissioner And Ors. on 11 May, 1994
Equivalent citations: [1995(71)FLR168], (1995)ILLJ282P&H, (1994)108PLR55
JUDGMENT
1. The petitioner, Niky Tasha (India) Pvt. Ltd., in the petition which was amended during its pendency, seeks declaring and consequently setting aside proviso to Section 14B of the amended Employees Provident Fund and Miscellaneous Provisions Act, 1952, as also Section 1(2) of the amending Act 1988 as ultra vires and violative of Articles 14 and 19(1) of the Constitution of India. It further seeks issuance of a writ of certiorari quashing order dated October 24, 1 1990, as also show cause notice dated August 21, 1990, and recovery certificate issued on June 10, 1991 the same being arbitrary, illegal and unconstitutional and against the principles of natural justice.
2. Brief facts giving rise to the case need a necessary mention.
3. It is pleaded that the petitioner is mainly engaged in the manufacture of cooking gas stoves and other domestic gas appliances which are being manufactured at Faridabad and it has been paying employees contribution as well as employer's contribution as also the deposit linked contribution charges besides administrative charges. However, on account of a slump in the market it had to face financial strains and was, thus, not in a position to make the contribution required to be so made under the Act as per time prescribed. It was supposed to make the payments within 15 days the deductions were made but financial difficulties came in its way causing some delay for a few months ranging from one to four months and only in a few cases it was more than four months. As the petitioner was under financial stringencies, it approached Canara Bank that under the sick small scale industries scheme, the petitioner be declared as a sick unit and the said bank issued a letter dated February, 28, 1991, informing it that the Reserve Bank of India was now permitting to release the rehabilitation package and accordingly the sick small scale industries status had been given to it from October 9, 1989. Thereafter another letter was issued on March 21, 1991 by the Canara Bank thereby treating it as a sick unit from April 1, 1989. It is pleaded that the Reserve Bank of India has issued certain other instructions which are applicable to the sick units which fall under the small industries. The scheme has been framed by the Reserve Bank of India for the rehabilitation of sick small scale industries. As per the industries which have been declared sick units under the sick small scale industries get relief from the Central Government, like exemptions from the Central Excise, wholly or partly for a period of time or for deferment of collection or treating the dues as loan repayable on the lines of Sale tax loans from the State Government. Such sick small scale industrial units are also entitled to income tax relief and under Clause (d) deferment of Provident Fund /waiver of penalties, income-tax and Employees State Insurance dues and collection after suitable rephasing should ensure at the same time that there is no deprivation of benefits to the retiring or sick employees. Thus, thereby, it is pleaded, the petitioner is entitled to the benefits under the package deal and the instructions on the subject are annexed to the petition as Annexure P6.
4. The Regional Provident Fund Commis-sioner(hereinafter to be referred to as respondent No. 1) issued a show cause notice to the petitioner on August 21, 1990, asking it to explain as to why damages Under Section 14B of the Employees Provident Fund and Misc. Provisions Act be not imposed upon it for the period December, 1988 to February, 1990. A reply was submitted to the aforesaid show cause notice and it is the case of the petitioner that without giving an opportunity of being heard, a stereotyped order, without considering that the petitioner is a sick small scale industrial unit entitled to the benefits under the Reserve Bank Package Deal, was passed. The aforesaid order was passed on November 1, 1990 and thereafter a recovery certificate was issued. Being aggrieved, the petitioner represented to respondent No. 1 for reconsidering the matter as earlier it could not place on record its stand in writing. Respondent No. 1 withdrew the earlier order on April 3 1991 but againa demand notice was received from respondent No. 2 on April 5, 1991. The said respondent also issued another notice and once again a letter was received by the petitioner on June 10, 1991, by which the petitioner's account was attached. This is the way and the manner in which the matter was proceeded which constrained the petitioner to make a representation to the Central Provident Fund Commissioner. It was, however, informed that no interference was called for as the orders passed were quasi- judicial. It is further pleaded that the record of the petitioner's factory are being inspected every year and an inspection book is also maintained by it. Respondent No. 1 did not choose to issue any show cause notice or impose damages at the earliest stage when there was a default. Factory was inspected in the year 1988-89 also whereas the show cause notice was issued on August 21, 1991, i.e., after a delay of about a year. It is in the aforesaid facts that various grounds have been detailed asking for setting aside of the impugned orders.
5. The Regional Provident Fund Commissioner has opposed the relief asked for by the petitioner and in its written statement by way of preliminary objections it is stated that the Employees Provident Funds and Misc. Provisions Act, 1952 ( as amended up to date) and the Scheme framed thereunder is a social welfare legislation enacted with the object of making some provisions for the future of industrial workers after they retire or for their dependents in case of their early death. Anyone who flouts the provisions of the Act and the Scheme aforesaid cannot be allowed to be spared from the penal provisions of the Act. It is further pleaded that the status of sick small scale industries being granted to the petitioner industry by the Reserve Bank of India would in no way entitle it to delay the payment of provident fund contributions and administrative charges, etc., of the Fund.
It also cannot escape liability on the ground of financial hardship. The damages are stated to have been levied at different rates after taking into account the submission made by the employer, the material placed on record, the period and sequence of each default as per the principles enshrined in the Act and the Scheme. It is also stated that the petitioner was given an opportunity of hearing before the damages were levied, and that on that account, the petitioner has misstated the facts, the basic facts as have been given in the writ petition have been admitted but the grounds on which the order is endeavoured to be set aside have been strongly refuted.
6. Before the matter proceeds any further, it will be useful to examine the way and the manner in which the petitioner was proceeded and the damage was imposed. On August 21, 1990, the petitioner was called upon to show cause within 15 days of the receipt of notice as to why damages at such rate as deemed fit and up to the extent of the amount in arrears should not be imposed and recovered. It was mentioned in the notice aforesaid that according to Sections 6, 6A and 6C of the Employees Provident Funds & Misc. Provisions Act, 1952, read with paragraph 38 of the Employees Provident Fund Scheme, 1952, paragraph 9(1) of the Employees Family Pension Scheme 1971, and paragraph 8(1) of the Employees Deposit Linked Insurance Scheme, 1976, the petitioner was required to deposit employees' and employer's share of the Employees Provident Fund and Family Pension Fund contributions and the Employee's share of the Insurance Fuad contributions, together with administrative charges and inspection charges, payable Under Section 17F of the Act of the respective Funds, within 15 days of the close of the month. In para 2 of the said notice of demand, it is mentioned that the petitioner has defaulted to pay the employees' provident fund contributions, etc., on or before the due dates for the months of December 1988 to March, 1989 (A/c I-88-Employee's share); April 1989 to November, 1989 as indicated in the statement appended overleaf (both shares), 12/1989 (Employees' share). Details of delayed payments on which damages Under Section 14B of the Act are liable to be imposed are given in the notice aforesaid. A look at the attached details would reveal that the amount delayed was between Rs. 4,000/- to 5,000/- under each item in so far as provident contributions are concerned; The same is in less than Rs. 3,000/- in each case, in so far as administrative charges are concerned. Deposit contributions are also in the range of Rs. 3,000/- or less, in all the cases. Linked insurance charges are in between Rs. 23/- to 43/- in each case. On August 28, 1990 (Annexure P8), the only reply that is forthcoming from the petitioner is that due to non-availability of adequate orders and acute financial crises, it could not deposit the provident fund due within the stipulated time. A request was, thus, made to take a lenient view in the matter. On November 1, 1990, the petitioner was informed of the order passed on October 24, 1990, by the Regional Provident Fund Commissioner Under Section 14B of the Act. The order aforesaid is , of course, a detailed one, rejecting by process of resoning all the pleas that were taken by the petitioner. In paragraph 5, a sum of Rs. 5,59,337 was found to be due for the items like employees' share, for same period, both the employees' and employers, shares for same period and the said amount was ordered to be recovered which also included a loss of Rs. 7070/- caused to the statutory fund on account of interest payable to the beneficiaries from the due date, irrespective of delay in deposit of dues by the employers. The balance amount of Rs. 5,52,267/- was said to be representing the penal part of damages to serve as a deterrent against defaults in payment. Even the amount of damage was ordered to be paid within 15 days of the receipt of the order.
7. It is therefore that the petitioner addressed a representation and on April 3, 1991, the order of attachment was withdrawn. On April 5, 1991, Recovery Officer sent a notice to the petitioner informing it that certificate dated February 26, 1991 had been forwarded by the Authorised Officer, Haryana for the recovery of an amount of Rs. 5,59,337/-. Once again, the Recovery Officer required the petitioner to deposit the amount vide its demand notice dated May 29, 1991.
8. When the matters came up for motion hearing, it was observed by the Division Bench 35 follows:-
"The penalty imposed prima facie appears to be disproportionate to the delay in payment. Notice of motion for August 23, 1991. Dasti."
The writ was, however, admitted on October 9, 1991, but no stay was granted. This constrained the petitioner to file a special leave petition which came up before the Supreme Court on February 20, 1992 when the following order was made:-
"The High Court on an earlier occasion has observed that penalty is on the higher side. We, therefore, request the High Court to dispose of the writ petition preferably within two months. With this observation the special leave petition is dismissed."
9. Mr. Bhandari, learned counsel for the petitioner, has raised number of points challenging the impugned order but his basic contention is that respondent No. 1 did not at all advert to various relevant factors like, number of defaults, the periods of delay, the frequency of defaults and the amounts involved in each default. This, the learned counsel contends, in itself, amounts to ignoring a very relevant factor for imposing damages and inasmuch as the period of delay, frequency of delays, amount involved in each case was different, there was no question for respondent No. 1 to have imposed 100 per cent damages with regard to each item. Mr. Ashok Aggarwal, Senior Advocate (assisted by Mr. Rajesh Bindal), appearing for the respondents has, however, joined issue on this basic question mooted out by contending that the Regional Provident Fund Commissioner, Haryana, has applied his mind to all the matters. He has also returned a firm finding that the petitioner is a habitual defaulter in the matter of making contributions to the employees provident fund, family pension scheme, employees' deposit insurance linked scheme of payment of administrative charges since 1986. Not only that, while issuing notice Annexure P7 dated August 21, 1990, defaults of delayed payment on which damages were liable to be imposed were given in detail and therefore, it cannot be said on any cogent grounds that the Regional Provident Fund Commissioner did not apply his mind to various amounts under various heads, duration of delay and other relevant data.
10. After hearing learned counsel for the parties, this Court is, however, of the considered view that the matter needs to be remitted to the Regional Provident Fund Commissioner for re-determining the matter as petitioner has been asked to pay 100 per cent damages. The attention of the Regional Provident Fund Commissioner was not focused on various factors like amount involved and duration of delay. Insofar as Annexure P7 is concerned, that only informs the petitioner that there was a delay of various contributions and that the petitioner was supposed to deposit a particular named amount within a period of 15 days and that the same was actually deposited on the dates reflected in the appendix to notice Annexure P7. In paragraph 5 of the impugned order, all that is mentioned is that for the reasons stated, damages for delayed payment of various items for the same period as mentioned in the notice Annexure P7, i.e., for the period December, 1988; April. 1989 to November, 1989; December March 1989, 1989; January 1990 February, 1990, would be Rs. 5,59,337/- and the same be recovered as indicated in the statement appended.
11. The Supreme Court in Organo Chemical Industries v. Union of India, (1979-II-L.L.J-416), observed as follows: (P. 427) "Having regard to the punitive nature of the power exercisable under Section 14B and the consequences that ensue therefrom, an order under Section 14B must be a speaking order containing the reasons in support of it. The guidelines are provided in the Act and its various provisions, particularly in the word "damages" the liability for which in Section 14B arise on the "making of default". While fixing the amount of damages, the Regional Provident Fund Commissioner usually takes into consideration, as he has done here, various factors, viz., the number of defaults, the period of delay, the frequency of defaults and , the amounts involved...."
A perusal of chart annexed with notice Annexure P7 would reveal that the first delayed payment is of FPF contribution to the tune of Rs. 4,591/-. The amount was deposited on July 5, 1989, i.e., after a delay of about seven months. The second item is against the aforesaid FPF but it is to the tune of Rs. 4,657/-. This was deposited about five months late. The next is an; amount of Rs. 4,915/- towards the same head which is also deposited after five months. The next is an amount of Rs. 4,871/- which was deposited after eight months. A bare perusal of record, thus, reveals that the delay was between 4 months to even a year and two months. Item No. 11 reflects delay in administrative charges to the tune of Rs. 2,783/- and also towards FPF contribution which is of an amount of Rs. 4,863/-, as also deposit contribution which is Rs. 2, 142/-, as also insurance linked charges of Rs. 43/-. All these amounts were supposed to have been deposited by July 15, 1989 but were actually deposited on October 5, 1989 and March 9, 1990. Somewhat similar is the position with regard to the next item and some more items thereafter. Even though the delay ranged from four months to over a year but a flat rate of 100% has been adopted by the Regional Provident Fund Commissioner. On somewhat identical facts, a Division Bench of Gujarat High Court in Star of Gujarat Textile Mills Ltd. v. Regional Provident Fund Commissioner, etc., (1993-1-LLJ-1023) after relying on a decision of the Supreme Court in Organo Chemical Industries's case (supra) held as follows:- (pp-1024 - 1025):
"Here, we find that it is not a case of total omission to make the contributions. There had been only delayed contributions. The periods are different and the days of delay are also different. A glance at the statement of damages, annexed to the impugned proceedings, shows that the days of delay range from a minimum of 7 days to a maximum of 47 days, but, a flat rat of 25% has been adopted by the 1st respondent; and certainly, we cannot commend the impugned proceedings on the ground that the application of the norms, as set down by the pronouncement of the Supreme Court, referred to above, has been done. This only exposes lack of application of mind on the part of the 1 st respondent."
Division Bench of the Gujarat High Court also relied upon a single Bench decision of the Madras High Court in K.A. Subramaniam v. The Commissioner, The Regional Provident Fund, Tamil Nadu & Pondicherry States (1979 LIC 981) and held: (p-1024) ".....The authority empowered to impose damages has to first of all decide whether the facts of a case warrant the imposition of damages. If his assessment of the situation results in a finding that imposition of damages is called for, then he has to determine the quantum of damages with reference to relevant factors such as the loss suffered by the affected party, the hardship caused to the beneficiaries, the efforts taken by the enforcement machinery to collect the defaulted payments etc. There is, therefore, a clear line of distinction between imposition of penalty which is penal in nature and imposition of damages which is compensatory in nature....."
12. The learned counsel appearing for the respondent has not been able to cite any precedent to the contrary on the issue noticed above.
13. I am in complete and respectful agreement with the view expressed by the Division Bench in Star of Gujarat Textiles Mills Ltd's case (supra) and , therefore following the said view, remit this case to the Regional Provident Commissioner to consider the whole question afresh taking note of the norms set down. Therefore, by this pronouncement the impugned order to the extent it imposes penalty is set aside, of course, with liberty to respondent No. 1 to pass a fresh order after hearing the petitioner.
14. Parties, through their counsel, are directed to appear before respondent No. 1 on June 14, 1994.