Bombay High Court
M/S. Unity Security Force And Training ... vs The Assistant Provident Fund ... on 14 August, 2019
Author: A.S. Chandurkar
Bench: A.S. Chandurkar
WP 2027/16 1 Judgment
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 2027/2016
M/s Unity Security Force & Training Institute,
A Proprietary Concern duly registered under
the Mumbai Shops & Estb. Act, 1948, Having
its Business at 'Satyadev Bhavan' New
Shukrawari, Behind Jankibai Dharmashala,
Nagpur. Thru its Proprietor Shri Chandrashekhar
Adamane. PETITIONER
.....VERSUS.....
The Assistant Provident Fund Commissioner,
Employees Provident Fund Organization,
132-A, Ridge Road, Raghuji Nagar,
Nagpur - 440 009. RESPONDENT
Shri A.J. Pathak, counsel for petitioner.
Shri H.N. Verma, counsel for respondent.
CORAM : A.S. CHANDURKAR, J.
ARGUMENTS WERE HEARD ON : 04TH JULY, 2019
JUDGMENT PRONOUNCED ON : 14TH AUGUST, 2019
JUDGMENT
RULE. Heard finally with consent of counsel for the parties.
2. The challenge raised in the present writ petition is to the order dated 15.12.2015 passed by the Employees Provident Fund Appellate Tribunal thereby dismissing the appeal preferred by the petitioner-Establishment and confirming the order dated 20.04.2015 that was passed under Section 14B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (for short, 'the said Act'). ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 :::
WP 2027/16 2 Judgment
3. The facts in brief are that according to the Establishment, it is a proprietary concern which is engaged in the business of providing security personnel to various manufacturing and non-manufacturing establishments. Such personnel are also provided to Government and Semi-Government organizations. The Establishment is duly covered under the provisions of the said Act and is remitting its contribution on regular basis. On 31.01.2015, a show cause notice under provisions of Section 7Q and 14B of the said Act demanding interest as well as damages was issued to the Establishment. Reply was given to the aforesaid notice in which it was stated that on account of delay in receiving the requisite amount from the principal employers where the security personnel were being deployed, the same resulted in late remittance of the provident fund dues. The delay was not deliberate nor was there any mala fide intention. After considering the reply as given, the Regional Provident Fund Commissioner passed an order on 20.04.2015 calling upon the establishment to pay penal damages under Section 14B of the said Act for an amount of Rs.49,63,692/-. Insofar as interest under Section 7Q of the said Act was concerned, it was directed to pay an amount of Rs.27,73,830/-. The Establishment being aggrieved by the said order preferred an appeal under Section 7-I of the said Act. By the impugned order, the said appeal came to be dismissed by observing that no ground had been made out to waive the imposition of ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 3 Judgment damages and interest. Being aggrieved by that order, the Establishment has filed the present writ petition.
4. Shri Atul Pathak, learned counsel for the petitioner submitted that the Appellate Tribunal failed to give due consideration to various grounds that were raised by the Establishment in the appeal preferred under Section 7-I of the said Act. The delay caused in remitting the amount of contribution was not deliberate. Only on the ground that the bills submitted by the establishment to the principal employer had not been cleared within reasonable time, delay was caused in remitting the contribution. There was absence of any mens rea on the part of the establishment and therefore the Appellate Tribunal ought to have taken into consideration these aspects while seeking to impose damages on account of delayed payment of contribution as there was a discretion in the manner of imposition of damages by considering the circumstances put forward in that regard. The cause for delay that was put forth was required to be taken into consideration and if it was found that there was no wilful violation then lesser damages could be imposed. Further referring to the provisions of paragraph 32A of the Employees Provident Fund Scheme, 1952 (for short, 'the scheme'), it was submitted that the damages levied under Section 14B of the said Act could either be reduced or waived depending upon the facts of the case. Referring to the ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 4 Judgment memorandum of appeal that was preferred under Section 7-I of the said Act, it was submitted that various grounds put forth in that regard were required to be considered. However, without giving due consideration to those aspects and by passing a non-speaking order, the appeal came to be dismissed. In that regard, the learned counsel placed reliance on the decision in Assistant Provident Fund Commissioner, EPFO & Another Versus Management of RSL Textiles India Pvt. Ltd., Thr. Its Director [AIR 2017 SC 679] and the judgment of the Full Bench of the Delhi High Court in Roma Henny Security Services Pvt. Ltd. Versus Central Board of Trustees, E.P.F. Organization through Asst. P.F. Commissioner, Delhi (North) [2013 I LLJ 29(Del)]. It was then submitted that there was absence of consideration with regard to the actual damages that had accrued and the damages that were imposed by way of penalty. Such bifurcation ought to have been made in the impugned order and as the same was done, the adjudication was contrary to the decision in Bhatkuli Taluka Co-Operative Agricultural Sale and Purchase Society Ltd., Amravati Versus Regional Provident Fund Commissioner [2007(2) Mh.L.J. 810]. It was further submitted that since the arrears were cleared on the date when the show cause notice was issued, there was no question of levying any interest under Section 7B of the said Act. Since the demand as made had been satisfied there was no occasion to levy interest on the establishment. For said purpose, reference was made to the judgment of ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 5 Judgment the learned Single Judge of the Delhi High Court in Hi-Tech Vocational Training Centre Versus Assistant Provident Fund Commissioner decided on 28.01.2011. It was thus submitted that in the light of the aforesaid position, the impugned order was liable to be set aside.
5. Shri H.N. Verma, learned counsel for the respondent supported the impugned order. According to him, since admittedly there was delay in making payment of the contribution by the establishment, imposition of penalty by way of damages under Section 14B of the said Act was justified. Referring to the initial order passed under Section 14B of the said Act, it was submitted that due opportunity was given to the establishment and as it was found that there was persistent and continuous default it was necessary to levy penal damages. He further submitted that the impugned order was passed after considering the provisions of paragraph 32A of the Scheme. He also referred to the communication issued by the establishment on 25.07.2014 to indicate that the delay in making the payments had been admitted by it. Since it was found that there was regular delay on the part of the establishment in remitting the contribution, the damages were rightly imposed by way of penalty. On that count, the impugned order was not liable to be interfered with. He also submitted that the judgment of the Full Bench of the Delhi High Court that was relied upon by the learned counsel for the ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 6 Judgment petitioner had been reversed by the Hon'ble Supreme Court in Civil Appeal No.6592 of 2014 vide order dated 27.02.2019. Hence, there was no reason to interfere with the impugned order.
6. I have heard the learned counsel for the parties at length and I have perused the documents placed on record. It is not in dispute that notice dated 26.02.2014 came to be issued to the establishment indicating the details as regards damages under Section 14B of the said Act and interest under Section 7Q of the said Act. In response thereto, the establishment put forth its say and especially the ground that since the payments by the principal employer were delayed, the same resulted in delay in paying the amount of contribution. That explanation was not accepted and orders were passed levying damages as well as interest by the Regional Provident Fund Commissioner. In the appeal filed by the establishment, it was sought to be emphasized that the establishment had not evaded any liability in the past and the statutory contributions were being regularly paid. It was further stated that it was the first occasion that there was delay in making payment of contribution. In that context, the aspect of absence of mens rea was put forward. In this regard, it is necessary to refer to the decision of the Hon'ble Supreme Court in the Management of RSL Textiles India Pvt. Ltd. (supra) wherein after referring to its earlier decision, it was observed that the presence or absence of ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 7 Judgment mens rea and/or actus reas would be a determinative factor in imposing damages under Section 14B of the said Act. It was further observed that in all cases it was not necessary that damages to the extent of 100% of the arrears have to be imposed. In Bhatkuli Taluka Co- operative Agriculture Sale and Purchase Society Limited (supra), the learned Single Judge has observed that the order passed under Section 14B of the said Act must show application of mind by the Authority to the assessment of actual loss and of penal damages and must thereafter state what is the allocation between the two heads. It was further observed that mechanical application of the maximum rates as stipulated in paragraph 32A without any further reason would indicate that there has been no application of mind to the exercise of discretion to levy damages at a lesser rate than prescribed. Thus, from the aforesaid decisions, it can be seen that though there is a power to levy damages under Section 14B of the said Act and paragraph 32A of the Scheme indicates the manner in which discretion has to be exercised, it is equally necessary that exercise of such discretion is indicated in the order passed under Section 14B of the said Act.
7. Perusal of the impugned order in the context of the grounds that were raised in the appeal filed under 7-I of the said Act indicates that except for observing that if the establishment was ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 8 Judgment permitted to seek waiver of damages and interest on the grounds stated, the same would result in instigating a defaulter to delay payment of the contribution are mere general observations. It is to be noted that in the present case, the damages as imposed are based on the amount of arrears and there is no consideration on the aspect of mens rea as put forth.
8. The other submission made on behalf of the establishment is that on the date when the show cause notice was issued, the establishment was not in arrears as the entire contribution had been paid but after some delay and hence there was no reason to impose damages. Reliance was placed upon the judgment of the learned Single Judge of the Delhi High Court. It may be stated that the learned counsel for the petitioner thereafter fairly submitted that the said decision to the extent of the establishment not being in arrears on the date of issuance of the notice had been overruled by the Division Bench in its decision in Assistant Provident Fund Commissioner Versus Hi-Tech Vocational Training Centre [2015(147) FLR 798]. Similarly, the judgment of the Full Bench of the Delhi High Court wherein it was observed that for the period of damages that were imposed under Section 14B of the said Act were inclusive of interest chargeable under Section 7Q of the said Act has since been reversed by the Hon'ble Supreme Court in Civil Appeal ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 ::: WP 2027/16 9 Judgment No.6572 of 2014. Be that as it may, it is found that the law as laid down in the Management of RSL Textiles India Pvt. Ltd. (supra) as well as by the learned Single Judge in Bhatkuli Taluka Co-operative Agriculture Sale and Purchase Society Limited (supra) has not been taken into consideration while deciding the appeal. In the light of the fact that discretion has been vested in the matter of imposition of damages by way of penalty under Section 14B of the said Act coupled with the existence or absence of mens rea it is found that the grounds specifically raised by the establishment require a fresh consideration by the Appellate Authority. Since the establishment has sought to put forth its explanation for the cause of delay in remitting the amount of contribution, consideration of these aspects would have material bearing on the adjudication. Hence, the following order is passed:-
I. The order dated 15.12.2015 passed by the Employees' Provident Fund Appellate Tribunal is set aside.
II. The Appeal filed by the Establishment under Section 7-I of the said Act is restored for fresh consideration in the light of the legal position referred to hereinabove. To enable adjudication of the appeal, the parties shall appear before the Appellate Tribunal on 02.09.2019.
III. The respective contentions of the parties on the aforesaid aspects are kept open for being urged and considered by the Appellate Tribunal.::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 :::
WP 2027/16 10 Judgment
9. The Writ Petition is partly allowed. Rule is made absolute in aforesaid terms. There would be no order as to costs.
(A.S. CHANDURKAR, J.) APTE ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:16 :::