Kerala High Court
Dynamic Services vs The Assistant Provident Fund ... on 11 September, 2006
Author: S. Siri Jagan
Bench: S.Siri Jagan
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE S.SIRI JAGAN
MONDAY, THE 16TH DAY OF JANUARY 2012/26TH POUSHA 1933
WPC.No. 29397 of 2006 (Y)
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PETITIONER(S):
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DYNAMIC SERVICES,
24/1173, BRISTOW ROAD, WILLINGDON ISLAND
COCHIN-682 003, REPRESENTED BY ITS
PROPRIETOR MR.V.M. RENISH.
BY ADVS.SRI.E.K.NANDAKUMAR
SRI.P. BENNY THOMAS
SRI. ANTONY DOMINIC
SRI. A.M. SHAFFIQUE
SRI. JAYASANKAR A.K.
RESPONDENT(S):
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1. THE ASSISTANT PROVIDENT FUND COMMISSIONER,
EMPLOYEES PROVIDENT FUND, ORGANISATION
SUB REGIONAL OFFICE, COCHIN.
2. THE UNION OF INDIA,
REPRESENTED BY ITS SECRETARY,
MINISTRY OF FINANCE
NEW DELHI.
R1 BY SRI.S.GOPAKUMARAN NAIR, SC, P.F.
R2 BY SMT.M.LALITHA NAIR, CGSC
SRI.P.PARAMESWARAN NAIR,ASG OF INDIA
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
16-01-2012, ALONG WITH WPC. 16900/2007, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
DCS
WPC.No. 29397 of 2006 (Y) \
APPENDIX
PETITIONER'S EXHIBITS :-
EXHIBITS P1 : COPY OF THE ORDER NO. KR/KC/13231-A/DAMAGES
CELL/7Q/T(2)/2006 DATED 11.09.2006 ISSUED BY THE IST
RESPONDENT TO THE PETITIONER
EXHIBITS P2 : COPY OF THE NOTIFICATION DATED 29.05.1990
RESPONDENT'S EXHIBITS :-
EXHIBITS R1(a) : PHOTO COPY OF THE ESTABLISHMENT WITH EFFECT FROM
1.03.2003 AND SUBMITTED RETURN OF OWNERSHIP OF FORM
5A ON 01.06.2004
EXHIBITS R1(b) : PHOTO COPY OF THE COVERING LETTER DATED 01.06.2004
EXHIBITS R1(c) : PHOTO COPY OF THE DETAILS OF FORM 12A SUBMITTED BY
THE ESTABLISHMENT
ANNEXURE R1(d) : COPY OF THE RELEVANT PAGES OF THE MANUAL OF
ACCOUNTING PROCEDURE
/TRUE COPY/
P.A. TO JUDGE
DCS
S. Siri Jagan, J.
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W.P(C) Nos. 29397/2006 & 16900/2007
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Dated this, the 16th day of January, 2012.
J U D G M E N T
The petitioners are establishments covered under the Employees Provident Funds and Miscellaneous Provisions Act. The petitioners committed delay in payment of contributions under the Act. By the impugned orders, the petitioners were directed to pay amounts towards interest at the rate of 12% p.a. under Section 7Q of the Act, and damages under Section 14B of the Act. The petitioners have separately challenged the imposition of damages by filing appeals before the Employees Provident Fund Appellate Tribunal and the same are pending. The petitioners' grievance in these writ petitions is relating to the levy of interest under Section 7Q. The petitioners raise a contention that the damages under Section 14B themselves is inclusive of interest as is clear from Ext.P2 circular (in W.P(C) No. 29397) issued prior to the introduction of Section 7Q itself. According to the petitioners, the fixation of 12% as the rate of interest in Section 7Q is arbitrary insofar as it is not commensurate with the interest paid by the Provident Fund Organisation to the individual employees covered under the Act because the interest payable to them is fixed from time to time by the Central Government on the recommendation of the Central Board of Trustees of the Provident Fund Organisation. The percentage so fixed is only less than 10% and at present, it is even less than 9%. Therefore, the rate of 12% as the rate of interest fixed under Section 7Q is far in excess of the interest W.P(C) Nos. 29397/2006 & 16900/2007 -: 2 :- paid by the Provident Fund Organisation to the employees and therefore fixation under Section 7Q is arbitrary, insofar as interest under Section 7Q is compensatory in nature, is their contention.
2. The 1st respondent has filed a statement producing copy of the relevant pages of Manual of Accounting Procedure followed by the Provident Fund Organisation for crediting interest to accounts of individual employees covered under the Act. According to them, the 12% interest recovered from the employers under Section 7Q for delayed payment is only simple interest, whereas the interest credited to the employees accounts is compound interest and only the percentage of interest on provident fund accumulation varies from time to time between 8 and 10%. Actually, considering the fact that it is compound interest, it would almost be equal to 12% simple interest. It is further submitted that apart from the amount to be credited to the individual accounts of the employees, administrative charges have also to be taken into account. When administrative charges are delayed, then also, the Provident Fund Organisation has to go on and compensation is due in respect of delay in payment of that account also. Therefore, that fact also has to be taken into account, while considering the validity of fixation of 12% as the rate of interest payable.
3. I have considered the rival contentions in detail.
4. I am of opinion that it is next to impossible to correlate interest under Section 7Q with the interest W.P(C) Nos. 29397/2006 & 16900/2007 -: 3 :- credited to individual account of the covered employees with mathematical exactitude. As rightly pointed out by the 1st respondent, interest under Section 7Q is simple interest, whereas the interest credited to the account of the individual employees is compound interest. There would not be much difference between 12% simple interest and 8- 10% compound interest. That itself goes a long way in justifying 12% interest in Section 7Q as against compound interest credited to the accounts of the individual employees. Further, apart from the contributions, other amounts are also payable by the employers like administration charges. When such amounts are delayed, naturally, the administration of Provident Fund Organisation will suffer. That also has to be adequately compensated.
Taking into account all these circumstances, I am of opinion that practically, there is no difference between 12% simple interest under Section 7Q of the Act and the compound interest credited to the individual employees' account. In the above circumstances, I do not find any merit in these writ petitions. Accordingly, they are dismissed.
Sd/- S. Siri Jagan, Judge.
Tds/