Kerala High Court
Latheef K.A vs Union Of India on 25 February, 2020
Author: V Raja Vijayaraghavan
Bench: V Raja Vijayaraghavan
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V
TUESDAY, THE 25TH DAY OF FEBRUARY 2020 / 6TH PHALGUNA, 1941
WP(C).No.2191 OF 2020(Y)
PETITIONER:
LATHEEF K.A
PROPRIETOR, M/S.MALABAR VILLAGE FOOD
COURT,MUVATTUPUZHA ROAD,VANGALLOOR,
THODUPUZHA,IDUKKI-685584,RESIDING AT
KOMBANAPARAMBIL,KAPPU MADAKKATHANAM.P.O,
MANJALLOOR,
ERNAKULAM-686670.
BY ADVS.
SRI.D.G.VIPIN
SRI.KAROL MATHEWS SEBASTIAN ALENCHERRY
RESPONDENTS:
1 UNION OF INDIA
REPRESENTED BY THE SECRETARY,
MINISTRY OF LABOUR AND EMPLOYMENT,
NEW DELHI.
2 THE CENTRAL PROVIDENT FUND COMMISSIONER,
EMPLOYEES PROVIDENT FUND ORGANIZATION,
BHAVISHYANIDHI BHAVAN,14 BHIKAJI CAMA PLACE,
NEW DELHI,REPRESENTING THE CENTRAL BOARD OF EMPLOYEES
PROOVIDENT FUND.
3 THE ADDITIONAL CENTRAL PROVIDENT FUND COMMISSIONER,
EPF ORGANIZATION ZONAL OFFICE(KERALA AND
LAKSHADWEEP)BHAVISHYANIDHI BHAVAN,
PATTOM,THIRUVANANTHAPURAM-695001.
4 THE ASSISTANT PROVIDENT FUND COMMISSIONER EMPLOYEES'
PROVIDENT FUND ORGANIZATION
REGIONAL OFFICE, ADITHYA SABARI TOWER,
POST OFFICE ROAD,THIRUNAKKARA,
KOTTAYAM-686001.
WP(C).No.2191 OF 2020 2
5 THE FEDERAL BANK LTD,
THODUPUZHA BRANCH,VENGALLOOR,LAKSHMI OPAL
ARCADE,VENGALLOOR.P.O, THODUPUZHA,
IDUKKI-685608,REPRESENTED BY BRANCH MANAGER.
R4 BY SRI.JOY THATTIL ITOOP, SC, EPF ORGANISA
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
25.02.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C).No.2191 OF 2020 3
JUDGMENT
The petitioner herein is the proprietor of M/s.Malabar Village Food Court, Muvattupuzha. The said establishment is covered under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ('EPF Act' for short) and the sundry schemes framed thereunder. The business run by the petitioner met with loss and there occurred considerable delay in remitting the contributions towards the Provident Fund Organization. He was accordingly issued with Ext.P1 notice by the 4 th respondent calling upon him to appear and furnish explanation. The petitioner appeared before the 4th respondent and gave reasons for the delay in remittance. The 4 th respondent, however, without heeding to the explanations offered by the petitioner, proceeded to pass Ext.P2 order determining penal damages under Section 14B of the EPF Act for delayed remittance of contributions for the months from 4/2013 to 2/2019. The said order was challenged by the petitioner herein before the Appellate Tribunal and the same is pending. It is contended that the 4 th respondent proceeded to levy interest under Section 7Q of the EPF Act and determined a sum of Rs.94,870/-. According to the petitioner, Exhibit P5 order levying WP(C).No.2191 OF 2020 4 interest was made without affording adequate opportunity to the petitioner to furnish his explanations. It is contended that though the legislature has provided an appellate forum to challenge the order passed under Section 14B, no such remedy is offered to an order passed under Section 7Q demanding interest. This, according to the petitioner, is a lacuna in the EPF Act. When the legality of Ext.P2 order is itself under consideration of the statutory forum, imposition of interest under section 7Q is contrary to all tenets of law, contends the petitioner. It is further contended that the issuance of Ext.P5 order is a futile exercise as the fate of Ext.P5 notice is dependent on the outcome of Ext.P3 appeal. It is averred that on the strength of Ext.P5 order, Exts.P6 and P7 prohibitory orders have been passed by the respondents putting on hold the account maintained by the petitioner with the Thodupuzha Branch of Federal Bank. It is contended that due to the embargo placed by the respondents, the petitioner is finding it difficult to operate his business and this would affect the rights granted to him by the Constitution of India. The petitioner has therefore approached this Court seeking the following reliefs:
a) To declare that the Employees Provident Fund and Miscellaneous Provisions Act, 1952 is ultravires to the constitution of India to the extent it does not provide any remedy against the orders passed under section 7 Q of the said Act.WP(C).No.2191 OF 2020 5
b) To issue a writ of certiorari or any other appropriate writ order or direction calling for the entire records from the 4 th respondent leading to the issuance of Exhibits P5, P6 and P 7 and quash Exhibit P 5, P 6 and P6 as ultra vires to the constitution of India."
2. Heard Sri.Vipin D.G, the learned counsel appearing for the petitioner and Sri.Joy Thattil Ittoop, the learned Standing Counsel for the 4 th respondent.
3. Sri. Vipin reiterated the contentions in the writ petition and argued that the failure of the legislature to incorporate a provision for appeal against an order passed under Section 7Q is illegal and unjust and therefore ultra vires the Constitution of India. According to the learned counsel, the 4th respondent has violated the principles of natural justice insofar as adequate opportunity was not granted to the petitioner to bring home his point that levy of interest while the order under Section 14B was on the challenge was against all tenets of law. It is further contended that since a specific provision is contemplated under the Act for levy of penal damages under Section 14B, the provision for levy of interest for the same default would amount to double jeopardy.
4. Sri. Joy Thattil Ittoop, the learned standing Counsel appearing for the 4th respondent, submitted that the contentions raised by the petitioner has been considered by Hon'ble Supreme Court as well as various other WP(C).No.2191 OF 2020 6 High Courts and has been decided against the petitioner. It is contended that appeal is a creature of statute, for the right of appeal inhers in no one, and therefore, for maintainability of an appeal, there must be authority of law. It is urged that levy of interest under Section 7Q is statutory and principles of natural justice can be applied only in a limited or narrow manner as has been held by the Apex Court in Arcot Textile Mills vs Regional Provident fund Commissioner1. Learned Standing Counsel appearing for the respondents has also relied on Net 4 India Ltd. v. Union of India and Ors. 2 rendered by a Division Bench of the Delhi High Court in which judgment the constitutionality of 7Q of the Act was upheld.
5. I have anxiously considered the submissions advanced by the counsel appearing for both sides.
6. The challenge to Section 7Q of the Act is primarily predicated on the ground that the statute does not provide the petitioner to prefer an appeal against the order.
7. In Organo Chemicals industries vs Union of India3, the Hon'ble Supreme Court had occasion to negative the challenge to the constitutionality of Section 14B as it stood then. One of the contentions raised was that the absence of any provision for an appeal, leaves the 1 (2013) 16 SCC 1 2 ( MANU /DE/2059/2016) 3 1979 (4) SCC 573 WP(C).No.2191 OF 2020 7 defaulting employer with no remedy. The said contention was rejected by the Hon'ble Supreme Court by observing as under.
"15. Inthis connection, it was also urged that the absence of any provision for appeal, leaves the defaulting employer with no remedy. The conferral of arbitrary and uncontrolled powers on the Regional Provident Fund Commissioner to quantify damages, it is said, without a corresponding right of appeal or revision' makes the provision contained in Section 14-B per se void and illegal and it is liable to be struck down on that ground. We are afraid the contention is wholly devoid of substance. Mere absence of provision for an appeal does not imply that the Regional Provident Fund Commissioner is invested with arbitrary or uncontrolled power, without any guidelines. The conferral of power to award damages under Section 14-B is to ensure the success of the measure. It is dependent on existence of certain facts; there has to be an objective determination, not subjective. The Regional Provident Fund Commissioner has not only to apply his mind to the requirements of Section 14-B but is cast with the duty of making a "speaking order", after conforming to the Rules of natural justice."
8. The Hon'ble Supreme Court held that the penalty under Section 14B could constitute of the following three factors:
(a) the loss of interest to the employees account;
(b) penalty and;
(c) administrative charges.
9. Thereafter, the statute was amended by Act 33 of 1988 and brought into effect from 1.9.1991 and 7Q was brought in for imposition of interest for delay in payment of amounts due under the Act. Section 7Q reads as follows:
"7Q: The employer shall be liable to pay simple interest at the rate of twelve per cent. per annum or at such higher WP(C).No.2191 OF 2020 8 rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till date of its actual payment:
Provided that higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank."
10. The question of imposition of damages and interest pursuant to amendment of Section 14B and the introduction of section 7Q was considered by a Division Bench of this Court in Regional Provident Fund Corporation v Harrisons Malayalam Ltd 4. It was held that during the pre-amendment stage, what was contemplated by the statutory provision was recovery of damages for default committed by an employer in payment of any contribution to the fund. After the amendment to Section 14B and after introduction of 7Q, Section 14B provided for recovery by way of penalty, such damages not exceeding any arrears as may be specified in the scheme. The compensatory element was thus taken away from the scope and ambit of Section 14B and the penalty element was retained. The said amount was liable to be recovered as damages. The legislature, however, alertly included Section 7Q making the employer liable to pay simple interest at 12% per annum or at specified higher rates from the date on which the amount became due, till its actual payment. The wisdom of the 4 2014 (3) KLT 790 WP(C).No.2191 OF 2020 9 legislature is self evident, since before amendment of Section 14B, absolute discretion was conferred on the authorised officer either to impose penalty or not to impose at all; in the latter even of which there would be no compensation at all provided to the organisation, which would be mulcted with the liability of interest to the employee from the date of actual dues. It was further held that the liability of payment of interest was not to be left to the discretion of the authorised officer since it does not call for any adjudication and accrual of interest in the employees account is liable to be compensated by the employer who caused the delay. It was held that 7Q is imposed automatically, on any delay, without any reference to mitigating circumstances; but with reference only to the period of delay and the rates specified. Even the previous and subsequent contact of the employer in making proper remittance of contribution will not be relevant in imposition of interest under Section 7Q. In other words, Section 14 B and 7Q operate in different fields and have different purposes and objects. In that view of the matter, the contention of the learned counsel that the imposition of interest under Section 7Q will depend on the quantum of penal damages levied under Section 14B of the Act has no basis.
11. Insofar as the right to prefer appeal and the application of the principles of natural justice is concerned, I find that the Hon'ble Supreme Court in Arcot Textile Mills vs Regional Provident fund WP(C).No.2191 OF 2020 10 Commissioner5, had occasion to consider the issue in minute detail. In para 20 and 21 it was held as follows:
20. On a scrutiny of Section 7-I, we notice that the language is clear and unambiguous and it does not provide for an appeal against the determination made under Section 7-Q. It is well settled in law that right of appeal is a creature of statute, for the right of appeal inheres in no one and, therefore, for maintainability of an appeal there must be authority of law. This being the position a provision providing for appeal should neither be construed too strictly nor too liberally, for if given either of these extreme interpretations, it is bound to adversely affect the legislative object as well as hamper the proceedings before the appropriate forum. Needless to say, a right of appeal cannot be assumed to exist unless expressly provided for by the statute and a remedy of appeal must be legitimately traceable to the statutory provisions. If the express words employed in a provision do not provide an appeal from a particular order, the court is bound to follow the express words. To put it otherwise, an appeal for its maintainability must have the clear authority of law and that explains why the right of appeal is described as a creature of statute.
(See Ganga Bai v. Vijay Kumar [(1974) 2 SCC 393], Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [(1999) 4 SCC 468], State of Haryana v. Maruti Udyog Ltd. [(2000) 7 SCC 348], Super Cassettes Industries Ltd. v. State of U.P. [(2009) 10 SCC 531] , Raj Kumar Shivhare v. Directorate of Enforcement [(2010) 4 SCC 772], Competition Commission of India v. SAIL [(2010) 10 SCC 744].)
21. At this stage, it is necessary to clarify the position of law which does arise in certain situations. The competent authority under the Act while determining the monies due from the employee shall be required to conduct an inquiry and pass an order. An order under Section 7-A is an order that determines the liability of the employer under the provisions of the Act and while determining the liability the competent authority offers an opportunity of hearing to the establishment concerned. At that stage, the delay in payment of the dues and component of interest are determined. It is a composite order. To elaborate, it is an 5 WP(C).No.2191 OF 2020 11 order passed under Sections 7-A and 7-Q together. Such an order shall be amenable to appeal under Section 7-I. The same is true of any composite order a facet of which is amenable to appeal and Section 7-I of the Act. But, if for some reason when the authority chooses to pass an independent order under Section 7-Q the same is not appealable.
12. The principles laid above would leave no manner of doubt that the challenge to the constitutionality of the provision on the ground of failure of the legislature to provide for an appeal against an order passed under Section 7Q of the Act cannot be sustained. I have also gone through the decision in Net for India (supra) and have no doubt in my mind that the principles laid down in the said report will apply on all fours in the instant case as well.
13. Next question which needs consideration is as to whether the order under Section 7Q can be set aside on the ground that the principles of natural justice has not been complied with in its letter and spirit. The specific contention of the petitioner is that no proper notice was served on him prior to passing an order under Section 7Q of the Act. The 4 th respondent has filed a statement and has produced Exhibit R4(a) composite notice issued under Section 14B of the EPF Act and an order for payment of interest under Section 7Q of the Act. It is contended by the learned counsel appearing for the petitioner that the said order would show that the interest under Section 7Q has already been assessed and his summoning was WP(C).No.2191 OF 2020 12 merely a fait accompli. The said contention is vehemently opposed by the learned Standing counsel who contends that by the said notice, the petitioner was asked to appear and furnish his explanation and in so far as an order under Section 7Q is concerned, the principles of natural justice will only have a limited operation. The Hon'ble Supreme Court in Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner 6, had occasion to explain the nature, scope and applicability of the principles of natural justice and its extent of applicabilty. In para 29 to 34 of the report, it was observed as follows:
29. The learned counsel for the respondent would contend that the natural justice has been impliedly excluded and for the said purpose she would emphasise upon the scheme and the purpose of the Act. There is no cavil for the fact that it is a social welfare legislation to meet the constitutional requirement to protect the employees. That is why the legislature has provided for imposition of damages, levy of interest and penalty. It is contended that it is luminous that the legislature always intended that when hearing takes place for determination of the money due, the component of interest would be computed and in that backdrop the affected person will have opportunity of hearing. But in reality when an independent order is passed under Section 7-Q which can also be done as has been done in the present case the affected person, we are inclined to think, should have the right to file an objection if he intends to do. We are disposed to think so, when a demand of this nature is made, it cannot be said that no prejudice is caused.
30. It is highlighted by the respondents that once the 6 [2013 (16) SCC 1] WP(C).No.2191 OF 2020 13 amount due is determined the levy of interest is automatic. The rate of interest is stipulated at 12% or at a higher rate if so is provided in the scheme. Despite this, there can be errors with regard to the period and the calculation. It is a statutory power which is exercised by the competent authority under the Act. Once the said authority takes recourse to the measure for computation and sends a bald order definitely the affected person can ask for clarification and when the computation sheet is provided to him he can file an objection. Though, the area of delineation would be extremely limited yet the said opportunity cannot be denied to the affected person.
31. We may state with profit that principles of natural justice should neither be treated with absolute rigidity nor should they be imprisoned in a straitjacket. It has been held in Ajit Kumar Nag v. Indian Oil Corpn. Ltd. [(2005) 7 SCC 764 that:
"30. ... The maxim audi alteram partem cannot be invoked if [the] import of such maxim would have the effect of paralysing the administrative process or where the need for promptitude or the urgency so demands."
It has been stated therein that the approach of the Court in dealing with such cases should be pragmatic rather than pedantic, realistic rather than doctrinaire, functional rather than formal and practical rather than precedential. The concept of natural justice sometimes requires flexibility in the application of the rule. What is required to be seen is the ultimate weighing on the balance of fairness. The requirements of natural justice depend upon the circumstances of the case.
32. In Natwar Singh v. Director of Enforcement [(2010) 13 SCC 255] this Court while discussing about the applicability of the rule had reproduced the following passage:
"25. ... 'It is not possible to lay down rigid rules as to when the principles of natural justice are to apply: nor as to their scope and extent. Everything depends on the subject-matter:' [see R. v. Gaming Board for Great WP(C).No.2191 OF 2020 14 Britain, ex p Benaim and Khaida [(1970) 2 QB 417 observed Lord Denning, M.R. '... Their application, resting as it does upon statutory implication, must always be in conformity with the scheme of the Act and with the subject-matter of the case.' [Ed.: See Administrative Law by Wade & Forsyth, 8th Edn. at p. 491, Line 4 from the bottom.] "
33. In this context, we may fruitfully refer to the verdict in Kesar Enterprises Ltd. v. State of U.P. [(2011) 13 SCC 733] wherein the Court was considering the applicability of principles of natural justice to Rule 633(7) of the Uttar Pradesh Excise Manual. The said Rule provided that if certificate was not received within the time mentioned in the bond or pass, or if the condition of bond was infringed, the Collector of the exporting district or the Excise Inspector who granted the pass shall take necessary steps to recover from executant or his surety the penalty due under the bond. A two-Judge Bench referred to the decisions in Swadeshi Cotton Mills v. Union of India [(1981) 1 SCC 664] , Canara Bank v. V.K. Awasthy [(2005) 6 SCC 321 : 2005 SCC (L&S) 833] and Sahara India (Firm) (1) v. CIT [(2008) 14 SCC 151] and came to hold as follows: (Kesar Enterprises Ltd. case [(2011) 13 SCC 733] , p. 743, para 30) "30. ... we are of the opinion that keeping in view the nature, scope and consequences of direction under sub- rule (7) of Rule 633 of the Excise Manual, the principles of natural justice demand that a show-cause notice should be issued and an opportunity of hearing should be afforded to the person concerned before an order under the said Rule is made, notwithstanding the fact that the said Rule does not contain any express provision for the affected party being given an opportunity of being heard."
34. Regard being had to the discussions made and the law stated in the field, we are of the considered opinion that natural justice has many facets. Sometimes, the said doctrine applied in a broad way, sometimes in a limited or WP(C).No.2191 OF 2020 15 narrow manner. Therefore, there has to be a limited enquiry only to the realm of computation which is statutorily provided regard being had to the range of delay. Beyond that nothing is permissible. We are disposed to think so, for when an independent order is passed making a demand, the employer cannot be totally remediless and would have no right even to file an objection pertaining to computation. Hence, we hold that an objection can be filed challenging the computation in a limited spectrum which shall be dealt with in a summary manner by the competent authority.
14. The Hon'ble Supreme Court has held that once the amount due is determined under Section 7Q, levy of interest is automatic. It is a statutory power which is exercised by the competent authority under the Act. The authority while exercising power under Section 7Q has to compute the interest and inform the establishment and the computational sheet has also to be furnished. The establishment will have the right to file objection in a limited spectrum challenging the computation which has to be dealt with in a summary manner. There has only to be a limited enquiry to the realm of computation which is statutorily provided regard being had to the range of delay. Beyond that nothing is permissible.
15. Going by the records in the instant case, I am inclined to accept the submission of the learned counsel that he has not been provided an opportunity to file an objection to the computation of interest. In that view of the matter, I am inclined to grant him an opportunity to file an objection WP(C).No.2191 OF 2020 16 to the order passed under Section 7Q as laid down in Arcot Mills (supra).
16. In the result, the challenge to the constitutionality of Section 7Q of the EPF Act raised by the petitioner is rejected. Exhibit P5 in so far as it directs the petitioner to pay certain sums to the respondent under Section 7Q is quashed. The respondent No. 4 is directed to permit the petitioner to file a representation/ objection before the 4 th respondent, who shall consider the same as provided in Arcot Mills (supra). As a condition precedent, the petitioner shall deposit a sum of Rs.25,000/- within a period of three weeks from today. Proceedings pursuant to Exhibits P6 and P 7 shall be kept in abeyance till an order is passed by the 4 th respondent after considering the objection/representation filed by the petitioner.
This petition is disposed of with the above directions.
Sd/-
RAJA VIJAYARAGHAVAN V JUDGE IAP WP(C).No.2191 OF 2020 17 APPENDIX PETITIONER'S/S EXHIBITS:
EXHIBIT P1 TRUE COPY OF THE NOTICE OF HEARING DATED 30.05.2018,ISSUED BY THE 4TH RESPONDENT EXHIBIT P2 TRUE COPY OF THE PROCEEDINGS NO.KR/KTM/20783/APFC/PENAL DEMAGES/14B/2019-2020 DATED 09.08.2019 EXHIBIT P3 TRUE COPY OF THE MEMORANDUM OF APPEAL FILED BY THE PETITIONER-APPEAL NO.465/2019 EXHIBIT P4 TRUE COPY OF THE INTERIM ORDER DATED 11.12.2019,PASSED BY THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, ERNAKULAM IN APPEAL NO.465/2019 EXHIBIT P5 TRUE COPY OF THE ORDER NO.KR/KTM/20783/APFC/7Q/2019-2020 DATED 09.08.2019 EXHIBIT P6 TRUE COPY OF THE PROHIBITORY ORDER NO.KR/KTM/20783/PD/8F/7Q/2019-2020 DATED 19.12.2019 EXHIBIT P7 TRUE COPY OF THE PROHIBITORY ORDER NO.KR/KTM/20783/PD/8F/7Q/2019-2020 DATED 27.12.2019.