Gujarat High Court
Rajkot Commercial Co Op Bank Ltd vs Regional Provident Fund Commissioner on 29 January, 2024
NEUTRAL CITATION
C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4426 of 2009
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
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1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? YES
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question YES
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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RAJKOT COMMERCIAL CO OP BANK LTD
Versus
REGIONAL PROVIDENT FUND COMMISSIONER
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Appearance:
MS VIDHI J BHATT(6155) for the Petitioner(s) No. 1
MS E.SHAILAJA(2671) for the Respondent(s) No. 1
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 29/01/2024
ORAL JUDGMENT
1. This petition is filed under Articles 226 and 227 of the Constitution of India challenging the order of the Employees' Page 1 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined Provident Funds Appellate Tribunal, New Delhi passed in ATA No.590(5)/ 2001, dated 8th May, 2007.
2. Facts arising for this petition are as under. 2.1 The petitioner is a Co-operative Bank duly registered under the provisions of Gujarat Co-operative Societies Act, 1961 having registration dated 1.12.1966 and engaged in Banking business from 1.1.1967 in the Rajkot city. As per the provisions of the Gujarat Co-operative Societies Act, 1961, if the Bank is employing less than 50 persons, it was not amenable to Employee Provident Fund and Misc.Provisions Act, 1952 as per the provisions of Section 16(1) (a) of the said Act. In the larger interest of the employees and as per provisions of Section 72 of the Gujarat Co-operative Societies Act, 1961, the petitioner had implemented the provisions of Provident Fund (for short, 'PF') Rules and deducted the PF contribution @ 8.33% / 10% from the wages, salaries and paid equal amount of its share, deposited the amount of both shares of contributions in the earmarked Fixed Deposit with the Rajkot District Co-operative Bank Ltd - Apex Bank as laid down under Section 71 of the Gujarat Co-operative Societies Act, 1961. Page 2 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024
NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined From the very beginning the amount of PF was being invested and lying in the safe custody of the Apex Bank till 31 st March, 1999. There was no any allegation about the funds which was utilized for the private purpose at any point of time. 2.2 The Respondent by its letter dated 18 th March, 1999 applied the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 with effect from 1.1.1992. By virtue of this letter, petitioner was informed to open PF account as per the provisions of Employees' Provident Funds Act. The said letter was received by the petitioner on 26 th March, 1999. On receipt of the same, petitioner had immediately started depositing PF dues from April, 1999 onwards with the respondent office regularly on or before due dates and had never committed any default. Payment from January, 1973 to March, 1999 is concerned, same is paid in three installments i.e. on 13th October, 1999, 16th May, 2000 and 24th May, 2000. Despite the above mentioned payments, a show cause notice came to be issued on 18 th October, 2000 under Section 14B of the Act purporting to levy damages for the alleged defaults for the period from February, 1992 to May, 1999. Thereafter, order was passed on 3 rd January, 2001 Page 3 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined levying damages of Rs.61,86,074/- that petitioner deposited Rs.21,79,778/- out of Rs.61,86,074/- on 22.2.2009 and challenged the order dated 3.1.2001 by way of Review Application before Employees' Provident Funds, Sub Regional Office, Rajkot wherein the respondent had imposed penal damages @ 12% for the period from January, 1992 to March, 1999 which amounts to Rs.23,09,937/- and, further damages were imposed as default was committed by the establishment beyond 6 months from due date. Thus, the total penal damages were imposed at Rs.51,28,586 (Rs.23,09,937 + Rs.28,18,749/-). They deducted the amount paid i.e Rs.21,79,778/- and thereafter, total damages of Rs.29,48,808/- came to be levied with outstanding interest as per the past accumulation statement of Rs.7,71,608/- which comes to the amount of Rs.37,20,416/-, under Section 14B of the Act. The total amount of Rs.37,20,416/- came to be recovered by the respondent on 20th October, 2001 and therefore, the entire amount towards the penal damages is paid to the respondent under protest. Being aggrieved and dissatisfied with the aforesaid order dated 17th August, 2001, petitioner herein had preferred the appeal before the learned Provident Fund Appellate Tribunal, New Delhi being ATA No.590(5)/2001, which Page 4 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined came to be dismissed vide order dated 8.5.2007, same is impugned in the present petition.
3. Heard learned advocate, Ms.Vidhi J. Bhatt, learned advocate for the petitioner and Ms.E.E.Shailaja, learned advocate for the respondent.
4. Ms.Bhatt, learned advocate for the petitioner submitted that petitioner had its own scheme under Section 72 of the Gujarat Co-operative Societies Act, 1971 from 1.1.1973 which was duly approved by the District Registrar, Co-operative Societies, Rajkot. Till the date of coverage notice dated 18 th March, 1999, petitioner was paying PF under its own scheme, therefore, it is not the case where the employer did not have any PF Scheme and its employers were put on disadvantage or loss at any point of time.
5. Ms.Bhatt, learned advocate further submitted that by coverage notice dated 18th March, 1999, petitioner was informed to make payment, which was duly complied and petitioner had started depositing the amount in the PF from April, 1999 onwards. Petitioner-Bank had also transferred the Page 5 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined amount accumulated from January, 1992 to March, 1999 in three equal installments i.e. 13th October, 1999, 16th February, 2000, and 24th May, 2000. After receiving the aforesaid amount, 5 months thereafter, 'Notice' under Section 14B came to be issued on 18th October, 2000 though on the day when the notice was issued, there was no any arrears / default.
6. Ms.Bhatt, learned advocate submits that even if belatedly the amount is deposited, but on the day when Section 14B of the Employees' Provident Fund Act 'Notice' came to be issued there was no details, the petitioner cannot be held liable towards any damages.
7. Ms.Bhatt, learned advocate submits that without application of mind in mechanical manner all the authorities passed an order though there was no any default on the part of the present petitioner as petitioner-Bank was already maintaining the account as per the Gujarat Co-operative Societies Act and depositing the funds with the Apex Bank and therefore, there was no any loss caused to any of the employees in absence of the amount deposited with the PF authority.
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8. Ms.Bhatt, learned advocate relies on the decision on Organo Chemical Industries V/s. Union of India reported in (1979) 4 SCC 573 wherein it is held that power to impose damages under Section 14B is a quasi-judicial function and must be exercised after notice to the defaulter and after giving him reasonable opportunity of being heard and that also by way of speaking order. Without following law laid down by the Hon'ble Apex Court, Ms.Bhatt, learned advocate submits that authority had left the damages the petitioner-Bank which is contrary to the law and therefore, prays to quash the order.
9. Ms.Bhatt, learned advocate further relies on the decision of the Supreme Court in the case of Mcleod Russel India Limited V/s. Regional Provident Fund Commission, Jalpaiguri reported in (2014) 15 SCC 272 wherein it was held that presence or absence of mens rea and/or actus reus would be a determinative factor in imposing damages under Section 14B, as also the quantum thereof since it is not inflexible that 100 per cent of the arrears has to be deposited in all the cases. Further, , if damages have been imposed under Section 14B it will be only logical that mens rea / actus reus was prevailing at the relevant time.
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10. Ms.Bhatt, learned advocate further relies on the decision in the case of Assistant Provident Fund Commissioner, EPFO and another V/s. Management of RSL Textiles India Pvt. Ltd. Through its director reported in 2017 (3) SCC 110 wherein it is held that in absence of finding regarding mens rea / actus reus on the part of the employer, action under section 14B of the Act cannot be sustained.
11. Ms.Bhatt, learned advocate drawing attention of this Court to impugned order submitted that there is no finding on the mens rea recorded by the authority while passing the impugned orders and submitted that in view of the absence of the required findings as laid down by the Hoh'ble Apex Court, the order is without any application of mind in mechanical way and without discussing any mitigating factors, requires to be quashed and set aside.
12. Ms.Bhatt, learned advocate relies the decision of this Court in case of Mansa Nagrik Sahakari Bank Ltd. V/s. Regional Provident Fund Commissioner of Gujarat State reported in 2005 SCC OnLine Guj.338 and submitted that as the similar case was before this Court wherein it was held that Page 8 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined establishments, which were having their own private provident fund scheme before coverage and who deposited provident fund in the Banks or finance establishments, they cannot be charge with penalty under Section 14B of the Act for the period prior to date of payment fixed in the coverage notice. Para-29 and 30 of the judgments, which is relied on are reproduced herein below.
"29. 16. At the hearing of the petition, we called upon the learned standing counsel for the respondents to indicate the basis on which the impugned order dated 1.10.2004 was passed under Section 14B. The learned standing counsel produced the instructions issued by the Central Provident Fund Commissioner through circulars dated 24.10.1975 and 15.6.2004 laying down the guidelines for levy of penal damages under Section 14B. Part III of the Circular dated 24.10.1975, reads as under:-
(a) to (e) .... .... ... ...
(f) Damages should not be levied at the present rates from the establishments which have been discovered and covered retrospectively i.e. in the case of discovered establishments in respect of which coverage notices are issued on or after 1.11.1973. In these cases, damages may be levied at the rate of 10% per annum for amounts due upto the date of issue of the coverage notice and paid within the stipulated period in coverage letter. Damages on the current contributions (on or after 1.11.1973) may be levied in accordance with the new rates. In the cases of discovered establishments in respect of which the coverage notices were issued prior to 1.11.73, damages at the then existing rates should be levied.
(g) to (i) ... ... ... ...
The Circular dated 15.6.2004, reads as under:-
"Very often establishments are covered retrospectively leaving a gap between the effective date of coverage and the actual date of communication of the coverage notice. When establishments are covered retrospectively the EPFO is required to credit interest to the members account from the date of coverage irrespective of the fact that the establishment has started compliance only after receiving the coverage intimation from the PF office. This interest burden on the EPFO on account of such belated remittance is normally taken care of by the employers by virtue of Section 14B of the Act.Page 9 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024
NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined Many establishments have represented against the levy of damages for the 'pre-discovery period' (the gap between the actual date of coverage and the date of intimation of the coverage notice) that they were prevented from making remittance in the absence of any code number allotted to them. Various High Courts also have taken strong exception to this particularly after introduction of Section 7Q of the Act. Moreover, different regions adopt different standards in levying damages in such cases. The matter was discussed in detail by the CBT in its 165th meeting held on 3.12.2003. It has been decided that no damages shall be levied for the pre-discovery period where the code number was allotted belatedly by the EPFO and the establishment was prevented from remitting the contributions in the absence of a code number allotted to it by the EPFO. In order to have uniformity of approach by different field offices and with a view to alleviate the difficulties experienced by the establishments, the following guidelines are issued in the matter of levy of damages in respect of establishments covered belatedly :-
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1. Levy of damages :No damages shall be levied on workers' share if the workers' share for for pre-discovery the pre-discovery period period has been waived.
2. Establishment :No damages shall be levied which paid PF however to compensate the dues within the interest loss to the EPFO, time prescribed only simple interest @12% in the coverage p.a. shall be levied.
notice
3. Establishments :No damages shall be levied which paid PF till the date of payment dues beyond the fixed in the coverage date fixed in notice. Only simple the coverage interest @12% upto the date notice mentioned in the coverage letter and damages at appropriate rates for the period of delay beyond the date fixed in the coverage letter be levied.
4. Establishments : Only difference of which were having interest amount between their own private 12% simple interest p.a. PF system before and the actual interest coverage and who earned by the private PF deposited the PF shall be levied if the in banks or latter is less than finance 12% p.a.. Beyond the date Page 10 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined establishments fixed in the coverage notice, damages shall be levied at the appropriate rates.
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However, the past cases already decided may not be reopened.To avoid confusion and inconvenience in the matter of remittance of PF dues where the establishments are covered belatedly, the coverage notices shall henceforth contain instructions that 'payments of PF contributions and allied dues shall be made within 15 days from the date of receipt of the coverage notice'."
30. In view of the aforesaid instructions and in view of the fact that the petitioner-bank was having its own private PF system, it is clear that the petitioner-bank's case would fall under category 4.Hence, the respondent- authorities could not have levied damages by way of penalty under Section 14B of the Act for the period prior to the date of payment fixed in the coverage notice. In the instant case, the penalty to be levied would be only for the period after the date of payment fixed in the coverage notice. The coverage notice did not specify any date for payment of dues. The order dated 27.12.2000 under Section 7A did not quantify the amounts under Section 7A which were already paid by 21.7.2000. The order dated 27.12.2000 quantified the amount of interest payable under Section 7Q of the Act which amount the Bank paid after almost three years. The respondent-authorities would, therefore, be required to re- calculate the amount of penalty for the said delay on the aforesaid basis after giving an opportunity of hearing to the petitioner. To avoid any future litigation, we asked the respondents whether it would be possible to quantify the amount of penal damages right away, the learned counsel for the respondents stated under instructions from Ms GA Shah, Assistant Provident Fund Commissioner, Ahmedabad that in view of the aforesaid formula, the amount of damages by way of penalty under Section 14B in the petitioner-bank's case would be about Rs. 4,26,417/-. We accordingly direct the petitioner-bank to pay the said amount to the respondent by 30th April 2005.
13. Ms.Bhatt, learned advocate relies in the decision of this Court in the case of Cosmos Cooperative Bank Ltd. V/s. Employees Provident Fund Appellate Tribunal reported in Page 11 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined 2016 SCC OnLine 9288 wherein in a similar case, the order passed by the Assistant Provident Fund Commissioner and the Appellate Tribunal was quashed and matter remanded back for fresh considerations.
14. Ms.Bhatt, learned advocate lastly submitted that impugned order dated 17.8.2001 wherein respondent has charged the penal damages twice on the petitioner for the period from January, 1992 to March, 1999 i.e. at the rate of 12% and 37% and further again interest is calculated on past accumulation dues without providing the following method or means of levy of penalties and without giving any justification for coming to the figures as mentioned in the order. Ms.Bhatt, further relies on para-32A of the Employees Provident Fund Scheme, 1952 and submits that maximum penalty which can be imposed is 25% and not 37%. Therefore, respondent in a routine way has passed a mechanical order without application of mind, which requires to be interfered with and requires to be quashed and set aside.
15. In view of above submissions, Ms.Bhatt, learned advocate submits that impugned order deserves to be quashed and Page 12 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined petition is required to be allowed.
16. On the other hand, learned advocate Ms.E.Shailaja, appearing for the respondent submits that on 22 nd February, 1999, the Area Enforcement Officer visited the petitioner - establishment and issued the spot memo for the production of the documents for the purpose of verification of the applicability of the Act. He finds that the precondition of the Act is not being satisfied, therefore, Show Cause Notice was issued on the same day i.e. 22nd February, 1999. Petitioner seeks time of 15 days for the production of the document in reference to the aforesaid spot memo and show cause notice vide a letter dated 24th February, 1999. Petitioner - establishment informed to the respondent - department that there were 50 employees in the year 1992 and from the year 1999 i.e. 24th February, 1999, there 75 employees were working in petitioner - establishment.
17. On 18th March, 1999, the show cause / Coverage Notice was issued to the present petitioner- establishment by the respondent - department under Employees' Provident Fund & Miscellaneous Provisions Act, 1952 (EPF and MP Act). Petitioner
- establishment bank had communicated that they are agreed Page 13 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined to join and comply with the EPF scheme from 1.1.1992 and also agreed to remit the contribution as well as administration on total wages vide a communication dated 4th May, 1999.
18. Ms.Shailaja, learned advocate further draws the attention of the Court with regard to the damages, which was levied against the present petitioner-establishment. The contribution was paid by the petitioner - establishment in 3 parts i.e. on 13th October, 1999 (dues for the period of November, 1998 to March, 1999) On 16th May, 2000 (i.e. the dues for the period of August, 1998 to October, 1998) and on 24th May, 2000 due for the period January, 1992 to July, 1998.). Ms.Shailaja, learned advocate submitted that these dates indicate that despite there having been delayed for more than 7 years at the first instance, the petitioner - establishment additionally committed further delay in depositing the current as well as past dues for the period running from 7 months to 14 months from the period mentioned in the coverage notice.
19. Therefore, under Section 14-B read with 32-A of the EPF Scheme 1952, the proceedings were initiated and finally concluded by reasoned order on 3rd January, 2001, after giving reasonable opportunity of hearing to the petitioner, wherein it Page 14 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined is held that petitioner - establishment was made liable for payment of Rs.61, 86,074/- towards the damages of delayed payment for the period of January, 1992 to May, 1999.
20. Against the aforesaid order, the review application was filed wherein the submissions made by the present petitioner that the establishment was covered under the provision of Co.Op. Soc. Act and have their own Provident Fund Scheme under Section 72 of the Guj. Co.Op. Soc. Act 1961 since 1.1.1973. and there was no any lapse on the part of the present petitioner - establishment in depositing the contribution in the aforesaid account towards the PF of the employees and after the coverage notice, the amount was remitted in the account of the PF.
21. Ultimately, the authority had reviewed its order and concluded the proceedings considering all accounts, which is lying with EPF authority and held liable of Rs.29,48,808/- towards the damages for the period of January, 1992 to March, 1999.
22. On referring the aforesaid order, Ms.Shailaja, learned advocate further submitted that the amount of Rs.7,71,608/-, which was calculated towards the past accumulation was again Page 15 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined modified and it was adjusted towards the dues by communication dated 6.8.2003.
23. The aforesaid order was further challenged before the appellate tribunal by way of appeal being No.ATA 590(5)2001 wherein after considering the evidence and submissions of both the parties, learned Tribunal by an order dated 8 th May, 2007, dismissed the appeal being devoid of any merits.
24. Ms.Shailaja, learned advocate further submits that despite receiving the coverage notice dated 18 th March, 1999, no prompt compliance was made by the petitioner- establishment and started making payment in three installments from April, 1999, therefore, authority had rightly levied the damages at the rate of 12% for the period of 15 th February, 1992 to 14th April, 1999 and at the rate of 37% for the period of 15th April, 1999 to 24th May, 2000, which is according to the provisions of the scheme.
25. Ms.Shailaja, learned advocate takes the Court to the various provisions of the Act and submitted that order passed under Section 14B of the Act is after considering all submissions and giving reasonable opportunity of hearing, Page 16 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined which is mandatory and therefore, no interference is required and prays to dismiss the petition.
26. Ms.Shailaja, learned advocate relied on the decision in the case of Horticulture Experiment Station Gonikoppal Coorg V/s. The Regional Provident Fund Organization rendered by 2022 Livelaw SC 202 wherein Hon'ble Apex Court held after considering the decision rendered in Union of India Vs Dharmendra Textile Processors and others reported in (2008) 13 SCC 369 that mens rea or actus reus is not an essential element for imposing penalty / damages for breach of civil obligation / liabilities.
27. Ms.Shailaja, learned advocate further relied on the decision of this Court in the case of Gandhidham Spinning and Mfg. Company Limited V/s. Regional Provident Fund Commissioner reported in 1986 Lawsuit Guj.87 held that circular cannot take place of the law and no blind reliance can be placed on the circular neither any rigid compliance thereof can be pressed in service for the invalidation of the impugned order.
28. Ms.Shailaja, learned advocate further relies on the Page 17 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined decision rendered by this Court in the case of Indu Nissan Oxo Chemicals Industries Ltd. V/s. Office of the Provident Fund Commissioner and 1 made in Special Civil Application No.14733/2010 stating that as per this decision the word "may" which is used in Section 14B can be considered as a mandatory.
29. At the end, Ms.Shailaja, learned advocate submits that the petitioner - establishment had already paid the amount of the damages levied by the authority, therefore, considering the overall facts of the case, Ms.Shailaja, learned advocate prays to dismiss the petition.
30. Before dealing with the rival submissions, it is necessary to refer to the relevant provisions of the Act and the scheme, which is reproduced herein below:
THE EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952
1. Short title, extent and application.--4 [(1) This Act may be called the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.] (2) It extends to the whole of India 5***.
6[(3) Subject to the provisions contained in section 16, it applies--
(a) to every establishment which is a factory engaged in any industry specified in Schedule I and in which 7 [twenty] or more persons are employed, and (b) to any other establishment employing 6 [twenty] or more persons or class of such Page 18 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf:
6. Contributions and matters which may be provided for in Schemes.--5*** The contribution which shall be paid by the employer to the Fund shall be 6 [ten per cent.] of the basic wages, 7 [dearness allowance and retaining allowance (if any)] for the time being payable to each of the employees 8 [(whether employed by him directly or by or through a contractor)], and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, 9 [if any employee so desires, be an amount exceeding 6 [ten per cent.]of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section]:
Para-29: "The contributions payable by the employer under the Scheme shall be at the rate of [ten per cent] of the [basic wages, dearness allowance (including the cash value fo any food concession) and retaining allowance (if any)] payable to each employee to whom the Scheme applies..."
Para-30 : "The employer shall, in the first instance, pay both the contribution payable by himself (in this Scheme referred to as the employer's contribution) and also, on behalf of the member employed by him directly or by or through a contractor, the contribution payable by such member (in this Scheme refrred to as the member's contribution)...."
Para 38: "The employer shall, before paying the member his wages in respet of any period or part of period for which contributions are payable , deduct the employee's contribution from his wages which together with his own contribution as well as Page 19 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined administrative charge of such percentage [of the pay [basic wages....."
14B. Power to recover damages.--Where an employer makes default in the payment of any contribution to the Fund 3 [, the 2 [Pension] Fund or the Insurance Fund] or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 4 [or sub-section (5) of section 17] or in the payment of any charges payable under any other provision of this Act or of 5 [any Scheme or Insurance Scheme] or under any of the conditions specified under section 17, 6 [the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf] may recover 7 [from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme:] 8 [Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard]:
Para-32A : "Where an employer makes default in the payment of any contribution to the fund, or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17 of the Act or in the payment of any charges payable under any other provisions of the Act or Scheme or under any of the conditions specified under Section 17 of the Act, the Central Provident Fund Commissioner or such officer as may be authorized by the Central Government by notification in the Official Gazette, in this behalf, may recover from the employer by way of penalty, damages..:"
[17. Power to exempt.--(1) The appropriate Government may, by notification in the Official Gazette and subject to such conditions as may be specified in the notification, 2 [exempt, whether prospectively or retrospectively, from the operation] of all or any of Page 20 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined the provisions of any Scheme-- (a) any 3 [establishment] to which this Act applies if, in the opinion of the appropriate Government, the rules of its provident fund with respect to the rates of contribution are not less favourable than those specified in section 6 and the employees are also in enjoyment of other provident fund benefits which on the whole are not less favourable to the employees than the benefits provided under this Act or any Scheme in relation to the employees in any other 3 [establishment] of a similar character; or (b) and 3 [establishment] if the employees of such 3 [establishment] are in enjoyment of benefits in the nature of provident fund, pension or gratuity and the appropriate Government is of opinion that such benefits, separately or jointly, are on the whole not less favourable to such employees than the benefits provided under this Act or any Scheme in relation to employees in any other 3 [establishment] of a similar character: 4 [Provided that no such exemption shall be made except after consultation with the Central Board which on such consultation shall forward its views on exemption to the appropriate Government within such time limit as may be specified in the Scheme.]
31. It is the case of the petitioner that Area Enforcement Officer visited the petitioner establishment on 22.2.1999 and issued a spot memo for the verification of documents for the purpose of verifying the applicability of the Act. On prima-facie satisfying during the visit that precondition for compliance under the EPF & MP Act is not satisfied, therefore, show cause notice was issued on 22.2.1999 for the purpose to submit the document as the establishment was covered under the EPF & MP Act, 1952 and scheme framed thereunder. Request was Page 21 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined made to provide 15 days time by way of communication dated 24.2.1999. Further the information given by way of a separate letter dated 24.2.1999 that from 1992, the strength of employees of 50 and from 24.3.1999, the strength of employees were of 76. As the establishment was satisfying the precondition for compliance under the EPF & MP Act, the allotment code letter was issued on 18.3.1999 wherein, subject mentioned as under:
Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Schemes framed thereunder-applicability thereof - Allotment of Code Number.
32. In the aforesaid draft Code Letter, para-1(C) mentions as under:-
The Code No.GJ/RJ/40205 is allotted to you for the purpose of making compliance the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Scheme framed thereunder. This Code number should invariably be quoted in all the correspondence with this office.
33. It transpires that Code No.40205 is allotted and inform to comply the provisions under the EPF & MP Act, 1952 on 18.3.1999. In Column No.14, it was informed to the petitioner-Page 22 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024
NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined establishment to transfer EPF fund, all accumulations standing to the Credit of the covered employees', as required by Section 15 of the Act and para-28 of the Employees Provident Fund scheme within 10 days from the date, the Act has become applicable to the establishment. Thereafter, current as well as back dues were deposited in three installments i.e. on 13.10.1999 for the period of November, 1998 to March, 1999, on 16.5.2000 for the period of August, 1998 to October, 1998 and on 24.5.2000 for the period of January, 1992 to July, 1998. Despite all these deposits, the show cause notice was issued on 18th October, 2000 under Section 14-B of the Act purporting to levy damages for the alleged defaults for the period of February, 1992 to May, 1999 calling upon the petitioner- establishment to explain that why damages on such right as deemed fit and upto the extent of the amount in the arrears should not be imposed and recovered from petitioner. It is not in dispute on the day when the 'Notice' was issued i.e. on 18 th October, 2000, all the dues were cleared off by the petitioner. The petitioner-establishment was appeared through the Officer and submitted that due to the ignorance, the amount has not been deposited. It was further contended that in the larger interest of its employees, the petitioner-establishment Page 23 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined adopted and established its own PF Rules as per the provisions of Section 72 of the Gujarat Co.Op. Soc.Act, 1961 with effect from 1.1.1973, which was duly approved by the District Registrar, Co.Op. Societies, Rajkot and as per the said Rules, the petitioner-establishment had deducted PF contributions at the rate of 8.33% / 10% of the Wages / Salaries of its employees every month and paid equal amount of its share and deposited the amount of both shares of contributions in the earmarked Fixed Deposit with the Rajkot District Co.Op. Bank Ltd i.e. the Apex Bank as laid own under Section 71 of the Gujarat Co.Op. Soc. Act, 1961. It is contended that from the beginning, all the amounts of the PF was being invested with and lying in the safe custody of the said Apex Bank till 31.3.1999 and petitioner-establishment had not retained the PF amount with it nor had used or utilized a single pie of PF amount for its own business purpose. PF amount was regularly deposited with the Apex Bank from the beginning upto date of receipt of the Code Letter dated 18.3.1999. It is further contended on the receipt of the said Code Letter, the petitioner-establishment immediately started depositing the PF dues from April, 1999 and on-wards with respondent-office regularly on or before due date and they had not committed Page 24 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined any default, however impugned order was passed on 3 rd January, 2001. Being aggrieved by the aforesaid order, the petitioner preferred Review Application, which was rejected vide an order dated 17.8.2001. Despite the aforesaid submissions, the authority passed an order to recover the amount of penal damages on delayed payment from January, 1992 to March, 1999 vide an order dated 17 th August, 2001. Against which, the appeal was preferred before the Appellate Tribunal being ATA/590(5)/2001, which was dismissed vide an order dated 8th May, 2007. Against which, the present petition is filed.
34. It is not in dispute that by way of Code Letter dated 18.3.1999, first time Code Number was allotted to the petitioner for opening the PF account under the Act.
35. The object of the Act is to provide for the Institution of the Provident Fund (Pension fund) and deposit link insurance fund for the benefit of employees in factories and other establishment. The meaning of Provident Fund as per literal dictionary is foresight, seeing far ahead and providing for the future. In short, provident fund is a fund for the future retired life by a person who is alert and conscious of his future. Thus Page 25 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined provident fund is a fund created to protect the future incidence of a person. In service jurisprudence it is a statutory fund created for the protection of future life after retirement, death or other causalities in life. That in the year 1952 the Employee's Provident Fund was enacted, providing the system of contribution and its management. In the fund both parties i.e. the employer and employee are to contribute their share as declared by the Government. It is not in dispute that Act is applicable to the petitioner-establishment. However, the fact that petitioner by way of its own scheme under Section 72 of the Gujarat Co.Op. Soc. Act, 1961 opened the account and depositing the PF amount from 1.1.1973 to 18.3.1999 until the Code Letter was alloted. Thus, it cannot be said that employer did not have any PF scheme and its employees were put into disadvantage of the scheme. On 18.3.1999, the code number was issued and informed to the petitioner establishment to deposit the amount within a period of 10 days from January, 1992 to March, 1999, same was deposited in three installments i.e. (1) 13th October, 1999 (2) 16th February, 2000 and (3) 24 th May, 2000, on the day when the show cause notice was issued i.e. on 18th October, 2000, there was no any arrears, for attracting the provisions under Section 14-B of the Act, on the Page 26 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined day of invocation of the said section, there must be default coupled with the arrears, if contributions to the fund has already been paid even if belatedly there cannot be said to have any arrears. The decision relied by the learned advocate for the petitioner - establishment in the case of Hi-Tech Vocational Training Centre V/s. Assistant Provident Fund Commissioner reported in 2011 SCC OnLine Del 468 wherein, para-18 to 22 held as under:
"18. There is another interesting aspect of the matter which does not appear to have been considered in any of the judgments aforesaid. Section 14 B empowers imposition of "penalty" by recovery of "such damages, not exceeding the amount of arrears", when an employer makes "default in the payment of any contribution to the Fund....." The language suggests that for power under Section 14 B to be exercised, if not on the date of levy of damages, at least on the date of invocation of Section 14 B, there must be a "default" coupled with "arrears". There can be no "arrears" if the contribution to the Fund has already been paid, even if belatedly. Black's Law Dictionary, 6th Edition defines "arrears" as money which is overdue and "unpaid". What has already been paid, cannot be "arrears". If there are no "arrears" there can be no computation of damages not exceeding the arrears. Though Section 14B itself refers to the scheme qua computation of rate of damages but para 32A of the Scheme also uses the word arrears in conjunction with period of default. It thus cannot be said that under the Scheme recovery of damages without the contribution being in arrears is possible.Page 27 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024
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19. The Supreme Court in Vithal Vasudeo Kulkarni v. Maruti Rama Nagane AIR 1968 SC 461, in relation to Rent Act held that the provision presupposes that there are arrears at the date of the application and which can be directed to be paid; if the tenant has paid up all the arrears and the landlord has accepted them, the cause of action disappears by payment. The said view was approved of in Dhan Singh Ramkrishna Chaudhari v. Laxminarayan Ramkishan (1974) 2 SCC 293.
20. In my opinion, the aforesaid dicta squarely applies to Section 14 B also. The proceedings for imposition of penalty thereunder can be initiated only if there are arrears and then, maximum damages of equal to arrears can be recovered. However, the proceedings cannot be commenced if there are no arrears on that date, even if there has been delay in payments.
21. I am conscious that the said interpretation may go contrary to the spirit of the statute. However in the face of the language used, which does not permit any other interpretation and the provision being penal - required to be interpreted strictly, I am unable to hold otherwise. Had the legislature intended to penalize delay in payment, instead of "default"
and "arrears", the expressions "delay" and "damages proportionate to delay" would have been used.
22. There is no discussion on the said aspect also in the impugned order. Rather it appears that as on the date of notice dated 24 th September, 2003 (supra), all payments had been made, though belatedly. The petition is entitled to succeed on this ground also".
36. It is no doubt that mens rea in the cases pertaining to the Employees Provident Fund & Miscellaneous Provisions Act is Page 28 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined not an essential for imposing penalty / damages for breach of civil obligation or liabilities as held by the Hon'ble Apex Court in the the case of HORTICULTURE EXPERIMENT STATION GONIKOPPAL, COORG V/s. THE REGIONAL PROVIDENT FUND ORGANIZATION made in Civil Appeal No.2136 of 2012 Dated 23.2.2022 but looking to the fact that there was no any default on the day when the notice was issued, impugned order deserves to be quashed and set aside.
37. This Court has also gone through the decision rendered by this Court in the case of Cosmos Co.Op. Bank Ltd. V/s. Employees Provident Fund - Appellate Tribunal reported in 2016 SCC OnLine 9288 wherein para-4 and para-23 to 27 reads as under:
4. So far as the factual background involved in and leading to present petition is concerned, the petitioner has averred and stated that:
"2.1 The petitioner is a multi state cooperative bank, having its registered office at the address mentioned in the cause title of the petition. It is the successor of Unnati Cooperative Bank Ltd. of Vadodara that has merged with the petitioner bank on 18.6.2006.
2.2 The petitioner states that erstwhile Unnati Cooperative Bank Ltd. was duly registered under the Gujarat Cooperative Societies Act, 1961 on 28.2.1977 as Unnati Cooperative Credit Society Ltd. that was converted into Unnati Cooperative Bank Ltd. on 25.6.1981. The bank was Page 29 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined having all its branches at Vadodara and Was employing less than 50 employee, therefore, the provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 (The "Act"
for short) were not applicable to the bank in view of the provisions of section 16(1 )(a) of the Act.
2.3 The petitioner states that despite of the fact that Act was not applicable to the bank, the bank had formed a Trust being Unnati Cooperative Bank Ltd. Elnployees Provident Fund Trust on 10.5.1993 and all the employees of the bank were covered under the said trust and the benefits of provident fund was made available to the employees as per the provisions of the Trust.
2.4 For the first time in the year 1993, i.e. on 18.3.1993 and on 3.2.1994, the said Bank voluntarily applied for participation in the provident fund scheme and also made a request to allot provident fund number to the bank though, the number of employees did not exceed 50, even at that time. 2.5 The petitioner states that on 24.12.1998, Office of the Sub- Regional Provident Fund Commissioner at Vadodara allotted provident fund No.21191 to the petitioner. Simultaneously, the petitioner received show cause notice dated 24.12.1998, whereby, the petitioner was called upon to show cause as to why action should not be taken against the bank for misappropriating the funds by not remitting the same to the statutory funds and investing it in its own sweet manner as it amounts to misappropriation and why prosecution should not be launched against responsible persons.
2.6 The petitioner states that as required under the provisions of the Act and the scheme, as soon as the petitioner received a Page 30 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined code number, covering the establishment w.e.f. 1.4.1984 the petitioner deposited the full amount of the provident fund accumulation covering the contribution from both sides from March 1997 to December 1998 by tendering the cheque dated 11.2.1999 that was credited to the fund on 16.2.1998. 2.7 The petitioner states that there was a small delay of 15 days in remitting the amount which was absolutely unintentional. Despite of that, the respondent issued a notice to the said Unnati Cooperative Bank on 22.11.2002, calling upon the bank as to why damages & interest of Rs.5,68,658/ u/s. 14(B) should not be levied as stated in the notice.
2.8 Simultaneously, the petitioner states that as the bank was sought to be covered w.e.f. 1.4.1984 as can be seen from the allotment letter dated 24.12.1998, the bank had to approach the respondent No.3 by letter dated 5.1.1999 representing all the facts in detail pointing out that the bank was employing 46 employees up to February 1997. Despite of that the bank had made an application on 3.2.1994 for allotment of the P.F. number. Not only that the bank had kept the fund amount separately in the trust managed by the employees and employer trustees. Further, the PF code was allotted for the first time in December 1998 therefore, the allegation of misappropriation was baseless and the establishment could not have been covered w.e.f. 1.4.1984.
2.9 The petitioner states that the respondent No.3 did not accept the submission and 111aintained that the establishment is rightly covered w.e.f. April 1984 by letter dated 7.4.1999. 2.10 Another representation giving full details was also made on 11.5.1999 but still the respondent No.3 passed an Page 31 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined order u/s. 7A covering the establishment from April 1984 holding that the bank was running with the help of electricity. 2.11 The petitioner had no option but to approach the Appellate Tribunal by way of Appeal No. No. ATA/5(13)99. The bank pointed out that bank never employed more than 50 persons even on the date of making an application but still, the Provident Fund Commissioner covered the bank holding that the bank was using electricity and was employing 20 or more persons from April 1984 and hence,∙ was coverable from April 1984. The said appeal was allowed by the Tribunal and the impugned order dated 9.7.1999 was set aside. Covering the establishment, coming back to the show cause notice dated 22.11.2002, the petitioner pointed out that though the Code number was allotted in 1998, the entire amount of the trust was covering the period from July 1986 to 28.2.1997 and from March 1997 to February 1998 was transferred to the fund without any delay and therefore, there was no question imposing either damages or interest more particularly when the amount was transferred from the voluntary trust from the Scheme under the Act. It was pointed out that damages or interest could not he levied as the remittance would not attract the provisions of section 14(B) of the Act. Despite of that, the respondent by order dated 7.1 0.2003, directed the petitioner to pay an amount of Rs.2,49,1511.
2.12 The petitioner therefore, preferred SCA No.15286 of 2003 before this Honourable Court inter alia contending that there was no question of any default much less, any intentional default in remittance more so, when there was no allotment of the number till 31.12.1998 and therefore, damages or interest could not have been imposed on the petitioner bank and the order was absolutely illegal, passed in a mechanical manner and therefore, Page 32 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined liable to be quashed and set aside.
2.13 The petition was disposed of by this Honourable Court by order dated 28.1.2004 directing the petitioner to prefer a petition under section 71 of the Act protecting the petitioner by continuing the interim relief till the appeal is decided by the Tribunal.
2.14 The petitioner accordingly preferred the appeal being Appeal No.227 of 2004 challenging the order dated 7.10.2003. The Ld. Appellate Authority held the hearing at Ahmedabad on 15.4.2010 and after hearing the petitioner passed an order on 16.4.2010, communicated together with letter dated 2004.2010, received by the petitioner on 6.5.2010. 2.15 The petitioner states that after the appeal was dismissed, the petitioner received a notice dated 31.5.2010 calling upon the petitioner to remit an amount of Rs.5,10,654/ to the respondents, however, on the representation of the petitioner, the said amount is reduced to Rs.3 ,62,3131/ by communication dated 2.6.2010. The petitioner states that even when the appeal was pending and interim relief was operating the respondent No.3 had without giving any intimation to the petitioner bank, debited and got an amount of Rs.2,54,677.57 from the account of Axis Bank and State Bank of India in the month of February 2010 when the petitioner came to know about same, the officers of the bank had to approach the respondent No.3 pointing out that the action was taken though interim relief was operating. The amount was returned to the petitioner later on. The petitioner apprehends that the recovery would be effected without any further intimation to the petitioner hence, the petitioner has approached the Honourable Court during vacation."
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23. At this stage, it is appropriate to take into account the provision under Section 14(B) of the Act, which reads thus:
"14B. Power to recover damages Where an employer makes default in the payment of any contribution to the Fund the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under subsection 2 of section 15 or subsection 5 of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme.Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard.
Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme."
24. The expression "may recover" as well as the expression "such damages, not exceeding the amount of arrears" are significant and indicate that the competent authority is obliged to pass appropriate order after carefully considering the facts and circumstances pleaded by the noticee in support of or by way of explanation with regard to alleged delay or default.
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25. When the legislature has used the expression "may recover such damages" it also signifies that the extent of damages prescribed under the scheme is the maximum extent of damages which can be levied but that does not mean that in all cases the authority is supposed to or obliged to impose maximum penalty.
26. For determining the quantum of penalty, the authority is supposed to take into account the explanation and circumstances pleaded by the noticee.
27. Further, the provision also makes it clear that damages are to be levied by way of penalty. Therefore, the section has the colour and characteristics of penal provision. In this view of the matter, the intention of the party should also be taken into account. The authority should endeavour to verify and ascertain as to whether the default or damages are caused intentionally or on account of the circumstances beyond the control of the noticee and appropriate order should be passed after considering such relevant aspects.
38. This Court has also considered the case of Mansa Nagrik Sahakari Bank Ltd. V/s. Regional Provident Fund Commissioner of Gujarat State reported in (2005) 46 (2) GLR 1592 wherein, paras 29 and 30, which are relevant, are reproduced herein below:
29. At the hearing of the petition, we called upon the learned standing counsel for the respondents to indicate the basis on which the impugned order dated 1.10.2004 was passed under Section 14B. The learned Page 35 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined standing counsel produced the instructions issued by the Central Provident Fund Commissioner through circulars dated 24.10.1975 and 15.6.2004 laying down the guidelines for levy of penal damages under Sec. 14B. Part III of the Circular dated 24.10.1975, reads as under:- (
a) to (e) .... .... ... ...
() Damages should not be levied at the present rates from the establishments which have been discovered and covered retrospectively i.e. in the case of discovered establishments in respect of which coverage notices are issued on or after 1.11.1973. In these cases, damages may be levied at the rate of 10% per annum for amounts due upto the date of issue of the coverage notice and paid within the stipulated period in coverage letter. Damages on the current contributions (on or after 1.11.1973) may be levied in accordance with the new rates. In the cases of discovered establishments in respect of which the coverage notices were issued prior to 1.11.73, damages at the then existing rates should be levied. (g) to (i) ... ... ... ... The Circular dated 15.6.2004, reads as under:- "Very often establishments are covered retrospectively leaving a gap between the effective date of coverage and the actual date of communication of the coverage notice. When establishments are covered retrospectively the EPFO is required to credit interest to the members account from the date of coverage irrespective of the fact that the establishment has started compliance only after receiving the coverage intimation from the PF office. This interest burden on the EPFO on account of such belated remittance is normally taken care of by the employers by virtue of Section 14B of the Act. Many establishments have represented against the levy of damages for the 'pre-discovery period' (the gap between the actual date of coverage and the date of intimation of the coverage notice) that they were prevented from making remittance in the absence of any code number allotted to them. Various High Courts also have taken strong exception to this particularly after introduction of Section 7Q of the Act. Moreover, different regions adopt different standards in levying damages Page 36 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined in such cases. The matter was discussed in detail by the CBT in its 165th meeting held on 3.12.2003. It has been decided that no damages shall be levied for the pre-discovery period where the code number was allotted belatedly by the EPFO and the establishment was prevented from remitting the contributions in the absence of a code number allotted to it by the EPFO. In order to have uniformity of approach by different field offices and with a view to alleviate the difficulties experienced by the establishments, the following guidelines are issued in the matter of levy of damages in respect of establishments covered belatedly 1, Levy of damages on workers' No damages shall be levied if the workers' share for the pre-
share for pre-discovery period discovery period has been waived.
2. Establishment which paid PF No damages shall be levied however to compensate the dues within the time prescribed interest loss to the EPFO, only simple interest @12% p.a. shall be in the coverage notice levied.
3. Establishments which paid PF : No damages shall be levied till the date of payment fixed in the dues beyond the date fixed in coverage notice. Only simple interest @12% upto the date the coverage notice. mentioned in the coverage letter and damages at appropriate rates for the period of delay beyond the date fixed in the coverage letter be levied.
4. Establishments 4. which were : Only difference of interest amount between 12% simple having their own private PF interest p.a.and the actual interest earned by the private PF shall be system before coverage and levied if the latter is less than 12% p.a.. Beyond the date fixed in the who deposited the PF in banks coverage notice, damages shall be levied at the appropriate rates.
or finance establishments However, the past cases already decided may not be reopened. To avoid confusion and inconvenience in the matter of remittance of PF Page 37 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined dues where the establishments are covered belatedly, the coverage notices shall henceforth contain instructions that 'payments of PF contributions and allied dues shall be made within 15 days from the date of receipt of the coverage notice'." (emphasis supplied)
30. In view of the aforesaid instructions and in view of the fact that the petitioner-bank was having its own private PF system, it is clear that the petitioner-bank's case would fall under category 4. Hence, the respondent-authorities could not have levied damages by way of penalty under Section 14B of the Act for the period prior to the date of payment fixed in the coverage notice. In the instant case, the penalty to be levied would be only for the period after the date of payment fixed in the coverage notice. The coverage notice did not specify any date for payment of dues. The order dated 27.12.2000 under Section 7A did not quantify the amounts under Section 7A which were already paid by 21.7.2000. The order dated 27.12.2000 quantified the amount of interest payable under Section 7Q of the Act which amount the Bank paid after almost three years. The respondent-authorities would, therefore, be required to re-calculate the amount of penalty for the said delay on the aforesaid basis after giving an opportunity of hearing to the petitioner. To avoid any future litigation, we asked the respondents whether it would be possible to quantify the amount of penal damages right away, the learned counsel for the respondents stated under instructions from Ms GA Shah, Assistant Provident Fund Commissioner, Ahmedabad that in view of the aforesaid formula, the amount of damages by way of penalty under Section 14B in the petitioner-bank's case would be about Rs. 4,26,417.00. We accordingly direct the petitioner-bank to pay the said amount to the respondent by 30th April 2005. The petition is accordingly disposed of in terms of the aforesaid direction".
39. In view of above, this Court is of the view that impugned order passed by the Appellate Tribunal dated 8 th May, 2007 as Page 38 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024 NEUTRAL CITATION C/SCA/4426/2009 JUDGMENT DATED: 29/01/2024 undefined well as the order dated 17 th August, 2001 passed by Respondent No.1 is bad in law and, therefore, same is required to quash and set aside. The disputed amount which has already been deposited with the respondent-authority, is required to be adjusted with regard to future dues or remitted back in the account of the petitioner-establishment.
40. Resultantly, petition is allowed with the aforesaid directions. Rule is made absolute accordingly.
(M. K. THAKKER,J) M.M.MIRZA / ASHISH M. GADHIYA Page 39 of 39 Downloaded on : Mon Jan 29 20:47:18 IST 2024