DISTRICT NIRMITHI KENDRA PATHANAMTHITTA v EMPLOYEES PROVIDENT FUND ORGANISATION

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE K.SURENDRA MOHAN & THE HONOURABLE MRS. JUSTICE MARY JOSEPH** **FRIDAY, THE 3RD DAY OF MARCH 2017/12TH PHALGUNA, 1938** **WA.No. 696 of 2015 () IN WP(C).234/2012** **----------------------------------------AGAINST THE ORDER IN WP(C) 234/2012 of HIGH COURT OF KERALA DATED 29-10-2014** **-----------------------------------------------** ## **APPELLANT(S)/PETITIONER :** **-------------------------------------------** **DISTRICT NIRMITHI KENDRA PATHANAMTHITTA, REPRESENTED BY ITS PROJECT MANAGER, SASIDHARAN NAIR, S/O.SADASIVAN NAIR, THUNDIYIL HOUSE, MALAYALAPUZHA, THAZHAM P.O., PATHANAMTHITTA.** **BY ADVS.SRI.RENJITH THAMPAN (SR.) SMT.P.R.REENA SRI.V.M.KRISHNAKUMAR** ## **RESPONDENT(S)/RESPONDENTS :** **-----------------------------------------------------** ## **1. THE EMPLOYEES PROVIDENT FUND ORGANIZATION REP.BY ASSISTANT COMMISSIONER,BHAVISHYA NIDHI BHAVAN, THIRUVANANTHAPURAM,PIN-695 004.** **2. RECOVERY OFFICER,** - **THE EMPLOYEES PROVIDENT FUND ORGANIZATION,BHAVISHYA NIDHI BHAVAN, THIRUVANANTHAPURAM,PATTAM PALACE P.O., PIN-695 004.** **3. THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, 4TH FLOOR, CORE 2,SCOP MINAR, LAKSHMI NAGAR, NEW DELHI-110 092.** **R1&2 BY ADV. SRI.N.N.SUGUNAPALAN (SR.) R1&2 BY ADV. SMT.T.N.GIRIJA, SC,EPF ORGANISATION** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 03-03-2017, ALONG WITH WA. 702/2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **VS** ## C.R. ## K.SURENDRA MOHAN & MARY JOSEPH, JJ. ---------------------------------------- ## W.A.Nos.696 & 702 of 2015 ----------------------------------------Dated this the 3[rd] day of March, 2017 ## JUDGMENT ## K.SURENDRA MOHAN, J. As per judgment dated 29.10.2014, the learned Single Judge has dismissed two writ petitions, W.P.(C) Nos.234/2012 and 26660/2014. Both the writ petitions were filed by the appellant. The judgment in W.P.(C) No.234/2012 is challenged in W.A.No.696/2015 and the judgment in W.P.(C)No.26660/2014 is challenged in W.A.No.702/2015. 2. The appellant is an institution formed by the State Government for the purpose of undertaking studies in the development of low cost technology in the house construction sector. The respondents who are the Employees' Provident Fund organisation and its officers found that the appellant had not been remitting contributions under the Employees' Provident Funds and W.A.Nos.696 & 702 of 2015 -2- Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act' for short). Accordingly, an enquiry was conducted under Section 7-A of the Act and an amount of Rs.11,82,705/- (Rupees Eleven lakhs eighty two thousand seven hundred and five only) was assessed as contribution payable by the appellant for the period from 01.01.1996 to 01.07.1996. It is not in dispute that, the order Ext.P3 was not challenged by the appellant and that, the amount computed as per the said proceedings has been remitted. The appellant is aggrieved by Ext.P4 order that followed Ext.P3. Ext.P4 was issued under Section 14-B of the Act levying an amount of Rs.7,81,679/- (Rupees Seven lakhs eighty one thousand six hundred and seventy nine only) as damages. It was challenging the said order that the appellant had filed W.P.(C)No.234/2012 before this Court. Apart from Ext.P4, as per a separate order, the respondents had levied interest under Section 7-Q of the Act, which is Ext.P8 in W.A.No.702/2015. The said order was under challenge in W.P.(C)No.26660/2014. As already stated above, both the writ petitions have been dismissed by the W.A.Nos.696 & 702 of 2015 -3- judgment appealed against. 3. According to the counsel for the appellant, the institution has only a limited source of income and therefore, the liability of paying the amounts assessed under Section 7-A of the Act itself has plunged the appellant into an acute state of financial stringency. It would be financial ruin, if the interest demanded under Section 7- Q of the Act and the damages imposed under Section 14-B of the Act were recovered. The learned counsel places reliance on the decisions of this Court in Ernakulam District Cooperative Bank Ltd. v. Regional Provident Fund Commissioner [2000 KHC 193] and Employees Provident Fund Organisation, Kozhikode v. M/s Sreekamakshy Agency (P) Ltd., Kozhikode and Another [2013(2) KHC 773] to contend that, the financial difficulties of the appellant ought to have been considered before imposing damages under Section 14-B of the Act. The same considerations ought to have applied, in so far as levy of interest under Section 7-Q is also concerned. The counsel therefore contends that, the learned Single Judge has erred in W.A.Nos.696 & 702 of 2015 -4- dismissing the writ petitions. 4. The contentions of the learned counsel for the appellant are refuted by the Standing Counsel who appears for all the respondents, contending that the interest under Section 7-Q of the Act is chargeable automatically. The contributions ought to have been paid for the period from 1996 onwards, which was not paid. The delay in making the remittances has resulted in loss to the Provident Fund and therefore, the interest and the damages charged are only natural consequences of the omission to remit the contributions, that were due. According to the learned counsel, the Act is a social welfare legislation and the provisions thereof have to be given effect to, considering the larger interests of the society. It serves a social purpose and it is for the advancement of the same that, the damages are imposed. ## 5. Heard. 6. It is not in dispute that, the appellant was a covered establishment, as per account No.KR/22250, from 01/1996 onwards. Therefore, there cannot be any dispute W.A.Nos.696 & 702 of 2015 -5- that the contributions under the Act ought to have been paid for the period that is under dispute. The proceedings of the Assistant Provident Fund Commissioner under Section 7-A of the Act is dated 06.10.2006. The said order was not the subject matter of challenge before any higher authority at any time. Therefore, the said proceedings have become final. It is also not in dispute that, the amount assessed as per the said proceedings have been paid. In view of the above, Section 7-Q is attracted and levy of interest is a natural consequence. Therefore, we do not find anything wrong in the proceedings of the respondents levying interest under Section 7-Q of the Act. Consequently, the learned Single Judge was right in dismissing W.P.(C) No.26660/2014. 7. In W.P.(C)No.234/2012, from which W.A.No.696/2015 is filed, the challenge was against Ext.P4 order dated 11/03/2010, levying damages under Section 14-B of the Act. It has been held by this Court in a number of decisions that, the levy of damages under Section 14-B of the Act is neither automatic nor a natural consequence, W.A.Nos.696 & 702 of 2015 -6- whenever there is delay in making the contributions under the Act. The decisions in Indian Telephone Industries Ltd. v. Asstt. P.F. Commissioner and Others [2006 KHC 1655], Employees Provident Fund Organisation's case (supra) as well as Ernakulam District Cooperative Bank's case (supra) are on the point. It has been held by the Division Bench in the two decisions of the year 2013 referred to above that, the levy of damages under Section 14-B of the Act is discretionary. Therefore, a decision has to be taken by the authority, taking into account the contentions raised as well as the attendant circumstances. A perusal of Section 14-B of the Act is relevant in the above context. Section 14-B of the Act reads as under :- “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 sub-section (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 W.A.Nos.696 & 702 of 2015 -7- 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 my 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.]” For the purpose of attracting the above provision, it is necessary for the authority to first find that, there was default in payment of contribution to the fund. In such circumstances, the officer who is authorised is empowered to recover damages not exceeding the amount of arrears, as may be specified in the scheme. The words 'may recover' clearly shows that, the officer is conferred with the W.A.Nos.696 & 702 of 2015 -8- discretion to decide whether or not to impose damages. The officer is also empowered to fix the quantum of damages. The quantum of damages would have to be fixed taking into account the contentions of the establishment against which the order is proposed as well as the attendant circumstances. 8. A perusal of Ext.P4 which is the impugned order imposing damages under Section 14-B of the Act does not reveal any consideration of the above relevant aspects. The learned Single Judge has proceeded to dismiss the writ petition, on the assumption that the only contention raised was regarding the financial incapacity of the appellant. In fact, the impugned order Ext.P4 does not disclose a consideration of the relevant factors referred to above. Therefore, Ext.P4, the impugned order in W.P.(C) No.234/2012 is unsustainable. The same is accordingly set aside. In the result, it is ordered as follows :- (i) W.A.No.702/2015 is dismissed. (ii) W.A.No.696/2015 is allowed, setting aside the W.A.Nos.696 & 702 of 2015 -9- judgment of the learned Single Judge to the extent it has dismissed W.P.(C)No.234/2012. The said writ petition is allowed, the impugned order Ext.P4 is quashed. (iii) The Assistant Provident Fund Commissioner, Thiruvananthapuram shall pass fresh orders under Section 14B of the Act, in accordance with law. Sd/K.SURENDRA MOHAN, JUDGE Sd/MARY JOSEPH, JUDGE vs /TRUE COPY/ PA TO JUDGE