Employees' Provident Fund Organization v. Thengakkal Estate Pvt. Ltd. & Ors

## IN THE HIGH COURT OF KERALA AT ERNAKULAM ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **&** **THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P. THURSDAY, THE 4[TH] DAY OF AUGUST 2022 / 13TH SRAVANA, 1944 WA NO. 599 OF 2022** **AGAINST THE ORDER/JUDGMENTWP(C) 25266/2014 OF HIGH COURT OF KERALA** ## **APPELLANT/S:** EMPLOYEES PROVIDENT FUND ORGANISATION , REP. BY THE REGIONAL PROVIDENT FUND COMMISSIONER, REGIONAL OFFICE, ADITYA SABARI TOWER, POST OFFICE, ROAD, THIRUNAKKARA, KOTTAYAM-686 001. BY ADV JOY THATTIL ITTOOP ## **RESPONDENT/S:** 1 M/S. THENGAKKAL ESTATE PVT LTD., VANDIPERIYAR, IDUKKI. 2 THE EMPLOYEES' PROVIDENT FUND TRIBUNAL, SCOPE MINAR, 4TH FLOOR, CORE II, LAXMI NAGAR, DISTRICT CENTRE, NEW DELHI. BY ADV N.JAMES KOSHY THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 04.08.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2- ## **W.A. NO. 599 of 2022** ## **A.K.JAYASANKARAN NAMBIAR. J., & MOHAMMED NIAS.C.P.J.** **…..................................................................................** ## **W.A. NO. 599 of 2022** **…................................................................................ Dated this the 4[th] day of August, 2022** ## JUDGMENT ## A.K. Jayasankaran Nambiar, J. The Employees' Provident Fund Organization represented by the Regional Provident Fund Commissioner, Kottayam is the appellant before us, aggrieved by the judgment dated 28-2-2022 of the learned Single Judge in W.P. (C ) No. 25266 of 2014. The brief facts necessary for disposal of the appeal shown of unnecessary details is as follows:- 2. The appellant organization was the writ petitioner before the learned single Judge, aggrieved by Ext. P6 order dated 10-6-2014 of the Employees' Provident Fund Appellate Tribunal, New Delhi, that set aside Exts. P1 and P2 orders passed by the respective Regional Provident Fund Commissioner, imposing penalty under Section 14-B of the Employees' -3- ## **W.A. NO. 599 of 2022** Provident Fund and Miscellaneous Provisions Act, 1952 to an extent of Rs.1,52,59,376/- on the respondent Company. The Regional Provident Fund Commissioner who had passed Exts. P1 and P2 orders had after taking note of the fact that the entire contribution required to be paid under the Act by the employer for the period from June 1992 to April 2003 had already been paid by them together with interest thereon, nevertheless deemed it fit to impose the maximum penalty provided for under Section 14-B of the Act. 3. In the appeal, that was preferred against the said orders of the Regional Provident Fund Commissioner, in terms of S. 7-I of the Act, the Appellate Tribunal found that the original authorities had not really exercised their discretion in the matter, and had mechanically imposed the maximum penalty provided for under the Act. It therefore, proceeded to analyse the factual situation that led to the delay in effecting the contributions to the Employees' Provident Fund Organization (“EPFO” for short) and on a consideration of the same, deemed it appropriate to reduce the damages ordered by the original authorities to 5% of the total demand. It was aggrieved by the said order of the Tribunal, that reduced the quantum -4- ## **W.A. NO. 599 of 2022** of damages found payable by the respondent company, that the appellant herein had approached the writ court. 4. The contention of the appellant before the writ court was essentially two fold. Firstly, it was contended that in as much as the respondent company had subsequently been declared as a sick industrial unit and there were provisions under Section 14-B that enabled them to approach the Central Board for reduction of the penalty imposed on them, it was not open to them to approach the Tribunal for relief against the orders imposing the penalty on them. As a corollary, it was contended that the Tribunal itself had no jurisdiction to entertain the appeals under the circumstances enumerated above. Secondly, it was the contention of the learned counsel for the writ petitioner that the Tribunal erred in reducing the penalty amount to the figure of 5% of the amount confirmed against the respondent by the original authorities. It was his submission that a reduction to such an extent was not warranted on the facts of the case, more so, when the Tribunal had not indicated in its order as to why it felt that reduction to the extent above was warranted. 5. The learned Single Judge who considered the matter found that -5- ## **W.A. NO. 599 of 2022** in respect of all the estates that had earlier been owned by the group that controlled the companies, there had been a number of proceedings for recovery of various statutory dues, and the financial condition of the group company was not conducive to facing a demand of the nature impugned in the appeal before the Tribunal. The learned single Judge, therefore, felt that no interference was called for with the order of the Tribunal impugned in the writ petition and the writ petition was, therefore, dismissed. 6. In the appeal before us, the learned counsel for the appellant Sri. Joy Thattil, re-iterates the arguments that were advanced before the learned Single Judge in the writ petition. In particular, he would take us through the provisions of Section 14-B of the EPF Act, as also the provisions of Para 32 (A) & (B) of the Employees' Provident Fund Scheme, 1952, to point out that in cases where the second proviso to Section 14-B of the Act stood attracted, the provisions of the Scheme referred above, clearly mandate that the Central Board can grant a reduction of damages only up to a maximum of 50%. He contends therefore, that even in the case of those persons to whom the second proviso to Section 14-B is not attracted, when the Tribunal exercises its powers to reduce the quantum of damages that is -6- ## **W.A. NO. 599 of 2022** imposed by the original authority, the said power can be exercise only to the extent of reducing the damages to 50% of the original demand. It is his further submission that on the facts of the instant case, the respondent had not established its financial difficulties before the authorities at any stage, and, therefore, the order of the Tribunal requires to be interfered with. 7. On a consideration of the submissions of Sri. Joy Thattil, as also the rival submissions of Sri. James Koshy, the learned counsel appearing for the respondent Company, we find that, for the reasons that follow, the appeal must fail. While it may be a fact that under Section 14B, there is a power conferred on the authorities under the Act to recover from the employer by way of penalty, such damages not exceeding the amount of arrears as may be specified in the scheme concerned, the said power is one that has to be exercised judicially. In other words, there cannot be a mechanical demand of the entire contributions found payable together with interest from the employer. The power coupled with the discretion conferred on the original authority is one that has to be exercised, inter alia after taking note of the circumstances under which -7- ## **W.A. NO. 599 of 2022** the delay in the payment of contributions and interest had occurred. A reading of the orders of the original authority, produced as Exts. P1 and P2 in the writ petition, does not reflect a consideration of those factors and the said authorities appear to have mechanically directed a payment of penalty quantified at 100% of the dues realised from the employer. It was under the said circumstances, that when the appeal against the said orders of the original authority were considered by the Tribunal, the Tribunal took note of the fact that pursuant to a sale of the assets of the employer, and a realisation of the sale proceeds, the entire dues owing to the EPFO, together with interest thereon as provided under Section 7-Q of the Act, had already been paid to the organization. The Tribunal, therefore, found that the penalty imposed in terms of Section 14-B had to be reduced to the extent of 5% of the demand confirmed by the original authority. 8. Although it may be a fact that the reasoning of the Tribunal is not entirely satisfactory, in that there is no specific reference as to the particular reasons that informed the reduction in the quantum of damages, especially to the extent of 5% of the demand confirmed by the original authority, we find that the provisions of Section 14-B contemplate the ## **W.A. NO. 599 of 2022** recovery of penalty as damages and, as rightly noticed by the Tribunal in the order impugned in the writ petition, the Supreme Court in the case of ## **Organo Chemical Industries and Another v. Union of India and Others** **(AIR 1979 SC 1803)** had observed that the word 'damages' has to be understood as an amalgam of penalty and compensation and the words “as it may think fit” essentially provide the authority concerned with a wide discretion in the assessment of damages. 9. On the facts of the instant case, we feel that in as much as the entire dues owing from the employer, together with the interest in terms of Section 7-Q in an amount of Rs 53, 33,447/-, had already been recovered from the respondent company, the penalty under Section 14-Q ought to have been restricted to an amount which was a percentage of the interest amount that was collected from the employer, since the compensatory aspect of the damages had already been covered by the interest collected under Section 7-Q of the Act. When we consider the quantum of damages directed to be imposed on the respondent by the Tribunal (Rs.7,62,968/-), we find the same to be approximately 15% of the interest already collected from the employer under Section 7-Q of the Act. The said amount, we feel -9- ## **W.A. NO. 599 of 2022** is adequate, on the facts and circumstances of the instant case, towards the damages leviable in terms of Section 14-B of the Act. Thus, for the reasons already stated by the Tribunal in the order impugned in the writ petition, the reasons stated in the judgment of the learned single judge impugned in this writ appeal, and the reasons stated in this judgment, we dismiss the writ appeal. No costs. **Sd/- A.K.JAYASANKARAN NAMBIAR, JUDGE** **Sd/- MOHAMMED NIAS C.P JUDGE** _ani/5/8/_ _/true copy_