Haileyburia Tea Estate Ltd. v. Assistant Provident Fund Commissioner & Employees Provident Fund Appellate Tribunal

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **FRIDAY, THE 20TH DAY OF DECEMBER 2019 / 29TH AGRAHAYANA, 1941** # **WP(C).No.15914 OF 2010(L)** ## **PETITIONER:** **M/S.HAILEYBURIA TEA ESTATE LTD. ELAPPARA, IDUKKI DISTRICT, REPRESENTED BY ITS, EXECUTIVE CO-ORDINATOR, MR. K.K.NAIR.** **BY ADVS.** **SRI.MATHEWS K.UTHUPPACHAN SRI.B.J.JOHN PRAKASH SRI.TERRY V.JAMES SRI.TOM THOMAS (KAKKUZHIYIL)** ## **RESPONDENTS:** |**1**|**THE ASSISTANT PROVIDENT FUND COMMISSIONR**| |---|---| ||**COMMISSIONER, EMPLOYEES PROVIDENT FUND,**| ||**ORGANIZATION, SUB REGIONAL OFFICE, CHALAKUZHY,**| ||**BUILDING, CMS COLLEGE ROAD, KOTTAYAM-686 001.**| |**2**|**EMPLOYEES PROVIDENT FUND APPELLATE**| ||**TRIBUNAL, 7TH FLOOR, 60, SKYLARK BUILDING,, NEHRU**| ||**PLACE, NEW DELHI-110 019.**| ||**R1 BY SRI.JOY THATTIL ITOOP, SC, EPF ORGANISAtion**| **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 17.10.2019, THE COURT ON 20.12.2019 DELIVERED THE FOLLOWING:** W.P.(C).No.15914/10 2 ## **JUDGMENT** **Dated this the 20th day of December 2019** - 1.This writ petition is filed challenging Exts.P8 order dated 5.7.2007 of the 1[st] respondent imposing penalty under Section 14B of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 'Act' and P11 order dated 05.03.2010 of the 2[nd] respondent dismissing the statutory appeal filed therefrom, as also Exhibit P12 demand notice issued by the Recovery Officer. - 2.Heard the learned counsel for the petitioner and learned Standing Counsel appearing for the respondents. - 3.It is submitted by the learned counsel for the petitioner that the petitioner is a company incorporated under the Companies Act, which owns several estates planted with tea. It is stated that the Semnivalley Estate of the petitioner at Elappara is covered by the Act with Code No.KR/49 coming within the jurisdiction of the 1[st] respondent. On account of financial crisis W.P.(C).No.15914/10 3 in the tea industry, the petitioner could not remit the Provident Fund contributions for the period from January 2002 to February, 2006. Notices with regard to lock out for the period from 12.1.2003 to 15.4.2004 are produced by the petitioner as Exhibits P1 and P2. It is stated that the company had been suffering severe losses and the crisis faced by the industry was brought to the notice of the Central Provident Fund Commissioner by the petitioner. It is stated that the matter was taken note of by the Government. Relief measures had been announced by the State Government by Exhibit P6 Government Order. It is stated that the 1[st] respondent had issued orders imposing penalty and damages under Section 14B of the Act and the petitioner had challenged the recovery steps by filing W.P.(C).No.4103/2007. This Court by Exhibit P7 judgment set aside the orders passed under Section 14B and 7Q and remanded the matter for consideration on condition that the petitioner deposits the contribution with interest accrued, as also 30% of the damages. W.P.(C).No.15914/10 4 - 4.It is stated that thereafter, the petitioner appeared before the - 1[st] respondent and produced all relevant documents. However, Exhibit P8 order was passed upholding the earlier order levying damages. Though the petitioner submitted Exhibit P9 statutory appeal, the same was also rejected by Exhibit P11 and Exhibit P12 demand was raised. This Court, while admitting the writ petition had stayed the implementation of Exhibit P8 and P11. - 5.The learned counsel for the petitioner submits that the petitioner had been prompt and regular in the payment of Provident Fund dues during prior periods. It is further submitted that it is only account of the general crisis faced by the Tea Industry that the petitioner was disabled from making payments in time. It is further contended that, the levy of penalty is discretionary in nature and the mechanical act of the respondents in having levied the maximum penalty even in spite of the admitted position that the petitioner was facing financial difficulties during the relevant time was completely W.P.(C).No.15914/10 5 unsustainable. Learned counsel placed reliance on a decision of the Division Bench of this Court in Sreekamakshy Agency (P) Ltd.(M/s.) v. Employees Provident Fund Appellate Tribunal and Another [2013 (1) KHC 457] to contend that financial difficulties and the unintentional nature of the delay in payment of contribution are relevant aspects to be taken into consideration, while considering the issue of imposition of the penalty under Section 14B. In the said decision a Division Bench of this Court after considering the contentions raised on either side had also taken into account the earlier judgments of the Apex Court on the point held that the power to impose penalty under Section 14B is clearly discretionary in nature and that the financial stringency faced by the employer is an issue which have to be considered by the appropriate authority while considering the necessity to impose damages as also the quantum of such damages. The learned counsel also places reliance on the decision in Assistant Provident Fund Commissioner, EPFO and Another v. Management of RSL Textiles India Pvt,Ltd. [2017 KHC 6030]. W.P.(C).No.15914/10 6 - 6.A statement has been placed on record by the 1[st] respondent. It is contended therein that the Act is a social welfare legislation and intended to benefit workers and their families. It is further submitted that the authority has no right to reduce or waive damages unless the establishment is a sick industrial company in respect of which a Scheme for rehabiliataion has been sanctioned by the Board for industrial and financial reconstruction. - 7.It is submitted by the learned standing counsel appearing for the respondents that there was absolutely no material before the respondent authority or the appellate authority to substantiate the contention of financial difficulty urged by the petitioner as a reason for the delay in remitting the Provident Fund dues. It is stated that in view of the specific provisions of the Act and the Employees Provident Fund Scheme, 1952, the respondents are duty bound to consider the factual aspects and to impose penalty wherever there is willful default in the matter of remittance of the dues. W.P.(C).No.15914/10 7 8.A decision of this Court in Calicut Modern Spinning and Weaving Mills Limited v. RPFC reported in [1982 (1) LLJ 440] is relied on to contend that the Provident Fund dues are to be paid promptly for every month irrespective of the fact whether wages have been paid or not. A decision of the Gujarat High Court in Aravind Mills v. R.M.Gandhi [1982 Lab.I.C344 Guj] and of the Apex Court in Organo Chemical Industries v. Union of India [(1979) 4 SCC 573] as well as in Hindustan Times Limited v. Union of India [1998 (1) LLJ 682] are relied on to contend that power cut and financial problems related to indebtedness or delay in realisation of amount paid by cheque or draft are not relevant explanations to avoid liability for damages. It is therefore contended that the imposition of penalty was completely in order going by the factual circumstances and that the writ petition is only liable to be dismissed. 9.I have considered the contentions advanced on either side. It is stated by the learned counsel for the petitioner that the reason for delay in payment of EPF dues is the general fiancial W.P.(C).No.15914/10 8 crisis faced by the establishment due to adverse situation experienced by tea plantations in Kerala. However, the learned standing counsel contends that the exact reason for delay from month to months has not been furnished with documentary evidence. It is stated that the company was in good financial condition for the period 2002-2003 and modernisation had been undertaken during the period. It was found that since store cash was paid by the company as advance of wages instead of paying full wages, there was statutory liability to remit the contributions on payments due as wages. It is stated that no damages were levied for the period from 12/2003 to 2/2004, though the lockout claim was from 1/2003 to 4/2004. The reason stated is that for the remaining lock out period, “the delay is comparatively lesser than that of the other period”. It was also found that the employer was remitting dues payable to the creditors other than the EPF organisation and he had given least priority for making payment to the organisation. Therefore, it was found that there was no justification for revising the earlier order levying damages for the period from 1/2002 to 2/2006. The W.P.(C).No.15914/10 9 damages as earlier levied were sought to be enforced. Though the petitioner had filed Exhibit P9 statutory appeal, the appeal was also rejected on the ground that financial crunch is not sufficient for waiving damages for delay in depositing the PF contributions. The contention regarding absence of intention has not been considered in the appellate order as well. The only reason stated is that financial difficulty is not a sufficient ground to explain the default in making payments under the Act within time. 10.I am of opinion that the non-consideration of the aspects of financial constraints and the absence of mens rea by the original authority and the appellate authorities renders the orders passed by them bad in law for want of application of mind. Though the question of financial stringency as a ground for delayed payment has been specifically raised, it has not been properly considered. Though evidence of lock out was provided, exemption has not been extended even for the entire period of the lockout. Apart from stating that the company was in sound financial condition during 2002-2003 and that other W.P.(C).No.15914/10 10 dues were being paid, the original authority has not given credit for the specific grounds of financial stringency caused by the petitioner. The appellate authority has only held that financial constraints are not a ground justifying the delay in making remittances. In view of the decisions to the effect that financial constraints are relevant consideration to be taken into account while deciding whether penalty is to be imposed for delayed payment of compensation as also to the quantum of penalty, I am of the opinion that the the impugned orders are untenable in law. 11.In the above view of the matter, the levy of penalty under Section 14B, that too, at the maximum rate permissible is completely unjustified. In the above view of the matter, I am of the opinion that Ext.P8 and P11 orders cannot be sustained. Exts.P8 and P11orders are set aside. The amounts already remitted by the petitioner, however, need not be refunded. The writ petition is ordered accordingly. Sd/- **Anu Sivaraman, Judge** sj W.P.(C).No.15914/10 11 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE NOTICE OF LOCKOUT DATED 12.1.2003.** **EXHIBIT P2 TRUE COPY OF THE NOTICE LIFTING LOCKOUT DATED 15.4.2004.** **EXHIBIT P3 TRUE COPY OF THE ANNUAL REPORT OF THE PETITIONER COMPANY FOR THE YEAR 2005-06.** **EXHIBIT P4 TRUE COPY OF THE CERTIFICATE DATED 14.12.2006 ISSUED BY THE INDIAN BANK, ERNAKULAM MAIN BRANCH.** **EXHIBIT P5 TRUE COPY OF THE LETTER NO.KR/KTM/48 & 49/ENF.1(3) 03 6632 DATED 22.7.2003 ISSUED TO THE PETITIONER BY THE 1ST RESPONDENT.** **EXHIBIT P6 TRUE COPY OF THE GOVERNMENT ORDER DATED 2.6.2004. EXHIBIT P7 TRUE COPY OF THE JUDGMENT DATED 14.2.2007 PASSED BY THIS HON'BLE COURT IN W.P.(C) NO.4103/2007.** **EXHIBIT P8 TRUE COPY OF THE ORDER NO.KR/KTM/49/PD/ENF 1(3)07 DATED 5.7.2007 ISSUED BY THE 1ST RESPONDENT.** **EXHIBIT P9 TRUE COPY OF THE MEMORANDUM OF APPEAL (ATA NO.87(7) 2007) DATED 4.8.2007 FILED BEFORE THE 2ND RESPONDENT. EXHIBIT P10 TRUE COPY OF THE COUNTER AFFIDAVIT DATED NIL BY THE 1ST RESPONDENT IN EXHIBIT P9 APPEAL.** W.P.(C).No.15914/10 12 **EXHIBIT P11 TRUE COPY OF THE ORDER DATED 5.3.2010 OF THE SECOND RESPONDENT IN APPEAL NO.ATA NO.87(7)/2007. EXHIBIT P12 TRUE COPY OF THE LETTER DATED 13.5.2010 ISSUED BY THE 1ST RESPONDENT.** True copy PS to Judge