Janatha Tile Works Ltd. v. Employees' Provident Fund Organisation & Ors.

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR. JUSTICE AMIT RAWAL`** ``` MONDAY, THE 12[TH] DAY OF JUNE 2023 / 22ND JYAISHTA, 1945 ``` ## **`WP(C) NO. 35151 OF 2011`** ## **`PETITIONER:`** ``` JANATHA TILE WORKS LTD., REP. BY ITS CHAIRMAN SRI.K.VELAYUDHAN, MOONNIYOOR P.O., TIRURANGADI, MALAPPURAM DISTRICT - 676 311. ``` ``` BY ADVS. SRI.B.SAJEEV KUMAR SRI.M.K.THANKAPPAN ``` ## **`RESPONDENTS:`** ``` 1EMPLOYEES PROVIDENT FUND ORGANISATION, REP. BY THE ASST. PROVIDENT FUND COMMISSIONER, BHAVISHYA NIDHI BHAVAN, SUB REGIONAL OFFICE, P.B.NO.1806, ERANHIPALAM P.O., KOZHIKODE, PIN 673 006. 2THE RECOVERY OFFICER, EMPLOYEES PROVIDENT FUND ORGANISATION, BHAVISHYA NIDHI BHAVAN, SUB REGIONAL OFFICE, P.B.NO.1806, ERANHIPALAM P.O., KOZHIKODE, PIN 673 006. 3THE E.P.F APPELLATE TRIBUNAL, REP. BY ITS REGISTRAR, 7TH FLOOR, SKYLARK BUILDING, 60 NEHRU PALACE, NEW DELHI. ``` ``` BY ADVS. ``` ``` SRI.THOMAS MATHEW NELLIMOOTTIL, SC, P.F. ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12.06.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) NO. 35151 OF 2011 -2- ``` ## **`JUDGMENT`** Order dated 03.05.2011 of the Appellate Tribunal Ext.P4 and dated 17.05.2006 of the Assessing Officer Exts.P2 and P2(a) assessing the damages under Section 7Q and 14B of Employees Provident Fund & Miscellaneous Provisions Act, 1952 (hereinafter referred to as ‘the Act’, for short) on account of the failure of the petitioner to remit the contribution of the employees, are under challenge in the present writ petition. 2. Petitioner is stated to have been indulged in manufacturing of tiles and was remiss in not making contribution resulting into proceeding under Section 7A of the Act. It is alleged that after selling the part of the land, liability under Section 14B was met with. But it was declared to be sick under the Industrial Revival plan by the Department of Industries and later on, company was run by the workers and engaged in the manufacturing and sale of roofing tiles. Neither the Assessing Officer nor the Appellate Authority taken into ``` WP(C) NO. 35151 OF 2011 -3- ``` consideration, despite specific pleadings in the ground of appeal and objections, the facts and thus the orders are not sustainable in the eyes of law. Similar plea has also been taken in the writ petition which fact has not been denied by the respondent in the counter affidavit and the said pleadings are deemed to be admitted. 3. It was next contended that in an identical matter i.e., Writ Petition No.3693/2016 a similar company was declared sick by the Industrial Department the damages have been quashed vide order dated 07.08.2008. 4. On the other hand, Mr.Thomas Mathew Nellimoottil, learned Standing Counsel appearing on behalf of the Provident Fund Commissioner submitted that the provisions of second proviso to Section 14B of the Act does not require any further interpretation, it has to be a company registered under the Sick Industrial Companies Act and not in the manner and mode as tried to be projected. It is also a matter of fact that the company after selling the land survived and carried on ``` WP(C) NO. 35151 OF 2011 -4- ``` the business. Once the company admitted the payment of liability after selling the land, the interest under section 7Q and 14B of the Act were inevitable. In support of the contention relied upon the judgment of Supreme Court in **Horticulture Experiment Station, Gonikoppal, Coorg V. The Regional Provident Fund Organisation (2022 LiveLaw (SC) 202)** wherein the levy of damages had been held to be sine qua non. 5. I have heard learned counsel for the parties and appraised the paper book. 6. The order dated 08.08.2014 rendered in Writ Appeal No.331 of 2009 reads as under: “Heard the learned counsel for the appellants, learned counsel appearing for the 1[st] respondent and the learned Government Pleader appearing for respondents 2 and 3. 2. The challenge in this appeal is against the judgment of the learned single Judge absolving the 1[st] respondent from damages under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act. 3. Although various contentions are raised ``` WP(C) NO. 35151 OF 2011 -5- ``` in the appeal memorandum and were reiterated before us, reading of the judgment itself shows that it was considering the fact that the 1[st] respondent is a sick industry and is a Cooperative Society which is run by none other than the workers that the learned single Judge has exercised his discretion and passed the impugned judgment. We do not think that the view taken by the learned single Judge is an illegal one to be corrected. Writ appeal is dismissed.” 7. However the similar controversy came to be pondered by this Court in W.P.(C) No. 21617 of 2007 and vide order dated 03.08.2007 in paragraph nos. 3 and 4 held as under: “3. I have considered the contentions of the petitioner. Section 14B reads as under. “[14B.Power to recover damages.Where an employer makes default in the payment of any contribution to the Fund[1] [,the [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 [or sub-section (5) of section 17] or in the payment of any charges payable under any other ``` WP(C) NO. 35151 OF 2011 -6- ``` provision of this Act or of 5 [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 such damages, not exceeding the amount of arrears, as it may thinks fit to impose: [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.]” ``` WP(C) NO. 35151 OF 2011 -7- ``` ## (emphasis supplied) What is contemplated under the 2[nd] proviso to Section 14B is firstly a registration as a sick Company with the Board of Industrial and Financial Reconstruction and secondly, sanctioning of a scheme for rehabilitation by the BIFR. 4. Admittedly, in this case, the petitioner has only been registered as a sick unit by the District Industries Centre, as per Ext.P2. There is no registration with the BIFR, much less sanction of a scheme for rehabilitation of the Company by the BIFR. Since the petitioner is claiming the benefits of the proviso, it is for the petitioner to satisfy this Court that the petitioner comes squarely within the four corners of the said proviso. Admittedly, the petitioner has not been registered with the BIFR and the BIFR has not sanctioned any scheme and therefore clearly the petitioner is not entitled to the benefits of the said proviso. That being so, there is no merit in the writ petition and accordingly, the same is dismissed. However, this shall not prejudice to the right of the petitioner in the appeal pending before the Tribunal. ” 8. The view expressed in the aforesaid judgment dated 03.08.2007 is the correct view for the reason that ``` WP(C) NO. 35151 OF 2011 -8- ``` the company has to be declared under the Sick Industrial Companies Act and not in the manner and mode. No documentary evidence has been placed on record of parting with the possession and the title of the company or the petitioner firm to the workers. The same was the position at the time of appeal as per the appendix attached with the same. Mere assertion in the writ petition does not suffice the requirement of pleading in a writ court until and unless it is supported by some documents. The pleading in the writ the petition are not in the nature of pleading of plaint where the documentary evidence has to be filed later on and proved. Such type of pleading in the writ court are not accepted. In the judgment in **Horticulture (supra)** it has been held that even if there is no mens rea the damages have to be paid. Paragraph No. 12 of the same reads as under: “12. The three-Judge Bench of this Court in Union of India v. Dharmendra Textile Processors and others (supra) while examining the scope and ambit of Section 271(1)(c) of the ``` WP(C) NO. 35151 OF 2011 -9- ``` Income Tax Act, 1961 held that as far as the penalty inflicted under the provisions is a civil liability is concerned, mens rea or actus reus is not an essential element for imposing civil penalties and overruled the two-Judge Bench judgment in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Another, (2007) 6 SCC 329 and approved the view expressed by a two-Judge Bench of this Court in Chairman, SEBI (supra) and held in paras 18 and 20 as under: “18. The Explanations appended to Section 271(1)(c) of the IT Act entirely indicates the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The judgment in Dilip N. Shroff case [(2007) 6 SCC 329] has not considered the effect and relevance of Section 276-C of the IT Act. Object behind enactment of Section 271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276-C of the IT Act. 20. Above being the position, the plea that Rules 96ZQ and 96-ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff case [(2007) 6 SCC 329] was not correctly decided but SEBI case [(2006) 5 SCC 361] has analysed the legal position in the correct perspectives. The reference is answered. The matter shall now be placed before the Division ``` WP(C) NO. 35151 OF 2011 -10- ``` Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to vires of Rule 967-Q(5) are concerned. In all other cases the orders of the High Court or the Tribunal, as the case may be, are quashed and the matter remitted to it for disposal in the light of present judgments. Appeals except Civil Appeals Nos. 3397 & 3398-99 of 2003, 4096 of 2004, 3388 & 5277 of 2006, 4316, 4317, 675 and 1420 of 2007 and appeal relating to SLP (C) No. 21751 of 2007 are allowed and the excepted appeals shall now be placed before the Division Bench for disposal.” 9. There was no occasion for the appellate tribunal to deal with the assertions in the absence of any material evidence. I do not find any illegality and perversity in the order of the Assessing Officer or Appellate Tribunal. No ground for interference is made out. Writ petition is dismissed. Interim order granted by this Court stands vacated. ``` Sd/- ``` ``` AMIT RAWAL JUDGE ``` ``` vv ``` ``` WP(C) NO. 35151 OF 2011 -11- ``` ## **`APPENDIX OF WP(C) 35151/2011`** ## **`PETITIONER EXHIBITS`** ``` EXHIBIT P1TRUE COPY OF THE CERTIFICATE BEARING NO.B/981/01 DATED 26-06-02 ``` ``` EXHIBIT P2TRUE COPY OF ORDER DATED 17-05-2006 EXHIBIT P2(a)TRUE COPY OF THE ORDER DATED 17-05-06 EXHIBIT P3TRUE COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT ``` ``` EXHIBIT P4TRUE COPY OF THE ORDER DATED 3-05-2011 PASSED BY THE 3RD RESPONDENT ```