JEWEL HOMES PVT.LTD v. EMPLOYEES PROVIDENT FUND ORGANISATION

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN TUESDAY, THE 10TH DAY OF JANUARY 2012/20TH POUSHA 1933 WPC.No. 25884 of 2011 (I) ------------------------- PETITIONER(S): ------------- JEWEL HOMES PVT.LTD, CASAGRANTE BUILDING,2ND FLOOR, OPP. TVS SHOWROOM DESABHIMANI JUNCTION,KALOOR, KOCHI-682 017 REPRESENTED BY ITS MANAGING DIRECTOR, P.A. JIHAS AGED 45 YEARS, SON OF P.A. ABDUL RAHIMAN. BY ADVS.SRI.B.ASHOK SHENOY SMT.LAKSHMI B.SHENOY RESPONDENT(S): -------------- 1 EMPLOYEES PROVIDENT FUND ORGANISATION, REPRESENTED BY ITS ASSISTANT PROVIDENT FUND COMMISSIONER,SUB REGIONAL OFFICE,36/685 A BHAVISHYANIDHI BHAVAN,P.B.NO.1895, KALOOR KOCHI 682 017. BY SRI.A.RAJASIMHAN,SC,EPF ORGANISATION DR.S.GOPAKUMARAN NAIR (SR.),SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10-01-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **APPENDIX** ## **W.P.(C) No. 25884/2011** ## **PETITIONER'S EXHIBITS:** **EXT.P1 : COPY OF LETTER NO.KR/KCH/CIRCLE:31/DAMAGES/KR/21865/CA DATED 23.6.2011 ISSUED BY RESPONDENT TO PETITIONER EXT.P2 : COPY OF REPLY LETER DATED 6.7.2011 SUBMITTED BY PETITIONER TO RESPONDENT WITH POSTAL ACKNOWLEDGEMENT IN RESPECT OF IT SIGNED BY RESPONDENT EXT.P3 : COPY OF ORDER NO.KR/KC/21865/DAMAGES CELL/7Q/2011/9982 DATED 21.9.2011 ISSUED BY RESPONDENT TO PETITIONER** ## **RESPONDENT'S EXHIBITS:** ## **NIL** ## **//TRUE COPY//** ## **P.A. TO JUDGE** vps ## **P.N.RAVINDRAN** , **J.** ## **---------------------------** ## **W.P.(C) No. 25884 OF 2011 -------------------------Dated this the 10[th] day of January, 2012** ## **J U D G M E N T** The petitioner is a company registered under the Companies Act, 1956 engaged in the business of construction and sale of apartments. It is an establishment covered under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act' for short) and the Schemes framed thereunder. In this writ petition, the petitioner challenges Ext.P3 order issued by the Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Kochi levying the sum of Rs.17,236/- as interest under section 7Q of the Act for delayed payment of contribution to the Employees Provident Fund Scheme 1952, the Employees Deposit Linked Insurance Scheme, 1976 and the Employees Pension Scheme, 1995 during the period from March 2007 to December 2009. The petitioner also seeks a declaration that interest can be levied under paragraph 38 of the Employees Provident Fund Scheme, 1952 only from the 21[st] day of the month following the month in which the contribution is deducted from the employees. The brief facts of the case are as follows. WPC No.25884/2011 2 2. By Ext.P1 notice dated 23.6.2011 the Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Kochi called upon the petitioner to pay the sum of Rs.17,236/- by way of interest under section 7-Q of the Act for the period from March 2007 to December, 2009. A statement showing the amount due under section 7-Q of the Act for each month was enclosed along with Ext.P1. Though Ext.P1 also relates to levy of damages under section 14B of the Act, the said order is under challenge in appeal before the Employees Provident Fund Appellate Tribunal, New Delhi and therefore the said part of the order is not under challenge in this writ petition. Upon receipt of Ext.P1, the petitioner filed Ext.P2 representation dated 6.7.2011 contending that the contribution for a particular month, for example March 2007 which is deducted from the salary paid for that month in April 2007 need be remitted with the Employees Provident Fund Organisation only by 15[th] of May and not by 15[th] of April as held by the Employees Provident Fund Organisation. The relevant portion of Ext.P2 representation is extracted below for easy reference. _“We may respectfully submit that the delay reckoned for the purpose of demand of interest is not correct in as much as the due date reckoned in the statement annexed to the letter under reference, is erroneous, in as much it is not reckoned in terms of Paragraph 38(1) of the Employees Provident Fund Scheme 1952. Going by Paragraph 38 of the Employees Provident Fund Scheme, contributions are payable only within 15 days of the close of the month, in which wages is paid and deduction towards contributions is made. When that be so, as wages to our employees for each_ WPC No.25884/2011 3 _month, are being paid by us in the succeeding month, with deductions towards employees' contributions being made in the succeeding month only; the contributions are to be paid from our en_ d _only before 15[th] of the month following the month in which payment of wages is made. For instance, the wages for the month of March 2007, being paid in April 2007 with deductions towards employees' contributions being made only in April 2007; contributions from our end are payable in terms of Paragraph 38 of the Employees Provident Fund Scheme, only by 15.5.2007 and not by 15.4.2007 as is reckoned in the statement annexed to your_ ” _letter._ The petitioner contented that the interest arrived at will have to be re-determined on that basis. 3. The main contention raised in the writ petition is identical to the contention raised in paragraph 2 of Ext.P2 representation. In addition, it is contended that under a circular the Employees Provident Fund Organisation has granted 5 days grace period for remittance of the contribution and therefore interest can be levied only from the 21[st] day of the month following the month in which deduction of contribution is made in the course of disbursement of salary to employees. In other words, the contention raised by the petitioner is that as the contribution for a particular month is deducted from the salary for that month when salary is paid in the next month, the period of 15 days stipulated in paragraph 38 of the Scheme is 15 days from the end of the month in which contribution is deducted from the salary and not 15 days from the end of the month in respect of which the WPC No.25884/2011 4 ## contribution is deducted. 4. The learned standing counsel appearing for the Employees Provident Fund Organisation has filed a statement dated 10.11.2011 wherein it is contended that remittances to the Employees Provident Fund Scheme 1952, the Employees Deposit Linked Insurance Scheme, 1976 and the Employees Pension Scheme, 1995 have to be made within 15 days of the close of every month. It is further conceded that five days grace period is allowed to deposit the dues. The relevant portions of the statement are extracted below. _3. The Provident Fund and other contributions have to be deposited by the 15[th] of the next month in which the employees of the establishment has worked in the establishment and the dues become payable to him. The contributions have to be deposited by the employer/establishment only after beneficiary worker has already worked and thus earned this amount in terms of the contract of employment and the provisions of the Act._ _4. Paragraph 30 read with Paragraph 38 of the Employees' Provident Fund Scheme, 1952, Para 3 of the Employees' Pension Scheme, 1955 and Para 8 of the Employees' Deposit Linked Insurance Scheme, 1976 specifies the mode and date of payment of contributions and administrative charges by the employer under the said scheme. Accordingly remittances have to be made within 15 days of close of every month._ _5. It is submitted that all the covered establishments are required to pay the contributions and administrative charges as prescribed in Section 6 of the Act on or before 15[th] of the month following the month to which the dues relates. However 5 days grace period is allowed to deposit the dues in case, if the 20[th] of a month happens to be a holiday, the dues should be deposited on the preceding working day. If the amount of dues is not remitted within the stipulated time (including 5 days grace period) penal damages and simple interest can be imposed under section 14 B and 7Q of the Act._ _8. It is also submitted that the grace time of 5 days is allowed only for remitting the dues and not for calculating the_ WPC No.25884/2011 5 _interest and damages payable under Section 7Q and Section 14B of the Act. The delay in remitting the dues after 20[th] of the month will attract the interest under Section 7Q and penal damages under Section 14B of the Act. Hence the contention that interest is leviable only from the 21[st] day of the close of the following month is not legally correct.”_ In short, the contention of the Employees Provident Fund Organisation is that the contribution deducted in respect of a particular month has to be remitted within 15 days from the end of the month in respect of which the contribution is deducted and not within 15 days from the end of the month in which recovery is effected from the wages paid to the employees. 5. I heard Sri.Ashok B.Shenoy, learned counsel appearing for the petitioner and Sri.A.Rajasimhan, learned standing counsel appearing for the Employees Provident Fund Organisation. I have also gone through the pleadings and the materials on record. The fact that there was delay in remittance of contribution to the Employees Provident Fund Scheme 1952, the Employees Deposit Linked Insurance Scheme, 1976 and the Employees Pension Scheme, 1995 during the period from March 2007 to December 2009 is not in dispute. The fact that the contribution for the said period was paid in full though belatedly is also not in dispute. The only contention raised by the petitioner is that the interest levied as per Ext.P1 will have to be refixed by giving it 35 days time for remittance of the contribution WPC No.25884/2011 6 which was deducted from the wages paid to the employees. In other words, the petitioner does not dispute its liability to pay interest but only the quantum of amount payable by way of interest. The dispute raised by the petitioner thus centers around the interpretation to be placed on paragraph 38 of the Employees Provident Fund Scheme 1952, paragraph 8 of the Employees Deposit Linked Insurance Scheme, 1976 and paragraph 3 of the Employees Pension Scheme, 1995. 6. Paragraph 38 of the Employees Provident Fund Scheme 1952 reads as follows: _“38. Mode of payment of contributions.-The employer shall, before paying the member his wages in respect 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 an administrative charge of such percentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within 15 days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contributions and administrative charge.” (emphasis supplied)_ 7. Paragraph 8 of the Employees Deposit Linked Insurance Scheme, 1976 reads as follows: _“8. Mode of payment of contribution-The contribution by the employer shall be remitted by him together with administrative charges at such rate as the Central Government may fix from time to time under sub-section (4) of section 6C of the Act (at_ WPC No.25884/2011 7 _present the rate of contribution is @ 0.05% of Insurance Fund and its administrative charges @ 01.01%) to be deposited within fifteen days of the close of every month by a separate bank draft or cheque or by remittance in cash in such manner as may be specified in this behalf by the Commissioner. The cost of remittance, if any, shall be borne by the employer.”_ _(emphasis supplied)_ ## 8. Paragraph 3 of the Employees Pension Scheme, 1995 reads as follows:- _“3. Employees' Pension Fund-From and out of the contributions payable by the employer in each month under section 6 of the Act or under the rules of the Provident Fud of the establishment which is exempted either under clauses (a) ad (b) of sub-section (1) of section 17 of the Act or whose employees are exempted under either paragraph 27 or paragraph 27A of the Employees' Provident Funds Scheme, 1952, a part of contribution representing 8.33 per cent of the employees' pay shall be remitted by the employer to the Employees' Pension Fund within 15 days of the close of every month by a separate bank draft or cheque on account of the Employees' Pension Fund contribution in such manner as may be specified in this behalf by the Commissioner. The cost of remittance, if any, shall be borne by the employer.”_ _(emphasis supplied)_ 9. Paragraph 38 of the Employees Provident Fund Scheme 1952, stipulates that the employer shall before paying the member his wages in respect of any period or part of a period for which contributions are payable, deduct the employee's contribution from his wages. It is also provided that the employer shall within 15 days of the close of every month remit the employees contribution thus deducted together with his own contribution as well as administrative WPC No.25884/2011 8 charges. Paragraph 8 of the Employees Deposit Linked Insurance Scheme, 1976 stipulates that the contribution by the employer shall be remitted by him together with the administrative charges within fifteen days of the close of every month. Paragraph 3 of the Employees Pension Scheme, 1995 stipulates that the employer shall remit the contribution payable by him to the Employees Pension Fund within 15 days of the close of every month. 10. On a plain reading of the aforesaid provisions it is evident that under the Employees Provident Fund Scheme, 1952, the Employees Deposit Linked Insurance Scheme, 1976 and the Employees Pension Scheme, 1995 the employer has to remit his share of contribution together with the employees share of contribution within 15 days of the close of every month. The contention raised by the petitioner which was reiterated by the learned counsel appearing for the petitioner is that the period of 15 days has to be calculated from the end of the month in which the contribution is deducted and not from the end of the month in respect of which the salary from which the contribution is deducted is paid. I am afraid the said contention cannot be accepted. The Apex Court has in **Organo Chemical Industries v. Union of India** (1979 (2) LLJ 416) interpreting paragraph 38 of the scheme held as follows: WPC No.25884/2011 9 _33. The initial responsibility for making payment of the contribution of the employer as well as of the employee, lies on the employer. Para 30 of the Scheme makes it incumbent on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employee by him. Under para 38, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month, i.e., a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence._ _(emphasis supplied)_ In the light of the binding decision of the Apex Court the contention of the petitioner that it is liable to pay interest only if the contribution is not remitted within 15 days from the end of the month in which it is deducted from the wages paid to the employee, cannot be accepted. 11. That takes me to the question whether as contended by the petitioner it is entitled to a grace period of five days for remittance of contribution in the light of the circular dated 24.10.1973. The full text of the circular has not been placed on record. The stand taken by the Employees Provident Fund Organisation in the statement dated 10.11.2011 is that no doubt a grace period of 5 days is available, but if remittance is not made within the said period of five days, interest will start to run in terms of the provisions contained in paragraph 38 of the Scheme. Even assuming that as per the circular the petitioner was WPC No.25884/2011 10 entitled to a grace period of five days, as the petitioner had not admittedly remitted the contribution within the said period of five days the petitioner cannot escape from the liability to pay interest on the expiry of the period of 15 days stipulated in paragraph 38 of the Scheme for the reason that the circular issued by the Central Provident Fund Commissioner cannot have the effect of amending the provisions contained in the scheme issued by the Central Government. I therefore find no reason to accept the said contention. I accordingly hold that the challenge to Exts.P1 and P3 is without any merit. The writ petition fails and is dismissed. **P.N.RAVINDRAN, (JUDGE)** vps WPC No.25884/2011 11 WPC No.25884/2011 12