Kannapuram Clay & Pot Workers Cottage Industrial Co-operative Society Ltd. v. Assistant Provident Fund Commissioner, Employees' Provident Fund Organization and Employees Provident Fund Appellate Tribunal

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** ``` THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN ``` # **`FRIDAY, THE 9[TH] DAY OF DECEMBER 2022 / 18TH AGRAHAYANA, 1944 WP(C) NO. 17883 OF 2011`** ## **`PETITIONER:`** ``` KANNAPURAM CLAY & POT WORKERS COTTAGE IN INDUSTRIAL CO-OPERATIVE SOCIETY LTD.,, P.O.MOTTAMMAL, CHERUKUNNU, KANNUR-670 331,, REPRESENTED BY ITS SECRETARY, E.MOHANAN. ``` ``` BY ADVS. SRI.P.M.PAREETH SRI.MOHAMMED SHAMEEL ``` ## **`RESPONDENTS:`** - **`1 ASSISTANT PROVIDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANIZATION,, SUB REGIONAL OFFICE, P.B.NO.117, FOURTH BUILDING,, V.K.COMPLEX, FORT ROAD, KANNUR-670 001.`** - **`2 EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, CORE 2, 4TH FLOOR, SCOPE MINAR,, LAXMI NAGAR, DIST.CENTRE, DELHI-110 092.`** ``` BY ADVS. ``` ``` SRI.K.C.SANTHOSH KUMAR, SC, EMPLOYEES PROVIDENT FUND ORGANIS DR.ABRAHAM P.MEACHINKARA, SC, EPF ORG. ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 09.12.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) NO. 17883 OF 2011 ``` ``` 2 ``` ## **P.V.KUNHIKRISHNAN, J. =================== WP(C) No. 17883 OF 2011** **=================== Dated this the 9[th] day of December 2022** ## **J U D G M E N T** The petitioner is an Industrial Co-operative Society registered under Kerala Co-operative Societies Act, 1969 and its members are traditional pottery workers. The business of the society is manufacture and sale of roofing tiles, bricks and other allied items. All the workers of the society are its members and members of the Employees Provident Fund under Employees Provident Funds and Miscellaneous Provisions Act 1952 (for short ‘Act 1952’) since 1978. It is the case of the petitioner that the society paid all contributions as per the Act, promptly and regularly for the last three years as on date of filing of the writ petition and there has no amount outstanding. However, during the period from April 1997 to March 2007, due to crisis in the tiles industries for various reasons and ``` WP(C) NO. 17883 OF 2011 ``` ``` 3 ``` consequential financial strain the society could not make payment of contribution in time is the submission. During that period, it is stated that there was heavy loss in the society. The grievances of the petitioner is that disregarding settled position of law in regard to the imposition of damage huge amount is demanded from the petitioner towards damage by the first respondent. As per Ext.P1 an amount of Rs.2,14,367/- is imposed for the period from April 1997 to November 1997. As per Ext.P2 an amount of Rs.10,13,134/- is imposed for the period from April 1998 to March 2002. The petitioner challenged Exts.P1 and P2 by filing Ext.P3 appeal. In the meanwhile for the period from November 1999 to March 2007 another amount of Rs.8,36,393/- was imposed under Section 14(B) of the Act 1952. Ext.P5 is the order. Challenging Ext.P5, Ext.P7 appeal is filed. Exts.P3 and P7 appeals were dismissed by the appellate authority as per Exts.P9 and P10. Consequently, Ext.P11 notice is issued directing to the society to pay an amount of Rs.20,70,110/-. Aggrieved by the same, this writ petition is filed. ``` WP(C) NO. 17883 OF 2011 ``` ``` 4 ``` 2. Heard the learned counsel for the petitioner and the learned Standing Counsel for the 1[st] respondent. 3. The learned counsel for the petitioner reiterated the contentions raised in this writ petition. The learned counsel takes me through Ext.P12 audited balance sheet for 10 years. The learned counsel submitted that, the delay was due to the financial stringency of the society. The learned counsel also relied the judgment of this Court in **Harrisons Malayalam Ltd. v. Regional Provident Fund Commissioner (2012 (1) KHC 243)** and the Apex Court judgment in **Assistant Provident Fund Commissioner, EPFO and Another v. Management of RSI Textiles India Pvt.Ltd. (2017 KHC 6030)** . The learned counsel also submitted that, the judgment in **Harrisons Malayalam’s** case (Supra) was taken up in appeal and the same is also dismissed after deleting the cost portion in **Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd. (2013 (3) KLT 790)** . The learned counsel submitted that, the appellate authority has not considered these points and simply dismissed the ``` WP(C) NO. 17883 OF 2011 ``` ``` 5 ``` appeal stating that, the financial stringency is not a ground to interfere with the orders passed under Section 14(B) of the Act 1952. 4. The learned Standing Counsel on the other hand, submitted that, the financial stringency is not a ground to interfere with the orders passed under Section 14(B) of the Act 1952. The learned counsel also submitted that, the society retain even the amount collected from the employee without paying to the department. The learned counsel also submitted that, that amounts to an offence under Section 406 of IPC. The learned Counsel also submitted that, while imposing damages under Section 14(B) of the Act 1952, the authority can impose damages within the frame work of 32(a) of the Employees Provident Fund Scheme, 1952. 5. This Court considered the contentions of the petitioner and the respondents. This Court also perused Exts.P9 and P10. A perusal of Exts.P9 and P10 will show that, the main reason for rejecting the appeal is that, the ``` WP(C) NO. 17883 OF 2011 ``` ``` 6 ``` financial constrain is not a ground to interfere with the orders passed under Section 14(B) of the Act 1952. This Court in **Harrison Malayalam’s case** (supra) considered the matter in detail and held that, merely because, there is a delay in payment of contribution, liability to pay damages is not automatic, but the same shall be decided by applying mind objectively to the merit of his case and not by resorting to mere arithmetic calculations of the damages as per the structured formula. 6. This Court also observed that, an order imposing penalty for failure to carry out a statutory obligations is the result of a quasi criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. 7. In **Assistant Provident Fund Commissioner's case** (Supra) this Court observed like this; “ 2. The High Court has taken a view that in the ``` WP(C) NO. 17883 OF 2011 ``` ``` 7 ``` absence of a finding regarding mens rea / actus reus on the part of the employer, action under S.14B of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 cannot be sustained. 3. This issue is now wholly covered against the appellants in the decision rendered by this Court in Mcleod Russel India Limited v. Regional Provident Fund Commissioner, Jalpaiguri and Others, reported in 2014 (15) SCC 263 wherein it has been held in paragraph 11 that" the presence or absence of mens rea and / or actus reus would be a determinative factor in imposing damages under S.148, as also the quantum thereof since it is not inflexible that 100 per cent of the arrears have to be imposed in all the cases. Alternatively stated, if damages have been imposed under S.14 B, it will be only logical that mens rea and / or actus reus was prevailing at the relevant time." 4. In the impugned Judgment, at paragraph 23, it has been specifically held by the High Court that "In this case, there is no finding rendered by the original authority or the appellate authority with regard to mens rea or actus reus except saying financial crises cannot be a reason to escape." 8. After going through the above judgment of the Apex Court and this Court, I am of the considered opinion that, the appellate authority has not properly decided the appeal. Reconsideration by the appellate authority is necessary in this case. For that purpose, the impugned appellate orders can be set aside and the matter can be remanded to the appellate authority for fresh consideration of the appeal, in the light of the dictum laid down by this ``` WP(C) NO. 17883 OF 2011 ``` ``` 8 ``` Court and the Apex Court. Therefore, this writ petition is allowed in the following manner . 1. Exts.P9, P10 and P11 are quashed. 2. ATA Nos.771(7)/2003 and 5(7)2009 are restored. The appellate tribunal will reconsider this appeal, in accordance to law, after giving an opportunity of hearing to the petitioner. ## **P.V.KUNHIKRISHNAN** **JUDGE** LU ``` WP(C) NO. 17883 OF 2011 ``` ``` 9 ``` ## **`APPENDIX OF WP(C) 17883/2011`** ## **`PETITIONER EXHIBITS`** ``` EXTHIBIT P1 TRUE PHOTOCOPY OF THE PROCEEDINGS NO.KR/KNR/3896/ENF-1 (D3)/DAMAGES/2002/2910 DATED 25- 11-02. EXTHIBIT P2TRUE PHOTOCOPY OF THE PROCEEDINGS NO. KR/KNR/3896/ENF-I (D3)/DAMAGES/2003/809 DATED 12-5-03. EXTHIBIT P3 TRUE PHOTOCOPY OF THE APPEAL NO. ATA.NO.771(7)2003 EXTHIBIT P4 TRUE PHOTOCOPY OF THE JUDGMENT DATED 7- 1-05 IN W.P.(C).NO.686/05 OF THIS HON'BLE COURT. EXTHIBIT P5TRUE PHOTOCOPY OF THE NOTICE DATED 25-8- 08 ISSUED BY THE FIRST RESPONDENT. EXTHIBIT P6TRUE PHOTOCOPY OF THE LETTER DATED 22-8- 08 ISSUED BY THE FIRST RESPONDENT TO THE PETITIONER. EXTHIBIT P7TRUE PHOTOCOPY OF THE APPEAL A.T.A.NO. 5 (7) OF 2009. EXTHIBIT P8TRUE PHOTOCOPY OF THE JUDGMENT DATED 1- 4-09 IN W.P.(C).NO.10719/09 OF THIS HON'BLE COURT. EXTHIBIT P9TRUE PHOTOCOPY OF THE ORDER DATED 17-1- 2011 IN ATA.NO.771(7)2003 PASSED BY THE SECOND RESPONDENT. EXTHIBIT P10TRUE PHOTOCOPY OF THE ORDER DATED 25-1- 2011 8- IN ATA.NO. 5(7)/2009 PASSED BY THE SECOND RESPONDENT. EXTHIBIT P11TRUE PHOTOCOPY OF THE NOTICE DATED 1-6- 11 ISSUED BY THE FIRST RESPONDENT TO THE PETITIONERDEMANDINGANAMOUNT RS.20,70,110/-. EXTHIBIT P12TRUE PHOTOCOPY OF THE AUDITED BALANCE SHEET OF THE PETITIONER FOR 1997-1998 TO 2006-2007. ``` ## **`// True Copy // PA To Judge`**