M/S Indian Rare Earths Mining Area Contract Workers' Welfare Forum v. Employees' Provident Fund Appellate Tribunal & Anr.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **TUESDAY, THE 15TH DAY OF OCTOBER 2019 / 23RD ASWINA, 1941** ## **WP(C).No.11817 OF 2010(B)** ## **PETITIONER:** **M/S.INDIAN RARE EARTHS MINING AREA CONTRACT WORKERS' WELFARE FORUM, CHAVARA P.O., KOLLAM-691 583, KR/274 D, REP. BY ITS SECRETARY, H.B.LOPEZ.** **BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.P.BENNY THOMAS SRI.P.GOPINATH (SR.) SRI.K.JOHN MATHAI** ## **RESPONDENTS:** **1 EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, SCOPE MINAR, CORE II, 4TH FLOOR, LAXMI NAGAR DISTRICT CENTRE, LAXMI NAGAR, NEW DELHI-110 092. 2 THE ASSISTANT PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION,SUB REGIONAL OFFICE, OLD MUNICIPAL OFFICE BUILDING, CHINNAKKADA, KOLLAM-691 001.** **R1 BY ADV. SRI.V.V.SURESH, SC EPF.ORGANISATION** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.11817 OF 2010** **2** ## **JUDGMENT** This writ petition is filed challenging Exts.P3 order dated 17.9.2008 of the 2[nd] respondent imposing penalty under Section 14B of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 and P5 order dated 01.02.2010 of the 1[st] respondent dismissing the appeal preferred by the petitioner. 2. Heard the learned counsel for the petitioner and learned Standing Counsel appearing for the respondent. 3. It is submitted by the learned counsel for the petitioner that the petitioner is a Charitable Society registered under the Travancore Cochin Liberty, Scientific and Charitable Societies Act, 1955. The Society oversees the civil work done by employees of the Society through contractors and receives the proceeds from the contractors of M/s Indian Rare Earths Limited, which is a Central Public Sector undertaking. 4. It is submitted that Ext.P1 show cause notice was issued on 24.07.2008, directing the petitioner to show cause why penal damages shall not be imposed under Section 14B for delay in remittance of contribution. Ext.P2 reply was submitted stating that the delay was neither willful nor deliberate and that it was **WP(C).No.11817 OF 2010** **3** occasioned due to financial difficulties and reasons beyond the control of the petitioner. By Ext.P3, the 2[nd] respondent found that, financial problem faced by the establishment is not a valid reason for non payment of statutory dues within time and ordered the levy of damages as a measure on of penalty in prompt compliance with regard to payment of contributions. An amount of Rs.1,17,096/- was levied as damages for the period from March 2005 to February 2006. The petitioner submitted Ext.P4 statutory appeal before the 1[st] respondent which was disposed of by Ext.P5 order. It was specifically averred in Ext.P4 appeal that the non remittance occurred due to financial constraints faced by the petitioner at the relevant time. The Tribunal, however, confirmed Ext.P3 order and stated that financial difficulty is not a ground to exonerate the default in payments and the appeal was dismissed. 5. The learned counsel for the petitioner submits tht, the petitioner had been prompt and regular in the payment of Provident Fund dues during prior periods. It is further submitted that it is a non profitable organization. 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 **WP(C).No.11817 OF 2010** **4** penalty even inspite of the admitted position that the petitioner was facing financial difficulties during the relevant time was completely unsustainable. Learned counsel placed reliance on a decision of the Division Bench of this Court in _**Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd.**_ [2013 (3) KLT 790] 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. The learned counsel also submits that in the case of the levy of penalty for the period from September 2005 to December 2005 and from March 2006 to May 2006 the issue has been considered by this Court in W.P.(C) No.9173 of 2011 and the impugned orders had been set aside on a finding that they were unsustainable. 6. This Court after considering the contentions raised on either side had also taken into account the judgment of the Apex Court in _**Assistant Provident Fund Commissioner, EPFO and**_ ## _**Another v. The Management of RST Textiles India Pvt.Ltd**_ [2017 (153) FLR 214] in Civil Appeal No.96-97 of 2017 dated 03.01.2017 as also the earlier judgment in _**Mcleod Russel India**_ **WP(C).No.11817 OF 2010** **5** ## _**Ltd v. Regional Provident Fund Commissioner, Jalpaiguri**_ _**and Others**_ [(2014)15 SCC 263] to arrive at the conclusion 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. It was held that the action of the appropriate authorities under the Act in ordering payment of penalty in all cases of delay without exercising any discretion in spite of repeated directions from the jurisdictional High Courts as well as the Apex Court is an abuse of judicial power and the orders imposing costs on the adjudicating and appellate authorities was vacated only due to the submissions of the counsel appearing for the employer company. 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 **WP(C).No.11817 OF 2010** **6** 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 thereunder. 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. 8.I have considered the contentions advanced on either side. I have also perused the judgment in W.P.(C) No.9173/2011. After **WP(C).No.11817 OF 2010** **7** considering the contentions, this Court in the judgment dated 11.12.2018 in W.P.(C) No.9173/2011 had held that the imposition of penalty without considering the aspect of men rea as also without considering the contention of the petitioner that it was only due to financial difficulties faced by it that there was delay in payment of the amounts was completely unsustainable. The same is the case in the instant case as well. It is clear from Ext.P2 reply as well as Ext.P4 that the petitioner had raised specific grounds that it was only due to raising beyond its control that it was unable to make the contributions in time. 9. However it is stated in Ext.P3 that financial constraints are not a reason for delayed payment of Provident Fund 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. 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. **WP(C).No.11817 OF 2010** **8** 10. The above view of the matter, the levy of penalty under Section 14B, that too at the maximum rate permissible is completely unjustified. It submitted by the learned counsel for the petitioner that 20% of the amount assessed had been deposited as a condition for grant of stay in this writ petition. In the above view of the matter, I am of the opinion that Ext.P3 and P5 orders cannot be sustained. Exts.P3 and P5 orders that thereby set aside. The amounts already remitted by the petitioner, however, need not be refunded. The writ petition is ordered accordingly. **Sd/-** **ANU SIVARAMAN JUDGE** mpm **WP(C).No.11817 OF 2010** **9** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE NOTICE DATED 24.07.2008 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER.** **EXHIBIT P2 TRUE COPY OF THE REPLY DATED 19.08.2008 SUBMITTED BY THE PETITIONER TO THE 2ND RESPONDENT.** **EXHIBIT P3 TRUE COPY OF THE ORDER DATED 17.09.2008 PASSED BY THE 2ND RESPONDENT.** **EXHIBIT P4 TRUE COPY OF THE APPEAL PETITION (WITHOUT ITS ANNEXURES) DATED 10.11.2008 SUBMITTED BY THE PETITIONER BEFORE THE FIRST RESPONDENT.** **EXHIBIT P5 TRUE COPY OF THE ORDER OF THE TRIBUNAL DATED 01.02.2010 IN ATA NO.807(7)/2008 PASSED BY THE FIRST RESPONDENT.** // TRUE COPY // P.A. TO JUDGE