M/S. Kerala Feeds Limited v. Regional Provident Fund Commissioner, Employees' Provident Fund Organisation, Sub Regional Office, Kochi; Recovery Officer, EPFO; Manager, State Bank of Travancore

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **& THE HONOURABLE MR. JUSTICE ASHOK MENON** **WEDNESDAY, THE 13TH DAY OF JUNE 2018 / 23RD JYAISHTA, 1940 WA.No. 373 of 2015 IN WPC. 34628/2011** **AGAINST THE ORDER/JUDGMENT IN WP(C) 34628/2011 of HIGH COURT OF KERALA DATED 03-10-2013** ## **APPELLANT(S)/PETITIONER** **M/S. KERALA FEEDS LIMITED KALLETTUMKARA, TRICHUR - 680 683, REPRESENTED BY ITS MANAGING DIRECTOR** **BY ADVS.SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.P.GOPINATH SRI.K.JOHN MATHAI** ## **RESPONDENT(S)/RESPONDENTS:** **1. THE REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANIZATION, SUB REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, KALOOR, KOCHI - 682 017.** ***2. THE RECOVERY OFFICER,** **EMPLOYEES PROVIDENT FUND ORGANIZATION, SUB REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, KALOOR, KOCHI - 682 017.** ***3. THE MANAGER, M/S.STATE BANK OF TRAVANCORE, CHALAKUDY, THRISSUR.** ***(ADDITIONAL R2 & R3 IMPLEADED AS PER ORDER DATED 19.2.2015 IN IA NO.269/2015 IN WA NO.373/2015)** **R3 BY ADV. SRI.T.SETHUMADHAVAN (SR.) R3 BY ADV. SRI.PUSHPARAJAN KODOTH R3 BY ADV. SRI.K.JAYESH MOHANKUMAR** **R1-R2 BY ADV. DR.S.GOPAKUMARAN NAIR (SR.)** **BY SRI.S.PRASANTH** **R1-R2 BY ADV. SRI.A.RAJASIMHAN,SC,EPF ORGANISATION** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 13-06-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WA 373/2015** ## **APPENDIX** ## **APPELLANT'S EXHIBITS** **ANNEXURE-A : COPY OF ORDER NO.KR.KC.15984-A RECOVERY 2014-15 DATED 16.1.2015 OF THE ASST. PF COMMISSIONER & RECOVERY OFFICER, EPFO.** **//TRUE COPY//** **PS TO JUDGE.** jg-23/6 K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------W.A.No.373 of 2015 ------------------------------------------Dated this the 13[th] day of June, 2018 ## J U D G M E N T Vinod Chandran, J. The appellant/petitioner is a public sector undertaking, who is aggrieved with the judgment of the learned Single affirming the assessment made under Section 7A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the EPF & MP Act”, for short). Before the learned Single Judge the Employees Provident Fund Organisation (EPFO) had raised a contention that the Writ Petition is not maintainable, especially since there was an efficacious alternate remedy available as per the statute. The statute provides for an appeal to the EPF Appellate Tribunal. The petitioner in the Writ Petition, however, contended; on established principles, that once there is admission of a Writ Petition under Article 226 of the Constitution of India and the same is kept pending for long, it cannot be rejected merely for the reason of an alternate remedy being available. It was also WA 373/15 -2- pointed out that there was a specific claim raised of violation of natural justice, insofar as certain persons sought to be summoned were not summoned by the Adjudicating Officer (AO). The learned Single Judge agreed with the petitioner finding that the Writ Petition after two years, especially pending with a stay of recovery, cannot be rejected for reason of availability of alternate remedy. The learned Single Judge hence proceeded to consider the case of the petitioner. 2. It was noticed that Enforcement Officer (EO) unearthed materials from the ledger extracts maintained by the petitioner. The actual amounts paid to the contractors, was taken as wages paid for the purpose of determining the actual amount of contributions paid. It was found that there is no dispute that the contract workers were enrolled under the petitioner in the EPF Scheme, and the petitioner was making payment of the contributions with respect to the contract workers. The petitioner as the principal employer had a duty to comply with the requirements of the EPF & MP Act even with respect to contract employees. As to the contention with respect to impleadment of the contractors, it was WA 373/15 -3- found that there was no prejudice caused for reason of non-impleadment or non-summoning of the contractors. Being the principal employer, it was the duty of the petitioner to have paid the contributions in accordance with the wages paid to the employees; and the responsibility and liability under the EPF & MP Act could not be wriggled out of merely on the ground that the contributions were made on the basis of the statement of wages as submitted by the contractors, was the categoric finding. The statement of the contractors as well as the wage registers were found to have been produced before the authority and in such circumstances, there could be found no defect in having not summoned the contractors. The learned Single Judge found that a challenge against the quantum determined by the EO cannot be agitated before this Court in a proceeding under Article 226 of the Constitution of India. For all the above reasons, the Writ Petition was dismissed. 3. We have heard the learned Senior Counsel appearing for the appellant/petitioner as also the learned Standing Counsel for the EPFO. 4. The learned Senior Counsel for the appellant WA 373/15 -4- points out that the contractors, if summoned, could have placed materials before the Officer from which materials the actual wages paid to the workers could have been determined. It is also submitted that, as of now, the AO has taken the entire contract amounts paid in each month and deducted the contributions as stipulated in the EPF & MP Act deeming the amounts paid to the contractor as the wages paid to the employees. This has been done without any reference to the number of employees engaged by the contractor or the possible wage component in the contract amount, which would necessarily include other expenses and administrative charges of the contractor, as also his profit. The entire procedure adopted by the AO is flawed and there is absolutely no finding sustainable on facts as available in Ext.P7 order. There is a clear abuse of the powers conferred under the EPF & MP Act, insofar as the factual questions having not been examined by the AO and the determination of contribution being not with reference to the individual employees of the contractor. The order would lead to unjust enrichment on the part of the EPFO, is the argument taken by the learned Senior Counsel for the WA 373/15 -5- appellant. 5. The learned Standing Counsel takes us through the impugned order to submit that the EO had sought for production of materials upon which initially the appellant admitted that there was no proper maintenance of attendance roll and acquittance register. It was also contended that only gate entry registers were maintained. Subsequently, before the AO, the appellant had produced certain registers which cannot be relied on especially considering the fact that initially they had admitted that no registers were available. The EO had found that the gross wages of the contract employees were not taken for determining the contribution under the EPF & MP Act. There could have been no such artificial reduction of wages made by the contractor or by the principal employer. It is pointed out that the entire documents produced by the appellant was perused by the AO, but however, the same were found to be not sustainable and hence the EO’s report was accepted in toto. It has also been found that the principal employer had not discharged their responsibility in ensuring that eligible EPF benefits are being given to the employees. The judgment of WA 373/15 -6- the learned Single Judge is not liable to be interfered with is the specific submission of the learned Standing Counsel. 6. We are quite conscious of the fact that the jurisdiction under Article 226 of the Constitution of India cannot be exercised in cases where there is an efficacious alternate remedy. However, exceptions have been culled out which are also part of the precedents as has been declared in (2005) 6 SCC 499 : [M/s.State of H.P. v. Gujarat Ambuja Cement Ltd.] . The Hon'ble Supreme Court held that such refusal to exercise discretion is more a rule of policy, convenience and discretion and never a rule of law. It is a measure of discipline and selfimposed limitation than a rigid principle to be employed without looking at the facts and the law. It is also not the principle that when a writ petition has been filed within the time provided for an appeal and there is also a stay granted, there can be no refusal to exercise discretion after a period of more than two years, when the Writ Petition was pending with a stay before this Court. If such a writ petition, admitted and pending before the Court for long, comes up for hearing, then it could be WA 373/15 -7- considered whether the party may be relegated to the appellate remedy. Then again when the petitioner makes out a strong case and there exist good grounds, this alone would enable the High Court to invoke the extraordinary jurisdiction. The decision to exercise or refuse discretion is with the High Court; whether it is at the admission stage or when heard after admission. 7. We notice that the learned Single Judge has considered the contentions of the petitioner against the order of the AO and procedure followed, and rejected the same. However, on the question of quantum, the learned Single Judge rightly refused to exercise the power conferred under Article 226 of the Constitution. With due respect, we are of the opinion that if such dispute on quantum could not be considered, it would have been befitting that the petitioner was relegated to the appellate remedy, at that stage at least, which would have allowed the petitioner to raise all contentions before the appellate authority. We say this after looking at the impugned order. 8. On a reading of Ext.P7 order, we are not convinced that there has been a proper consideration WA 373/15 -8- of the facts and there is lacking an application of mind. (1990) 1 SCC 68, [Food Corporation of India v. Provident Fund Commissioner] provide illuminating information as to how an AO is expected to carry out adjudication under Section 7A of the EPF & MP Act. The powers under Section 7A has been dilated upon as is seen from para 9 thereof, which is extracted hereinbelow:- “9. It will be seen from the above provisions that the Commissioner is authorised to enforce attendance in person and also to examine any person on oath. He has the power requiring the discovery and production of documents. This power was given to the Commissioner to decide not abstract questions of law, but only to determine actual concrete differences in payment of contribution and other dues by identifying the workmen. The Commissioner should exercise all his powers to collect all evidence and collate all material before coming to proper conclusion. That is the legal duty of the Commissioner. It would be failure to exercise the jurisdiction particularly when a party to the proceedings requests for summoning evidence from a particular person.” 9. The aforesaid decision has been placed on record for the purpose of urging that the contractors are an essential party in the proceedings and that the refusal to summon them results in violation of principles of natural justice. Looking at the facts we are not convinced that there could be any WA 373/15 -9- violation of principles of natural justice ferreted out, from the mere fact of the AO having refused summoning of the contractors. Admittedly, the transactions examined by the EO and the AO were of employment of contract employees through contractors. When persons are employed by a principal employer through a contractor, it is the responsibility of the principal employer to maintain wage registers and also ensure that the minimum wages are paid to the employees as also contributions made from the actual wages payable to such employees, both with respect to the employee's contributions as also the employer's contributions. It is the bounden duty of the principal employer to deduct such amounts from the amounts due to the contractor and pay it directly to the EPFO and other statutory organisations established for the welfare of labour. In such circumstances, it was the principal employer’s duty to ensure proper maintenance of registers as also payment of wages, which would have necessarily resulted in the appropriate amounts being deducted from the contract amounts so as to satisfy the contributions as due under the EPF & MP Act. We hence do not think that in the facts and WA 373/15 -10- circumstances of the case, there was any requirement for summoning the contractors. 10. Be that as it may, the Hon'ble Supreme Court held that exercising the power under Section 7A, the Commissioner has to determine actual concrete differences in payment of contributions and other dues by identifying the workmen and cannot decide on abstract questions of law. We do not see any such effort having been taken by the AO. The AO proceeds solely on the report of the EO and makes abstract presumptions on law and facts. The AO has thought it fit to extract the entire report of the EO. The EO had found that with respect to labour contracts of loading and unloading, the Company had calculated the contributions on the entire contract amounts whereas in other contracts, only a portion of the amounts disbursed has been shown as wages. Necessarily, on such a finding, it should have been examined as to the nature of each of the contracts in which such an assumption was made. Reply filed by the appellant as produced at Ext.P4 shows the contracts having been granted for various purposes like bundling, dumping, cleaning, etc. It was the specific objection of the appellant that the amounts disbursed to the WA 373/15 -11- contractor does not reflect solely the wage component. The Contractor too has expenses, administrative charges and a profit margin, which has to be met from the total award amounts. There has been no such examination of the nature of the contracts either by the EO or the AO. What is alarming is that there is no determination of contribution based on the wages paid. If details were not available as to the exact wages possible, the AO could have made an assessment with reference to the nature of work, the minimum wages payable to such category of workers and so on and so forth. 11. Further, after extracting the report of the EO, the AO immediately finds that the employer has defaulted in the payment of the dues under the EPF & MP Act and violated the provisions of the Act, the Pension Scheme and the Deposit Linked Insurance Scheme. A summons is said to have been issued to the appellant and various appearances have been noticed. There is also reference to four wage registers belonging to four contractors, which have been produced before the AO. The AO then dilates upon the spirit of the welfare legislation being the EPF & MP Act and also notices various decisions on the WA 373/15 -12- subject. The definition of basic wages is also noticed and extracted. On a curt statement of consideration of the facts, the AO finds that the appellant has defaulted in the contributions. The AO appreciates the EO for the good work done, but however does not examine the facts which disclose that he has not done the work which he is expected to do under Section 7A of the EPF & MP Act. 12. The computation, we already noticed, is not with reference to the individual employees who are said to have been shown as being paid low wages; against which alone the contributions were determined. The EO specifically found that certain employees were not paid the required wages and the contributions were deducted only on the minuscule amounts shown in the registers of the employer. It is not clear as to the number of employees or the details of such employees whose contributions were purposefully reduced and shown as being minuscule. The learned Standing Counsel for the EPFO specifically contended that there is never extracted the details of the employees in the adjudicating order. However, at least the number of employees whose contributions were not made in accordance with WA 373/15 -13- the EPF & MP Act are to be shown. Difference in payment also has to be computed on the wages shown and actually paid and the contribution determined thereon. The computation as seen from Ext.P7 is only the determination of contribution assuming the total amounts paid to the contractor to be the wages paid to the employees. 13. As we see from the computation at Ext.P7, for each month, specific amounts due under the EPF, administration charges, Pension Scheme and Deposit Linked Insurance Scheme have been added and the total amounts between 1-2006 to 8-2010 is shown as Rs.34,67,485/-. This has not been shown with reference to the wages said to have been paid to the employees; nor is it clearly stated as to the number of employees who benefit from such contributions. We find the adjudication made by the AO to be not in accordance with the provisions of the EPF & MP Act. There is absolute and total absence of application of mind and the factual aspects are not considered at all. The AO being the first fact finding authority had to necessarily examine the issues in the proper perspective especially based on the facts available. Considering the fact that adjudication has not been WA 373/15 -14- done in accordance with the provisions of the EPF & MP Act, specifically in accordance with the powers conferred under Section 7A of the Act, we set aside the order of the AO and remand it to the AO. 14. We are also told that the entire amounts have been attached and recovered from the appellant after the impugned judgment. In such circumstances, the same shall be retained by the EPFO till a final adjudication is made. We grant the appellant one months time from the date of receipt of certified copy of the judgment to produce additional documents, if any, and appear before the AO. The AO shall then give a date of hearing and proceed with the adjudication in accordance with law and in accordance with the observations made herein above as also the specific declarations found in the judgment of the Hon'ble Supreme Court. The Writ Appeal is disposed of as above. No order as to costs. Sd/K.VINOD CHANDRAN JUDGE Sd/ASHOK MENON JUDGE jg