M/S Malappuram Cooperative Spinning Mills Ltd. v. Board of Trustees, Employees’ Provident Fund Organisation, Regional Provident Fund Commissioner, Assistant Provident Fund Commissioner and Central Government Industrial Tribunal cum Labour Court, Ernakulam

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR. JUSTICE AMIT RAWAL`** ## **`TUESDAY, THE 8[TH] DAY OF NOVEMBER 2022 / 17TH KARTHIKA, 1944`** ## **`WP(C) NO. 2132 OF 2020`** ## **`PETITIONER:`** ``` M/S.MALAPPURAM COOPERATIVE SPINNING MILLS LTD., P.B.NO.206, DOWN HILL POST, MALAPPURAM-676519, REPRESENTED BY ITS MANAGING DIRECTOR. ``` ``` BY ADVS. LATHA ANAND SRI.M.N.RADHAKRISHNA MENON SRI.S.VISHNU (ARIKKATTIL) SRI.RADHAKRISHNA PILLAI B SHRI.SIDHARTH P.S. SRI.ROHITH MOHAN SHRI.S.S VISHNU SHRI.RISHI VARMA T.R. ``` ## **`RESPONDENTS:`** ``` 1THE BOARD OF TRUSTEES, EMPLOYEES PROVIDENT FUND ORGANIZATION, REPRESENTED BY ITS SECRETARY, BHAVISHYANIDHI BHAVAN, 14, BHIKAJI CAMA PLACE, NEW DELHI, INDIA. 2REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANIZATION, REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, ERANJIPALAM, KOZHIKODE-673006. 3THE CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT, ERNAKULAM-682016. 4ASSTT. PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANIZATION, REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, ERANJIPALAM, KOZHIKODE-673006. ``` ``` BY ADV DR.ABRAHAM P.MEACHINKARA, SC, EPF ORG. ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.11.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` ``` WP(C) NO. 2132 OF 2020 ``` ``` 2 ``` ## **JUDGMENT** Petitioner is an industrial co-operative society running a spinning mill engaged in the manufacturing of yarn of different counts. It falls within the provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 and has been allotted a code. Non-payment of the contribution though deducted from the salary of the employees for the period from 01.02.2014 to 21.01.2016 and also delayed payment for the period from July, 2013 to November, 2013 owing to adverse conditions in the business, resulted into enquiry and proceedings under Section 7A. On account of non-deposit of aforementioned amount proceedings under Sections 14B and 7Q were initiated. The Assessing Authority vide order dated 08.05.2017 Ext.P11 assessed the damages to the extent of Rs.22,95,669/-. 2. Aggrieved of the aforementioned order, the petitioner preferred an appeal. The Appellate Authority by noticing the balance-sheets placed on record for the first time and also the ``` WP(C) NO. 2132 OF 2020 ``` ``` 3 ``` fact that the Kerala Government had been supporting, reduced the damages to the extent of 50%. 3. Learned counsel appearing on behalf of the petitioner submitted that there was no actus mens rea on the part of the petitioner in not depositing the contribution though the wages and the salary to the employees had been paid on time. It was on account of adverse financial conditions, the balance sheet are the testimony of the same, thus the amount is liable to be reduced to the extent of 25%. 4. On the contrary, learned counsel for the respondents opposed the aforementioned prayer by raising the issue that the question of mens rea is no longer sustainable in view of the judgment rendered by the Supreme Court in _**Horticulture Experiment Station Gonikoppal, coorg**_ v. _**The Regional Provident Fund Organization**_ [Civil Appeal No.2136 of 2012] wherein, in paragraph 17 it has been held by relying upon the other provisions of the Act that mens rea cannot be the sole consideration as the damages or the penalty under the various ``` WP(C) NO. 2132 OF 2020 ``` ``` 4 ``` provisions of the Act are statutorily required to be paid. 5. I have heard the learned counsel for the parties and appraised the paper book. 6. This Court while admitting the writ petition on 27.01.2022 by relying upon two judgments in _**Regional Provident Fund Commissioner V**_ . _**Harisson Malayalam Ltd.**_ [2013 (3) KLT 790] and AIR 2007 SCC _**Assistant Provident Fund Commissioner, EPFO and Another v. Management of RSI Textiles India Pvt. Ltd. thr. its Director'**_ had passed the following order: “Sri.Abraham P.Meachinkara, the learned Standing Counsel takes notice for the respondents 2 and 4. He seeks time to file a statement. Smt.Latha Anand, the learned counsel appearing for the petitioner would refer to Exhibits P1 to P10 and it is argued that the petitioner herein is undergoing severe financial crisis due to adverse financial conditions and the textile mill is on the verge of being closed down. The learned counsel would refer to Exhibit P14 and it is argued that the Tribunal had also appreciated the fact the petitioner is running on financial help being extended by the State Government. Taking note of all these aspects the petitioner was directed to remit 50% of the damages by the Tribunal. Reliance is also placed by the learned counsel on the decision ``` WP(C) NO. 2132 OF 2020 ``` ``` 5 ``` of this Court in **Regional Provident Fund Commissioner** v. **Harrisons Malayalam Ltd.** ¹ and also in **Assistant Provident Fund Commissioner, EPFO and Another** v. **Management of RSI Textiles India Pvt. Ltd. thr. its Director'** wherein it is held that existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages or the quantum thereon. Serious objection is raised by the learned Standing Counsel and it is argued that the records reveal that the petitioner had realised the employees contributions from the workers and thereafter failed to remit the contributions before the respondent No.2. Having considered the submissions advanced, it is ordered that there will be an interim order as prayed for, on condition that the petitioner herein deposits 25% of the amount demanded under Exhibit- P14 within a period of three weeks from today. Post along with the statement of respondents 2 and 4 immediately thereafter. 7. Pursuant to the aforementioned, 25% of the damages fixed by the labour court has already been paid. The balance sheets Exts.P1 to P10 no doubt reflect that the petitioner spinning mill had cumulative losses but the fact remains the salary have been paid on time not the contribution ``` WP(C) NO. 2132 OF 2020 ``` ``` 6 ``` entailed into proceedings under Section 7Q. 8. The findings rendered by the Supreme Court in _**Horticulture Experiment Station**_ (supra) paragraph 17, are extracted below: “17. Taking note of three-Judge Bench judgment of this Court in Union of India and Others v. Dharmendra Textile Processors and others (supra), which is indeed binding on us, we are of the considered view that any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for imposition of levy of damages under Section 14B of the Act 1952 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.” Provisions of Section 14B if read with the aforesaid, even if there was no mens rea on the part of the management or establishment, the said plea cannot be looked into but the factum of the losses cannot be ignored. It is on that backdrop of the matter, Appellate Authority reduced the damages to the extent of 50%. In my view, it is justiciable and do not suffer from any illegality or perversity. Since the petitioners have already deposited 25% ie., of Rs.11 lakhs and odd amount, I ``` WP(C) NO. 2132 OF 2020 ``` ``` 7 ``` uphold the order and dismiss the writ petition. However, I permit the petitioner to deposit other half of 50% ie., 25% in 12 equal monthly instalments commencing from 01.12.2022. In case of default of three instalments steps will be taken by the respondents. Till then the recovery proceedings against the petitioner is ordered to be kept in abeyance. **Sd/AMIT RAWAL JUDGE** nak ``` 8 ``` ## **`WP(C) NO. 2132 OF 2020`** ## **`APPENDIX OF WP(C) 2132/2020`** ``` PETITIONER EXHIBITS ``` ``` EXHIBIT P1TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDED 31.3.2014. ``` - `EXHIBIT P2 TRUE COPY OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2014.` - `EXHIBIT P3 TRUE COPY OF THE BALANCE SHEET AS ON 31.3.2015.` - `EXHIBIT P4 TRUE COPY OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2015.` ``` EXHIBIT P5TRUE COPY OF BALANCE SHEET AS ON 31.3.2016. ``` - `EXHIBIT P6 TRUE COPY OF OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2016.` - `EXHIBIT P7 TRUE COPY OF BALANCE SHEET AS ON 31.3.2017.` - `EXHIBIT P8 TRUE COPY OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2017.` - `EXHIBIT P9 TRUE COPY OF BALANCE SHEET AS ON 31.3.2018.` ``` EXHIBIT P10TRUE COPY OF PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2018. ``` - `EXHIBIT P11 TRUE COPY OF ORDER DATED 8.5.2017 ISSUED BY THE 2ND RESPONDENT IMPOSING DAMAGES.` - `EXHIBIT P12 TRUE COPY OF APPEAL NO.8 OF 2017 DATED 4.7.2017 FILED BY THE PETITIONER BEFORE THE 3RD RESPONDENT.` ``` 9 ``` ## **`WP(C) NO. 2132 OF 2020`** ``` EXHIBIT P13TRUE COPY OF COUNTER AFFIDAVIT OF THE 2ND RESPONDENT DATED 22.1.2017. EXHIBIT P14TRUE COPY OF ORDER DATED 16.12.2019 PASSED BY THE 3RD RESPONDENT REDUCING DAMAGES. EXHIBIT P15TRUE COPY OF NOTICE DATED 3.1.2020 ISSUED BY THE 4TH RESPONDENT. ```