M/S Secure Well v. The Assistant P.F. Commissioner, Employees' Provident Fund Organisation

# **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR. JUSTICE GOPINATH P.`** ``` WEDNESDAY, THE 31[ST] DAY OF JANUARY 2024 / 11TH MAGHA, 1945 ``` ## **`WP(C) NO. 11943 OF 2016`** ## **`PETITIONER:`** ``` M/S.SECURE WELL, VIVEKANANDA BHAVAN, PULLEPPADY ROAD, KOCHI-682 035, REPRESENTED BY ITS MANAGING PARTNER MANU GEORGE. ``` ``` BY ADV SRI.A.V.XAVIER ``` ## **`RESPONDENT:`** ``` THE ASSISTANT P.F. COMMISSIONER, EMPLOYEES' PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, KALOOR, KOCHI-682 107. ``` ``` BY ADVS. SRI.N.N.SUGUNAPALAN (SR.) SMT.T.N.GIRIJA SCEPF ORGANISATION SMT.NITA N.S, SC, EPFO ``` ``` THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 31.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` WP(C) NO. 11943 OF 2016 2 ## JUDGMENT The petitioner has approached this Court challenging Ext.P4 proceedings dated 22.02.2016 through which the petitioner was found liable to pay interest for delayed remittance of Provident Fund contributions under Section 7Q of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as ‘the Act’) for the period from March 1995 to October 2005 and also for the period from August 2010 to April 2012. 2. The learned counsel appearing for the petitioner would submit that the petitioner is a partnership firm constituted on 10.05.1984. It is submitted that one K.I.George, who was the father of the present Managing partner, was the managing partner of the firm till his death on 24.11.2009. It is submitted that the firm had been making remittance of provident fund contributions without any fail. It is submitted that for the first time through Ext.P1 and Ext.P2 notices dated 18.06.2014, the petitioner was informed that there had been delay in payment of contributions for the period from March 1995 to October 2005 and for the period from August 2010 to April 2012 and therefore, the petitioner is liable to pay WP(C) NO. 11943 OF 2016 3 interest under Section 7Q of the Act and also damages under Section 14B of the Act. It is the submission of the learned counsel for the petitioner that since the demands were not raised within a reasonable time, the petitioner has been unable to prove with records that there has been no delay in the remittance of provident fund contributions and therefore, the petitioner is not liable to interest under Section 7Q of the Act or for damages under Section 14B of the Act. It is also pointed out that the petitioner had filed Ext.P3 objections to Exts.P1 and P2 stating that it is not in a position to produce the records for the period from March 1995 to October 2005. It however produced documents to show that there was no delay in the payment for the period from August 2010 to April 2012. The petitioner also brought to the notice of the authority a decision of the Supreme Court in E.S.I Corporation v. C.C.Santhakumar [2007 (2) LLJ 3] to contend that though there was no limitation prescribed in the Act, the proceedings must be taken, if at all, within a reasonable time. It is submitted that since the proceedings were not initiated within a reasonable time and thereby denied the petitioner an opportunity of defending the claim, the proceedings are liable to be quashed on that short ground. WP(C) NO. 11943 OF 2016 4 3. The learned Standing Counsel appearing for the Provident Fund Organization would refer to the counter affidavit filed by the respondent to contend that the petitioner has an adequate alternate remedy against Ext.P4 demands under Section 7 I of the Act. It is submitted that the petitioner has not made out any ground for interference under Article 226 of the Constitution of India notwithstanding the availability of an alternate remedy. It is submitted that the demands were issued after finding that there was delay in remittance of provident fund dues and since interest under Section 7Q of the Act is mandatory, no fault can be attributed to the demands for interest under Section 7Q of the Act. It is submitted that when there is delay in payment of provident fund contributions, damages under Section 14B of the Act are also leviable and therefore, there cannot be any fault with the demand for damages under section 14B of the Act. 4. Having heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the Provident Fund Organization, I am of the view that the learned counsel for the petitioner is right in contending that when there is unreasonable delay in initiating proceedings for levy of interest / damages as in WP(C) NO. 11943 OF 2016 **==> picture [8 x 10] intentionally omitted <==** this case, the proceedings must be quashed on that ground alone. The facts of this case will show that the petitioner was called upon to pay interest under Section 7Q of the Act for two distinct periods, i.e from March 1995 to October 2005 and for August 2010 to April 2012. The notices were issued only in the year 2014. Considering the initial period for which the demand for interest and damages was levied, the first notice issued in 2014 was almost 10 years after the last month in respect of which the demand was raised (October 2005). Ext.P2 covers the demand for the period from August 2010 to April 2012, where the interest demanded was a sum of Rs.366/and the damages under Section 14B of the Act was Rs.151/-. In ## C.C.Santhakumar (supra), it was held:- “(32.)That brings us to the other question i.e. whether a concept of reasonable time can be read into the provision even though not specifically provided for? Similar questions have arisen in several other statutes. (33.) In Hindustan Times Ltd. v. Union of India (1998 (2) SCC 242) this court dealt with the power to recover damage under S.14(B) of the Employees Provident Fund and Misc. Provisions Act, 1952 (in short the 'Provident Fund Act'). There also the question arose as to whether in the absence of any period of limitation the authority under the Provident Funds Act could recover the damages after a long period of time. It was inter alia held as follows : WP(C) NO. 11943 OF 2016 6 "The authority under S.14B has to apply his mind to the facts of the case and the reply to the show cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard; the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on plea of power-cut, financial problems relating to other indebtedness or the delay in realization of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no period of limitation prescribed by the legislature for initiating action for recovery o damages under S.14B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under S.14B would be taken; mere delay in initiating action under S.14B cannot amount to prejudice inasmuch as the delay on the part of the Department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action under S.14B he has changed his position to his detriment to such an extent that if the recovery is made after a large number of years, the prejudice to him is of an "irretrievable" nature; he might also claim prejudice upon proof of loss of all the relevant records and / or non availability of the personnel WP(C) NO. 11943 OF 2016 7 who were, several years back in charge of these payments and provided he further establishes that there is no other way he grounds which could lead to "irretrievable" prejudice; further, in such cases of "irretrievable" prejudice, the defaulter must take the necessary pleas in defence in the reply to the show cause notice and must satisfy the authority concerned with acceptable material; if those pleas are rejected, he cannot raise them in the High Court unless there is a clear pleading in the writ petition to that effect. (34.) "A "reasonable period" would depend upon the factual circumstances of the case concerned. There cannot be any empirical formula to determine that question. The court / authority considering the question whether the period is reasonable or not has to take into account the surrounding circumstances and relevant factors to decide that question. (35.) In State of Gujarat v. Patel Raghav Natha (1969 (2) SCC 187) it was observed that when even no period of limitation was prescribed, the power is to be exercised within a reasonable time and the limit of the reasonable time must be determined by the facts of the case and the nature of the order which was sought to be varied. This aspect does not appear to have been specifically kept in view by the Division Bench. Additionally, the points relating to applicability of the Andhra Pradesh Assigned Lands (Prohibition of Transfers) Act, 1977, and even if it is held that the Act was applicable, the reasonableness of the time during which action should have been initiated were also not considered. It would be hard to give an exact definition of the word "reasonable". Reason varies in its WP(C) NO. 11943 OF 2016 8 conclusions according to the idiosyncrasy of the individual and the times and circumstances in which he thinks. The reasoning which built up the old scholastic logic stands now like the jingling of a child's toy. But mankind must be satisfied with the reasonableness within reach; and in cases not covered by authority, the decision of the Judge usually determines what is "reasonable" in each particular case; but frequently reasonableness "belongs to the knowledge of the law, and therefore to be decided by the courts". It was illuminatingly stated by a learned author that an attempt to give a specific meaning to the word "reasonable" is trying to count what is not a number and measure what is not space. It means prima facie in law reasonable in regard to those circumstances of which the actor, called upon to act reasonably, knows or ought to know. (See: Municipal Corpn. of Delhi v. Jagan Nath Ashok Kumar, (1987 (4) SCC 497) and Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. (1989 (1) SCC 532). As observed by Lord Romilly, M. R. in Labouchere v. Dawson (41 LJ Ch 472) it is impossible a priori to state what is reasonable as such in all cases. You must have the particular facts of each case established before you can ascertain what is reasonable under the circumstances. Reasonable, being a relative term is essentially what is rational according to the dictates of reason and not excessive or immoderate on the facts and circumstances of the particular case. (36.) These aspects were highlighted in Collector and Others v. P. Mangamma and Others (2003 (4) SCC 488). (37.) As observed in Veerayee Ammal v. Seeni Ammal (2002 (1) SCC 134), it is "looking at all the circumstances WP(C) NO. 11943 OF 2016 9 of the case; a "reasonable time" under ordinary circumstances; as soon as circumstances will permit; so much time as is necessary under the circumstances, conveniently to do what the contract requires should be done; some more protracted space than 'directly'; such length of time as may fairly, and properly, and reasonably be allowed or required, having regard to the nature of the act or duty and to the attending circumstances; all these convey more or less the same idea". (38.) According to Advanced law Lexicon by P. Ramanatha Aiyar 3rd Edition, 2005 reasonable time means as follows: "That is a reasonable time that preserves to each party the rights and advantages he possesses and protects each party from losses that he ought not to suffer. "Reasonable Time" is defined to be so much time as is necessary, under the circumstances, to do conveniently what the contract or duty requires should be done in a particular case. If it is proper to attempt any definition of the words "reasonable time", as applied to completion of a contract, the distinction given by Chief Baron Pollock may be suggested, namely, that a "reasonable time" means as soon as circumstances will permit. In determining what is a reasonable time or an unreasonable time, regard is to be had to the nature of the instrument, the usage or trade or business, if any, with respect to such instrument, and the fact of the particular case. The reasonable time which a passenger is entitled to alighting from a train is such time as is usually required by passengers in getting off and on the train in safety at the particular station in question. A reasonable time, looking at all the circumstances of the case; a reasonable time under ordinary circumstances; as soon as circumstances will permit; so much time as is WP(C) NO. 11943 OF 2016 10 necessary under the circumstances, conveniently to do what the contract requires should be done; some more protracted space than "directly" such length of time as may fairly, and properly, and reasonably be allowed or required, having regard to the nature of the act or duty and to the attending circumstances; all these convey more or less the same idea. Reasonable time always depends on the circumstances of the case. (Kinney) It is unreasonable for a person who has borrowed ornaments for use in a ceremony to detain them after the ceremony has been completed and the owner has demanded their return. (AIR 1930 Oudh 395). The expression "reasonable time" means so much time as is necessary under the circumstances to do conveniently what the contract or duty requires should be done in a particular case". (See: Joseph Severance v. Benny Mathew (2005 (7) SCC 667))” In the light of the judgment of the Supreme Court in C.C.Santhakumar (supra), it must be held that the demands relatable to Ext.P1 notice have be quashed on the ground that the demands were raised with unreasonable delay. Therefore, this writ petition is allowed in part. The demands confirmed in Ext.P4 to the extent they relate to Ext.P1 notice and for the period from March 1995 to October 2005 will stand quashed. However, the demands for interest under Section 7Q of the Act and for damages for the period from August 2010 to April 2012 relatable to Ext.P2 notice are WP(C) NO. 11943 OF 2016 11 sustained. If the petitioner pays the amounts demanded in Ext.P2, within a period of one month from the date of receipt of a certified copy this judgment, no further amount shall be demanded from the petitioner on that ground. The writ petition will stand disposed of as above. Sd/GOPINATH P. JUDGE DK WP(C) NO. 11943 OF 2016 12 ## **`APPENDIX OF WP(C) 11943/2016`** ## `PETITIONER ANNEXURES` |`EXT.P1:`|`COPY OF COMMUNICATION`| |---|---| ||`NO.KR/KCH/0005292/000/ENF.503/DAMAGES`| ||`DATED 18.06.2014 WITH ANNEXURE A`| ||`STATEMENT OF AMOUNTS UNDER SECS.7Q AND`| ||`14B RELATED TO THE PERIOD 03/1995 TO`| ||`10/2005.`| |`EXT.P2:`|`COPY OF COMMUNICATION`| ||`NO.KR/KCH/0005292/000/ENF.503/DAMAGES`| ||`DATED 18.06.2014 WITH ANNEXURE A`| ||`STATEMENT OF AMOUNTS UNDER SECS.7Q AND`| ||`14B RELATED TO THE PERIOD 08/2010 TO`| ||`04/2012.`| |`EXT.P3:`|`COPY OF THE WRITTEN STATEMENT OF THE`| ||`PETITIONER DATED 11.11.2014.`| |`EXT.P4:`|`COPY OF THE PROCEEDINGS OF THE`| ||`RESPONDENT KR/KCH/5292/ENF/503/DAMAGES`| ||`CELL/2015 DATED 22.02.2016.`| |`EXT.P5:`|`COPY OF THE NOTICE OF DEMAND TO`| ||`DEFAULTER NO.KR/KC/5292/RECOVERY/2016-`| ||`2017 DATED 13.04.2017`|