M/S. The Co-operative Sugars Ltd. v. Board of Trustees, Employees Provident Fund Organization

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 8[TH] DAY OF JANUARY 2024 / 18TH POUSHA, 1945** **WP(C) NO. 15982 OF 2021** ## **PETITIONER:** M/S.THE CO-OPERATIVE SUGARS LTD., MENON PARA, CHUTTUR, PALAKKAD 678 556, REPRESENTED BY LIQUIDATOR, MANAGER DISTRICT INDUSTRIES CETNRE, PALAKKAD. BY ADVS. LATHA ANAND M.N.RADHAKRISHNA MENON K.R.PRAMOTH KUMAR S.VISHNU (ARIKKATTIL) ROHITH MOHAN SIDHARTH P.S. RADHAKRISHNA PILLAI B ## **RESPONDENTS:** 1 THE BOARD OF TRUSTEES, EMPLOYEES PROVIDENT FUND ORGANISZTION, BHAVISHYANIDHI BHAVAN, BHIKAIJI CAMA PALACE, NEW DELHI 110 066, REPRESENTED BY ITS SECRETARY. 2 ASSISTANT PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANIZATION , SUB REGIONAL OFFICE, KOZHIKKODE 673 006. 3 THE CENTRAL GOVERNMENT INDUSTRIAL, TRIBUNAL CUM LABOUR COURT ERNAKULAM 682 016. BY ADV ABRAHAM P.MEACHINKARA – R1 & R2 SRI. SAJEEVKUMAR K. GOPAL -SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C)No.15982/2021 2 ## **JUDGMENT** The petitioner has approached this Court challenging Ext.P12 order of the Central Government Industrial Tribunal-Cum-Labour Court (hereinafter referred to as the Tribunal), Ernakulam in Appeal No.252/2019. The petitioner who was the appellant before the Tribunal has challenged an order issued by the Provident Fund Authority under Section 14B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 'EPF Act') as also the demand for interest under Section 7Q of the EPF Act. The damages and the interest were in respect of contribution for the period from 08/2004 to 01/2014. By Ext.P12 order, the Tribunal reduced the damages under Section 14B of the EPF Act to 50% and found that, in so far as the appeal challenges the levy of interest under Section 7Q of the EPF Act, the appeal is not maintainable. 2. The learned counsel for the petitioner would submit that the petitioner is a Government Company which was engaged in the production of arrack. It is submitted that after the ban on arrack, the financial position of the petitioner-company worsened to such an extent that it was not able to pay the salaries of its employees. It is W.P.(C)No.15982/2021 3 submitted that,by Ext.P1 order dated 24.11.2005, the salary of employees in the petitioner-company was reduced to 50%. It is submitted that the petitioner-company is now under liquidation and this writ petition is filed by the Liquidator of the Company, namely, the General Manager, District Industries Centre, Palakkad. It is submitted that since the delay in remittance was not on account of any willful act of the company, the damages under Section 14B of the EPF Act could not have been levied. It is submitted that, going by the decisions of the Supreme Court in _**Employees' State Insurance Corporation v. HMT Ltd and Another; (2008) 3 SCC 35**_ and _**Mcleod Russel (India) Limited v. Regional Provident Fund Commissioner; Jalpaiguri and others; (2014) 15 SCC 263**_ , there could be no levy of damages under Section 14B of the EPF Act unless there was a conscious and deliberate failure to remit the contributions payable under the EPF Act. It is submitted that, though the Tribunal had reduced the damages under Section 14B of the EPF Act to 50%, the petitioner is entitled to an order waiving damages completely, in the peculiar facts and circumstances of this case. In so far as the finding of the Tribunal regarding interest under Section 7Q of the EPF Act is concerned, the learned counsel fairly submits that an appeal against levy of interest under Section 7Q of the EPF Act was not maintainable before the Tribunal and the finding of W.P.(C)No.15982/2021 4 the Tribunal to that extent cannot be challenged. 3. The learned Standing Counsel appearing for the Employees Provident Funds Organization would submit that the damages under Section 14B of the EPF Act is a civil liability. It is submitted that the moment there is a default in remittance of amount, the liability to pay damages under Section 14B of the EPF Act arises and it is not open for the petitioner to contend that the damages can be levied only if there is a willful failure to remit the contribution under the EPF Act. He places reliance on the judgment of the Supreme Court in _**Horticulture Experiment Station Gonikoppal v. Regional Provident Fund Organization; (2022) 4 SCC 516**_ to contend that the requirement of _mens rea and/or actus reus_ is no longer an essential requirement for the levy of damages under Section 14B of the EPF Act. It is submitted that the decision in _**Horticulture Experiment Station Gonikoppal (supra)**_ was rendered after noticing the earlier judgments in _**HMT (supra)**_ and _**Mcleod Russel (India) Ltd. (supra)**_ and following a Three Bench judgment of the Supreme Court in _**Union of India v. Dharamendra Textile Processors; (2008) 13 SCC 369**_ , which was a matter arising under the provisions of the Income Tax Act. It is submitted that the Supreme Court has practically held that, though the levy of damages under Section 14B of the EPF Act may seem to be W.P.(C)No.15982/2021 5 a penal provision since the same arises out of a civil liability, the requirement of criminal law that _mens rea and/ or actus reus_ is an essential ingredient before a penalty can be imposed is not a requirement for imposition of damages under Section 14B of the EPF Act. It is submitted that the Tribunal has, taking note of the entire facts and circumstances, granted some relief to the petitioner and has reduced the damages by 50%. It is submitted that there is no ground made out for interference with the said decision of the Tribunal in exercise of the jurisdiction vested in this Court under Art.226 of the Constitution of India. It is also pointed out that the decision of the Supreme Court in _**Mcleod Russel (India) Ltd. (supra)**_ on which considerable reliance was placed by the learned counsel for the petitioner itself takes the view that unless the orders of the lower authorities display manifest arbitrariness or perversity, this Court, in exercise of jurisdiction under Art.226 of the Constitution of India, should not interfere with such orders. 4. The learned counsel for the petitioner, in reply, would submit that the petitioner has yet another contention which is that, an amount of Rs.1,76,20,136.70 which was remitted by the petitionercompany to the Provident Fund Organization as stated in Ext.P3 has not been properly accounted for. It is submitted that this payment must be factored by the Provident Fund Organization. W.P.(C)No.15982/2021 6 5. Having heard the learned counsel for the petitioner, the learned Standing Counsel appearing for the Provident Fund Organization, I am of the view that the learned Standing Counsel for the Provident Fund Organization is right in contending that the impugned order of the Tribunal does not suffer from any manifest arbitrariness or perversity warranting its interference at the hands of this Court in exercise of the jurisdiction vested in this Court under Art.226 of the Constitution of India. The Tribunal has, on consideration of the matter, taken the view that the amount of damages imposed on the petitioner-company under Section 14B of the EPF Act should be reduced to 50%. The circumstances pointed out by the learned counsel for the petitioner has weighed with the Tribunal in reducing the damages under Section 14B of the EPF Act to 50%. As rightly pointed out by the learned Standing Counsel for the Provident Fund Organization, in the light of the law laid down by the Supreme Court in _**Horticulture Experiment Station Gonikoppal (supra)**_ , the requirement of _mens rea and/or actus reus_ is no longer a necessary ingredient for imposition of damages under Section 14B of the EPF Act. The Tribunal has, on application of mind, taken the view that, in the peculiar facts and circumstances of the case, the amount of damages can be reduced to 50%. The said decision calls for no interference at the hands of this Court under W.P.(C)No.15982/2021 7 Art.226 of the Constitution of India. Therefore, the challenge to Ext.P12 order of the Tribunal in Appeal No.252/2019 fails. 6. Coming to the contention of the learned counsel for the petitioner that an amount of Rs.1,76,20,136.70 which was paid by the petitioner-company is pending with the Provident Fund Organization without proper adjustment, I am of the view that this is a matter that should be considered by the 2[nd] respondent. This matter has been brought to the attention of the Regional Provident Commissioner, Kozhikode through Ext.P3 letter dated 14.10.2009. Therefore, there will be a direction to the 2[nd] respondent to consider Ext.P3 and take a decision as to whether any amount already paid by the petitionercompany has to be adjusted against the demands/damages now levied on the company, in accordance with the law. Subject to the above direction to the 2[nd] respondent, this writ petition will stand dismissed. sd/- **GOPINATH P.** **JUDGE** acd W.P.(C)No.15982/2021 8 ## **APPENDIX OF WP(C) 15982/2021** PETITIONER EXHIBITS - Exhibit P1 TRUE COPY OF GOVERNMENT ORDER NO. GO (MS) NO. 152/2005/ID DATED 24.11.2005. - Exhibit P2 TRUE COPY OF THE LETTER DATED 12.01.2009 SUBMITTED BY THE PETITIONER TO THE SECRETARY TO GOVERNMENT. - Exhibit P3 TRUE COPY OF THE LETTER DATED 14.10.2009 SUBMITTED BY THE PETITIONER TO THE 2ND PROPONENT. - Exhibit P4 TRUE COPY OF ORDER NO. KR/KKD/0002356000/ENF 4(1) 14B/2014-2015 10987 DATED 05.01.2015. - Exhibit P5 TRUE COPY OF ORDER NO. KR/KKD/0002356000/ENF 4(1)/7Q/20142015/109988 DATED 05.1.2015. - Exhibit P6 TRUE COPY OF LETTER NO. 24235/G2/2010/TD DATED 24.07.2013 ISSUED BY THE SECRETARY TO GOVERNMENT. - Exhibit P7 TRUE COPY OF AUDIT CERTIFICATES FOR THE PERIOD 2003/2004 PRODUCED BY THE PETITIONER. - Exhibit P8 TRUE COPY OF AUDIT CERTIFICATE FOR THE PERIOD 2004-2005 PRODUCED BY THE PETITIONER. Exhibit P9 TRUE COPY OF AUDIT CERTIFICATES FOR THE PERIOD 2005-2006 PRODUCED BY THE PETITIONER. Exhibit P10 TRUE COPY OF AUDIT CERTIFICATES FOR THE PERIOD 2006-2007 PRODUCED BY THE PETITIONER. Exhibit P11 TRUE COPY OF AUDIT CERTIFICATES FOR THE PERIOD 2007-2008 PRODUCED BY THE PETITIONER. 9 W.P.(C)No.15982/2021 Exhibit P12 TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED 19.01.2021. RESPONDENT EXHIBITS Exhibit R2(A) TRUE COPY OF THE LETTER DATED 09/09/2021 ISSUED BY THE 2ND RESPONDENT