Sreelakshmi Cashew Company v. Assistant Provident Fund Commissioner, Employees' Provident Fund Organisation, Recovery Officer, Employees' Provident Funds Appellate Tribunal

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN** **WEDNESDAY, THE 10TH AUGUST 2011 / 19TH SRAVANA 1933** **WP(C).No. 10294 of 2011(J)** **---------------------------------------** ## **PETITIONER(S):** **------------------------** **SREELAKSHMI CASHEW COMPANY, P.SUNDARAN, MANAGING PARTNER, SREELAKSHMI CASHEW COMPANY, LAKSHMI PRABHA, KADAPPAKKADA, KOLLAM.** **BY ADV. SRI.N.D.PREMACHANDRAN SMT.LALIZA.T.Y.** ## **RESPONDENT(S):** **--------------------------** **1. THE ASSISTANT PROVIDENT FUND COMMISSIOINER, EMPLOYEES PROVIDENT FUND ORGANISATION, MANNANIYYA COMPLEX, CHINNAKKADA, KOLLAM - 691 001.** **2. THE RECOVERY OFFICER, EMPLOYEES PROVIDENT FUND ORGANISATION, MANNANIYYA COMPLEX, CHINNAKKADA, KOLLAM - 691 001.** **3. THE EMPLOYEES PROVIDENT FUNDS APPELLATE TRIBUNAL, SCOPE MINAR, IVTH FLOOR, CORE-II, LAKSHMI NAGAR, DISTRICT CENTRE, NEW DELHI.** **BY ADV.SRI.V.V.SURESH,SC, EPF** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29/7/2011, THE COURT ON 10/08/2011 DELIVERED THE FOLLOWING:** **sts** ## **WP(C)NO.10294/2011** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1 COPY OF THE SUMMONS DATED 19/9/2008.** - **P2 COPY OF THE LETTER DATED 20/1/2009.** - **P3 COPY OF THE DEMAND NOTICE DATED 24/12/09.** - **P4 COPY OF THE REPRESENTATION DATED 8/1/2010.** - **P5 COPY OF THE ORDER UNDER 7A DATED 13/3/2009.** - **P6 COPY OF THE APPLICATION FOR REVIEW DATED 25/2/2010.** - **P7 COPY OF THE ORDER DATED 19/5/2010.** - **P8 COPY OF THE APPEAL DATED 21/6/2010.** - **P9 COPY OF THE APPLICATION TO WAIVE DEPOSIT DATED 21/6/10.** - **P10 COPY OF THE APPLICATION FOR STAY DATED 21/6/2010.** - **P11 COPY OF THE NOTICE OF DEMAND DATED 15/6/2010.** - **P12 COPY OF THE NOTICE OF DEMAND DATED 15/6/2010.** - **P13 COPY OF THE STAY ORDER PASSED BY THE 3RD RESPONDENT DATED 14/7/2010.** - **P14 COPY OF THE COVERING LETTER DATED 24/9/2010 FORWARDING THE DEMAND DRAFT (BANKER'S CHEQUE) TO THE 2ND RESPONDENT.** - **P15 COPY OF THE ORDER PASSED BY THE 3RD RESPONDENT DATED 9/2/2011.** - **RESPONDENT'S EXHIBITS: NIL** ## **/TRUE COPY/** **P.S.TO.JUDGE** **sts** ## **P.N. RAVINDRAN, J.** ## ------------------------------- ## **W.P.(C) No.10294 of 2011** ------------------------------- ## **Dated this the 10[th] day of August, 2011** ## **J U D G M E N T** Ext.P15 order passed by the Employees' Provident Fund Appellate Tribunal on 9.2.2011 dismissing Ext.P8 appeal filed by the petitioner under section 7-I of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act' for short) from Exts.P5 and P7 orders passed by the first respondent under sections 7A and 7B thereof, is under challenge in this writ petition. The brief facts of the case are as follows:- 2. The petitioner, a partnership firm, engaged in the business of processing raw cashewnuts and exporting cashew kernels, had taken on lease a cashew factory belonging to M/s.Sukumar Cashew Company, Kilikolloor, Kollam. The lease was for the period from 10.5.2006 to 31.10.2008. As per the terms of the lease arrangement, the petitioner was bound to pay the wages of workers and also the contributions to the Employees Provident Fund and other welfare schemes. After the W.P.(C) No.10294 of 2011 2 petitioner commenced operations, the first respondent issued Ext.P1 notice of enquiry under section 7A of the Act. It was stated therein that information has been received by the first respondent to the effect that the petitioner has failed to remit fully, the provident fund contribution in respect of his establishment during the period from October 2004 to May 2008. As per Ext.P1, the enquiry was scheduled to be held on 10.10.2008. The enquiry was not held on that date, but it was adjourned to 12.11.2008 and still later to 20.1.2009. Though the enquiry was adjourned, the petitioner's representative was informed that there was difference in the contribution paid by the petitioner to the Employees' State Insurance Corporation and to the Provident Fund Organisation in respect of the very same set of employees. The Managing Partner of the petitioner firm thereupon submitted Ext.P2 letter dated 20.1.2009 to the first respondent requesting the first respondent to furnish him the records relating to the quantum of ESI contribution in respect of the petitioner's establishment during the period in respect of which the enquiry was being held for the purpose of enabling the petitioner to furnish a proper explanation and to clarify the W.P.(C) No.10294 of 2011 3 doubts, if any. The first respondent however did not furnish the information sought by the petitioner and thereafter issued Ext.P5 order dated 5.2.2009 directing the petitioner to pay the sum of Rs.3,27,863/- towards the contribution payable in respect of non enrolled employees during the period from March, 2008 to May, 2008. Ext.P5 order was communicated to the petitioner only on 27.1.2010. Aggrieved thereby, the petitioner filed Ext.P6 application for review under section 7B of the Act raising various contentions including the contention that materials which has not been furnished to the petitioner were relied on while passing Ext.P5 order. By Ext.P7 order passed on 19.5.2010, after hearing the petitioner, the review petition was rejected. Aggrieved thereby, the petitioner filed Ext.P8 appeal before the Employees' Provident Fund Appellate Tribunal. By Ext.P15 order passed on 9.2.2011, the Tribunal rejected the appeal. The order reads as follows:- _“The appeal in this case is preferred against the order passed by the PF authority under Section 7A of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 directing the appellant to deposit the dues._ W.P.(C) No.10294 of 2011 4 _2. The case of the appellant is that the appellant purchased the establishment from M/s.Sukumar Cashew Company on 10.5.2006 and since then it was making the contribution regularly. The EPF authority started a proceeding under Section 7A and assessed the dues relating to the previous owner. The appellant is not liable to pay and the order is illegal one._ _3. The case of the respondent is that under Section 17B both the transferee and transferor are jointly liable to pay. So the assessment was made correctly._ _4. It is contended that the default was made by the previous owner. So, the appellant was not liable to pay and no opportunity was given to him to place his case._ _5. The officer of the respondent supported the order._ _6. The applicability of the Act is not questioned. It is not disputed that the appellant purchased property in the year 2006 but under Section 17B, both the transferee and transferor are jointly and severely liable. In the case of Dalgam Agro Industry v. Union of India reported in 2004 Vol.III LLJ at page 430 the Hon'ble_ W.P.(C) No.10294 of 2011 5 _Court of Kolkata held that “a transferee would be liable for the damages jointly and severely in respect of default committed prior to date of transfer in terms of Provision contained in Section 17B” and similar view was held in the case of Assistant PF Commissioner v. Eveready Industry reported in 2009 Vol.II LLJ at page 678. The order of the authority reveals that inspite of number of adjournments the appellant failed to cooperate. So it cannot be said that no opportunity was given to the appellant or there was breach of principle of natural justice. No infirmity is noticed in the order of the authority._ _7. Hence ordered, the appeal is dismissed. Copy of order be sent to the parties. File be consigned to record room.”_ (emphasis supplied) In this writ petition, the petitioner challenges Ext.P15 order passed by the Employees' Provident Fund Appellate Tribunal and seeks a direction to the first respondent to conduct the section 7A enquiry afresh, after affording the petitioner a reasonable opportunity to put forward its contentions. 3. One of the contentions raised in the writ petition is that the Employees' Provident Fund Appellate Tribunal has not W.P.(C) No.10294 of 2011 6 adverted to any of the material contentions raised by the petitioner in Ext.P8 appeal memorandum and the Tribunal has proceeded on the basis that the petitioner has disputed its liability to pay the contribution determined by the first respondent on the ground that as the transferee, the petitioner is not liable. It is also contended that the Appellate Tribunal has not adverted to the merits of the contentions raised by the petitioner in the appeal memorandum and therefore Ext.P15 order is liable to be ser aside for that reason also. The petitioner has also contended that Ext.P5 order passed by the first respondent under section 7A of the Act and Ext.P7 order passed by the first respondent rejecting the application for review filed under section 7B of the Act are also liable to be set aside for the reason that all the materials relied on by the first respondent were not furnished to the petitioner and the petitioner was not afforded an opportunity to cross examine the Enforcement Officer. 4. I heard Sri.N.D.Premachandran, learned counsel appearing for the petitioner and Sri.V.V.Suresh, learned standing counsel appearing for respondents 1 and 2. Though notice has W.P.(C) No.10294 of 2011 7 been served on the third respondent, the postal acknowledgment card has been returned without the signature of the Registrar of the third respondent Tribunal. However, I am of the opinion that in the absence of any allegation of bias or malice against the Tribunal, it is not necessary to hear the third respondent. From a reading of Ext.P8 appeal memorandum filed by the petitioner, it is evident that the material contentions put forward by the petitioner relates to the validity of section 7A enquiry conducted by the first respondent. The petitioner had also challenged the findings arrived at by the first respondent. The petitioner had no case in the memorandum of appeal that as the transferee, it was not liable to pay the contribution. As a matter of fact, by the order impugned in the appeal, the petitioner was held liable to pay the contribution only for the period from March 2008 to May 2008. The petitioner was admittedly the lessee during the said period. But a reading of Ext.P15 order passed by the Appellate Tribunal discloses that the Appellate Tribunal has proceeded on the basis that the petitioner is questioning the order passed by the first respondent on the ground that the assessment relates to the period during which the previous W.P.(C) No.10294 of 2011 8 owner was running the establishment. It is thus evident that the Appellate Tribunal has not adverted to the material contentions raised by the petitioner in Ext.P8 memorandum of appeal. I am therefore satisfied that the order passed by the Appellate Tribunal cannot be sustained. The Tribunal should in my opinion re-consider the appeal and pass fresh orders thereon after affording the petitioner an opportunity of being heard. I accordingly allow the writ petition, quash Ext.P15 and direct the third respondent Tribunal to dispose of A.T.A.No.397(7)2010 afresh after notice to and affording the petitioner an opportunity of being heard. Until such time as revised orders are passed on Ext.P8 appeal, further proceedings pursuant to Exts. P5 and P7 orders shall be kept in abeyance. ## **P.N. RAVINDRAN, JUDGE.** nj. ## **P.N.RAVINDRAN, J.** -------------------------------------- W.P.(C) No.10294 of 2011 ## **JUDGMENT** Dated:- 10[th] August, 2011 --------------------------------------