The Kerala State Cashew Development Corporation Ltd. v. Regional Provident Fund Commissioner, Employees Provident Fund Organisation, Sub Regional Office, Kollam, and the Employees Provident Fund Appellate Tribunal, New Delhi-001

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE SMT. JUSTICE P.V.ASHA** **TUESDAY, THE 14TH DAY OF JUNE 2016/24TH JYAISHTA, 1938** ## **WP(C).No. 31891 of 2011 (J)** **-----------------------------------------** ## **PETITIONER(S):** ## **------------------------** **THE KERALA STATE CASHEW DEVELOPMENT CORPORATION LTD., CASHEW HOUSE, P.B.NO.13, KOLLAM REPRESENTED BY ITS MANAGING DIRECTOR.** ## **BY ADV. SRI.C.UNNIKRISHNAN (KOLLAM)** **RESPONDENT(S):** - **--------------------------** **1. THE REGIONAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, MANNANNIA COMPLEX, CHINNAKKADA, KOLLAM - 689001.** **2. THE EMPLOYEES PROVIDENT FUND APPELLATE, TRIBUNAL, NEW DELHI-001.** ## **R BY SRI.PIRAPPANCODE V.S.SUDHIR,SC,EPF ORGN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14-06-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **AD** **WP(C).No. 31891 of 2011 (J)** ## **-----------------------------------------** ## **APPENDIX** ## **PETITIONER'S EXHIBITS** **----------------------------------EXT.P1(A): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.14-BHARANIKAVU** - **EXT.P1(B): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.33- KADAKKAL** - **EXT.P1(C): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.33-KADAKKAL** - **EXT.P1(D): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.20-ELAMPALLOOR** - **EXT.P1(E): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.20- ELAMPALLOOR** - **EXT.P1(F): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.22- NEDUMPAIKULAM** - **EXT.P1(G): TRUE COPY OF THE ORDER IMPOSING DAMAGES IN RESPECT OF FACTORY NO.11 EDAMULAKKAL** - **EXT.P2: TRUE COPY OF ONE OF THE APPEALS PREFERRED BY THE PETITIONER ON BEHALF OF ITS FACTORY NO.14 BHARANIKAVU AS ATA NO.203(7)/2010** - **EXT.P3(A): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.203(7)/10** - **EXT.P3(B): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.204(7)/10** - **EXT.P3(C): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.205(7)/10** - **EXT.P3(D): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.206(7)/10** - **EXT.P3(E): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.32(7)/07** - **EXT.P3(F): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.33(7)/07** - **EXT.P3(G): TRUE COPY OF THE ORDER ISSUED BY THE 2ND RESPONDENT TRIBUNAL IN ATA NO.33(7)/07** - **EXT.P4: TRUE COPY OF THE STATEMENT SHOWING YEAT WISE AMOUNT REQUIRED FROM 1998 TO 2010 FOR DISBURSEMENT OF GRATUITY** - **EXT.P5(A): TRUE COPY OF THE SANCTION ORDER ISSUED BY THE GOVT. OF KERALA IN G.O(RT.) NO.993/2008/ID DATED 2.9.2008 ALLOTTING RS. 5 CRORES** **EXT.P5(B): TRUE COPY OF THE SANCTION ORDER ISSUED BY THE GOVT. OF KERALA IN G.O(RT.) NO.599/2009/ID DATED 20.5.2009 ALLOTTING RS.8 CRORES** **EXT.P5(C): TRUE COPY OF THE SANCTION ORDER ISSUED BY THE GOVT. OF KERALA IN G.O(RT.) NO.799/2010/ID DATED 03.06.2010 ALLOTTING RS.20.40CRORES** **EXT.P5(D): TRUE COPY OF THE SANCTION ORDER ISSUED BY THE GOVT. OF KERALA IN G.O(RT.) NO.509/2011/LBR DATED 28.03.2011 ALLOTTING RS.21.00 CRORES** - **EXT.P6: TRUE COPY OF THE ORDER DATED 8.7.2008 IN S.L.P NO.13771 OF 2008** - **EXT.P7(A): TRUE COPY OF THE CERTIFIED BALANCE SHEETS FOR THE YEAR ENDING 31.3.2007 OF KSCDC** **EXT.P7(B): TRUE COPY OF THE PROVISIONAL BALANCE SHEETS FOR THE YEAR ENDING 31.3.2007 OF KSCDC** **EXT.P8(A): TRUE COPY OF THE COMMON ORDER PASSED BY THE EXFAT.** **EXT.P8(b): TRUE COPY OF THE INTERIM ORDER DATED 12/02/2008 IN WPC 4945/2008 OF THIS HON'BLE COURT.** - **EXT.P9 : TRUE COPY OF THE JUDGMENT DATED 25/01/2010 OF THIS HON'BLE COURT IN WPC 1004/2010.** - **EXT.P10: TRUE COPY OF THE ONE OF THE ORDERS ISSUED BY THE EPF APPELLATE TRIBUNAL IN ATA NO.759(7)/10.** - **EXT.P11. TRUE COPY OF THE JUDGMENT DATED 26/11/10 IN W.A.703/10 OF THIS HON'BLE COURT.** ## **RESPONDENTS' EXHIBITS** **---------------------------------------** ## **NIL** **//TRUE COPY//** **P.A. TO JUDGE** **AD** ## **P.V.ASHA J.** **-------------------------------------------W.P.(C) No.31891 of 2011 ---------------------------------------------** Dated this the 14[th] day of June, 2016 ## **J U D G M E N T** The Kerala State Cashew Development Corporation Ltd., has filed this writ petition challenging the orders Ext.P1 series by which the Regional Provident Fund Commissioner-the first respondent has imposed damages for the delayed payment of contribution under the Employees Provident Fund and Miscellaneous Provisions Act (for short, “the Act”) and the Employees Provident Fund Scheme, and Ext.P3 series of orders of the Appellate Tribunal upholding the same. 2. According to the petitioner, it is running 30 Cashew Factories in order to provide employment to poor cashew workers in the State. With the support of the balance sheet for the relevant financial years, it is stated that the petitioner has been facing severe financial crisis and therefore there occurred some delay in remitting the Provident Fund contribution, which was not willful. Exts.P7(a) and P7(b) balance sheet and trading and profit and loss account are produced to show that the loss was **W.P.(C) No.31891 of 2011** 2 to the tune of Rs.20,13,49,427.45 for the year ended 31[st] March 2007. It also shows that the company has been in recurrent loss. Ext.P1 series of orders were issued, after considering the explanation submitted by the petitioner with reference to the notices issued by the first respondent. In the explanations as well as the appeals submitted before the Appellate Authority petitioner has explained the circumstances for the delayed remittance. According to it, the Company has been suffering severe set back since the year 1999-2000 and it was compelled to close factories from May, 2001 onwards. Some of the factories run only a few days in a month. 3. The first respondent did not accept the explanation of petitioner and issued Ext.P1 series of orders stating that there were no circumstances for waiving damages, since the employer is bound to pay monthly contribution within 15[th] of every month. It is further stated that the employer is required to comply with the provisions under the Act promptly and noncompliance with the statutory requirements of the welfare **W.P.(C) No.31891 of 2011** 3 legislation attracts damages by way of penalty under Section 14B of the Act. Accordingly it fixed the damages for the period from (a) 03/07 to 10/07 (P1a); (b) 03/07 to 10/07 (P1b); (c) 03/06 to 02/07 (P1c); (d) 03/06 to 02/07 (P1d); (e) 03/06 to 02/07 (P1e); (f) 03/01 to 02/02 (P1f) and (g) 12/00 to 02/01 (P1g). 4. The petitioner filed appeals against Ext.P1 series of orders before the Appellate Tribunal and the Appellate Authority rejected all those appeals by Ext.P3 series of orders dated 11.01.2011. The appellate authority found that financial ups and downs is a common feature in every industrial establishment. It also found that there was no case for the petitioner that the salary of employees could not be paid in time. Referring to the judgment in **Esskay Machinery Ltd. v. RPFC** (1998 LLR 925) it was held that financial crisis will not be sufficient for waving damages for not depositing EPF contribution. Referring to the judgments in **Hindustan Times v. Union - of India ([1998] 2 SCC 242)** and **Ernakulam Co operative Bank v. RPFC** [2000 (1) LLJ 1662] it was held **W.P.(C) No.31891 of 2011** 4 that there was no sufficient reason for granting exemption and to waive the damages and interest. The petitioner submits that none of the respondents considered the request of the petitioner in the correct perspective. 5. Heard Shri.C.Unnikrishnan, learned counsel for the petitioner and Sri.Pirappancode V.S.Sudhir, the learned counsel appearing for the respondents. 6. Section 14B of the Act provides that where an employer makes default in payment of any contribution to the Fund, the Central Provident Fund Commissioner 'may recover' from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the Scheme. The only condition is that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard. It further provides that the Central Board may reduce or waive the damages levied under this Section in relation to an establishment. What is provided under Section 14B of the Act is that the Central Provident Fund Commissioner “may” recover damages by way of penalty. That means **W.P.(C) No.31891 of 2011** 5 damages is not the rule for any default in payment. 7. Para 32(a) of the Employees Provident Fund Scheme provides for the procedure under which penalty, damage, etc., can be levied. Recovery of damages for default in payment of any contribution where an employer makes default in the payment of any contribution to the Fund or in the transfer of accumulations required to be transferred under Section 15(2) or Section 17(5) of the Act or in the payment of any charges payable under any other provisions of Act or the Scheme or under any of the conditions specified under Section 17 of the Act, the Central Provident Fund Commissioner may recover from the employer by way of penalty, damages at the rates given in the table therein. As per this table the damages that can be recovered for default for a period of 6 months and above is 25%. Para 32B provides for the terms and conditions for reduction or waiver of damages by the Central Board. 8. The question whether the levy of damages is compulsory notwithstanding the financial conditions of the **W.P.(C) No.31891 of 2011** 6 employer has been considered by this court in several judgments. In **Harrisons Malayalam Ltd. v. Regional Provident Fund Commissioner** [2012 (2) KLT SN 74], this Court held that merely because there is delay in payment of contributions, liability to pay damages does not arise automatically, but the same shall be decided by applying mind objectively to the merits of each case and not by resorting to mere arithmetical calculation of damages as per a structured formula. It was held that there must be application of mind taking into account the reasons for delay and whether the delay could have been avoided by ordinary diligence by the employer, exercise of judicial discretion by the authority imposing damages by objective application of mind to the circumstances pleaded and proved by the employer is necessary. It was further held that when deciding the question regarding the payment of damages it should also be looked into whether there is any contumacious conduct on the part of the employer in delaying payment of contributions. 9. From the orders impugned i.e., Ext.P1(a) series **W.P.(C) No.31891 of 2011** 7 and Ext.P3(a) series such an application of mind or analysis with reference to the facts and circumstances arising in the case with respect to the materials placed by the petitioner is not seen to have been done. Therefore though financial condition is not a criteria for levying damages, as held in the judgments relied on by the respondents, I remit the matter to the 1[st] respondent for a re-consideration in the light of the aforesaid judgment of this Court. Under the above circumstances, I quash Ext.P1(a) to (g) series orders and Ext.P3(a) to (g) in ATA Nos.203(7)/10, 204(7)/10, 205(7)/10, 206(7)/10, 544 (7)/ 10, 32(7)/07 and 33(7)/07 and direct the first respondent to re-consider the matter with reference to the materials produced by the petitioner. Orders shall be passed with notice to the petitioner within a period of three months. With the above observations, this writ petition is disposed of. Sd/- **P.V.ASHA, JUDGE.** AS/16/06/16