WP(C).234/2012 (D) & WP(C).26660/2014, District Nirmithi Kendra v. Employees' Provident Fund Organisation

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 29TH DAY OF OCTOBER 2014/7TH KARTHIKA, 1936 WP(C).No. 234 of 2012 (D) -------------------------- PETITIONER(S): -------------------------- DISTRICT NIRMITHI KENDRA , PATHANAMTHITTA, REPRESENTED BY ITS PROJECT MANAGER SASIDHARAN NAIR, S/O.SADASIVAN NAIR, THUNDIYIL HOUSE MALAYALAPUZHA, THAZHAM PO, PATHANAMTHITTA. BY ADVS.SRI.RENJITH THAMPAN (SR.) SRI.V.M.KRISHNAKUMAR RESPONDENT(S): - ---------------------------- 1. EMPLOYEES PROVIDENT FUND ORGANISATION REP.BY ASSISTANT COMMISSIONER, BHAVISHYA NIDHI BHAVAN, THIRUVANANTHAPURAM, PIN 695 004. 2. RECOVERY OFFICER, THE EMPLOYEES PROVIDENT FUND ORGANIZATION, BHAVISHYA NIDHI BHAVAN, THIRUVANANTHAPURAM PATTOM PALACE PO, PIN 695 004. 3. THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL - 4TH FLOOR, CORE 2, SCOP MINAR, LAKSHMI NAGAR, NEW DELHI 110 092. R1 &2 BY SMT.T.N.GIRIJA, SC,EPF ORGANISATION SRI.N.N. SUGUNAPALAN, SC, P.F. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29-10-2014, ALONG WITH W.P.(C).26660/2014 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 234 of 2012 APPENDIX PETITIONER(S) EXHIBITS EXHIBIT P1 TRUE COPY OF THE REGISTRATION CERTIFICATE OF THE PETITIONER DATED 29/6/1988 ISSUED BY THE REGISTRAR TO THE PETITIONER SOCIETY. EXHIBIT P2 TRUE COPY OF THE BYE-LAWS OF THE PETITIONER ,NIRMITHI KENDRA,PATHANAMTHITTA. EXHIBIT P3 TRUE COPY OF THE PROCEEDINGS OF THE ASSISTANT PROVIDENT FUND COMMISSIONER DATED 6/10/2006 ISSUED TO THE CHAIRMAN,NIRMITHI KENDRA,PATHANAMTHITTA. EXHIBIT P4 TRUE COPY OF THE PROCEEDINGS OF THE ASSISTANT PROVIDENT FUND COMMISSIONER NO.KR/22250/RO/TVM/PD/NS/2010 DATED 11/3/2010 ISSUED TO THE PETITIONER EXHIBIT P5 TRUE COPY OF THE APPEAL MEMORANDUM FILED BY THE PETITIONER BEFORE THE EMPLOYEES PROVIDENT FUNDS APPELLATE TRIBUNAL. EXHIBIT P6 TRUE COPY OF THE ORDER DATED 20/9/2011 OF THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL ,NEW DELHI IN ATA NO.293(7) 2010. RESPONDENTS' EXHIBITS EXHIBIT R1(a)TRUE COPY OF THE LIST OF EMPLOYEES DURING JANUARY 1996 EXHIBIT R1(b)TRUE COPY OF THE PROFORMA OF COVERAGE //True Copy// P.A. To Judge ## **K.VINOD CHANDRAN, J** - - - - - - - - - - - - - - - - - - - - W.P.(C).Nos. 234/2012 & 26660/2014 - - - - - - - - - - - - - - - - Dated 29[th] October, 2014 - - - - - - - - - - - - - - - - - - - - - - - - ## **JUDGMENT** The petitioner in both the writ petitions challenged the orders passed by the respondent Organization under Section 7Q and Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short 'the EPF and MP Act'). ## 2. W.P.(C).234/2012 challenges Section 14B proceedings levying damages concluded by Ext.P4 and confirmed in Ext.P6 appeal. W.P.(C). 26660/2014 challenges the order demanding interest under Section 7Q, as per Ext.P8 produced in that writ petition. 3. The contentions of the petitioner are as follows: **WP(C)s.234/12 & 26660/14** 2 4. The petitioner is an Institution under the State Government which has been constituted for developing low cost technology in house construction and is a Society registered under the Travancore - Cochin Literary, Scientific and Charitable Societies Act. The petitioner has in its office only eight employees and the primary contention raised is that, the Society is exempted insofar as the petitioner having no power and having not employed more than 20 persons which alone, according to the petitioner, would attract coverage under the EPF and MP Act. The order under Section 14B is also challenged on the ground that there is no deliberate contumacious conduct on the part of the petitioner and it is only due to financial constraints that the contributions were not made. I have heard the learned Standing Counsel appearing for the respondent Organization also. **WP(C)s.234/12 & 26660/14** 3 5. Enquiry was ordered under Section 7A of the the EPF and MP Act as early as in 2006. Petitioner was issued summons and on receipt of the same, the Project Manager and Accountant attended the enquiry. After due opportunity, the Assistant Provident Fund Commissioner of the Organization computed the dues for the period from 01/1996 to 07/2006 and issued Ext.P3 order demanding an amount of Rs.11,82,705/-. It was also specifically noticed in Ext.P3 that the amount assessed is exclusive of the penal damages leviable under Section 14B and the amounts leviable as interest under Section 7Q of the the EPF and MP Act. The petitioner did not challenge the order issued under Section 7A and did not also pay the amounts demanded in the said order. The payments were made subsequently in the year 2010, upon which Ext.P4 order was issued levying damages under Section 14B. It is the levy of damages under Section 14B which was **WP(C)s.234/12 & 26660/14** 4 challenged before the Appellate Authority and which concluded with Ext.P6. 6. Ext.P6 found that the order under Section 7A has not been challenged by the petitioner and hence, there can be no challenge against the levy of damages under Section 14B since that is a consequential order. That may not be correct since this Court has in **Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd. (2013 (3) KLT 790)** held that, financial constraints is an issue which can be considered in mitigation of the damages levied under Section 14B. But in considering the said mitigation, the learned Standing Counsel specifically points out, that the petitioner does not have any claim of financial stringency insofar as the period in which the default has been committed. Contributions were not paid since the petitioner was under the **WP(C)s.234/12 & 26660/14** 5 misapprehension of no coverage under the Act. 7. The learned Standing Counsel would specifically refer to the contention of the petitioner recorded in Ext.P4, in answer to the notice directing show cause, as to why Section 14B shall not be imposed. The Project Manager, who appeared and filed authorization, had also filed a statement, in which it is contended that: - “The payment of arrears put their institution into a financial crisis resulting in total paralysis of the institution. Even now their institution is running in heavy loss and financial stringency,. 8 months salary to the employees is pending for want of fund. He further states that the said action was against the then existed Govt.orders in this regard and also against the provisions of related legislations.” 8. Hence, the specific plea of financial stringency is on account of the financial difficulty in which the petitioner was put for **WP(C)s.234/12 & 26660/14** 6 reason of the payments made as directed in Ext.P3. The mitigation, in imposition of Section 14B damages, can be considered, even as per the Division Bench judgment, only when financial constraints are complained of during the period of default of contribution. In such circumstances, it cannot be said that the petitioner can be permitted to plead any mitigation, going by the specific averment made by the petitioner before the authority and hence, there would be no purpose served in sending back the matter for fresh consideration either by the Tribunal or by the original authority. W.P.(C).234/2012 is found to be devoid of merit and the same is dismissed, affirming Ext.P6 _inter alia_ for the grounds stated herein. 9. W.P.(C).26660/2014 is filed against an order imposing interest under Section 7Q. The **WP(C)s.234/12 & 26660/14** 7 Honourable Supreme Court has in **M/s. Arcot Textiles Mills Ltd., v. Regional Provident Fund Commissioner and Others (AIR [2014] SC 295)** held that, an order under Section 7Q is not appealable. In **Harrisons Malayalam Ltd.,** (supra), the Division Bench also noticed that Section 7Q is automatic and is compensatory in nature in the context of which there can be no discretion conferred on the Officer in levying such interest. W.P.(C). 26660/2014 also stands dismissed. ## **Sd/-** **K.VINOD CHANDRAN Judge** Mrcs //True Copy//