IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 1. Civil Writ Petition No.9004 of 2005 M/s Rubber Reclaim Company of India (P) Ltd. and another … Petitioners Versus Central Provident Fund Commissioner and others … Respondents 2. Civil Writ Petition No.12941 of 2005 M/s Rubber Reclaim Company of India (P) Ltd. and another … Petitioners Versus Central Provident Fund Commissioner and others … Respondents Date of decision: 13th October, 2010 CORAM: HON’BLE MR. JUSTICE KANWALJIT SINGH AHLUWALIA Present: Mr. Pawan Kumar Mutneja, Advocate with Mr. Arun Gosain, Advocate for the petitioners. Mr. Kamal Sehgal, Advocate for the respondents. KANWALJIT SINGH AHLUWALIA, J. By this common order, two petitions viz. (1) Civil Writ Petition No.9004 of 2005 and (2) Civil Writ Petition No.12941 of 2005, preferred by M/s Rubber Reclaim Company of India (P) Ltd. and another against Central Provident Fund Commissioner and others shall be decided together. In CWP No.9004 of 2005, a prayer has been made that a writ in the nature of certiorari be issued and order (Annexure P-9) dated 25th May, 2005 issued under Section 8F of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (hereinafter referred to as, ‘the 1952 Act’), demanding Rs.6,73,979/-, be quashed. A further prayer has been made that a writ in the nature of mandamus be issued and respondent No.3-Assistant Provident Fund Commissioner be directed not to recover Civil Writ Petitions No.9004 and 12941 of 2005 the above said amount till the representation submitted by the petitioner to the Central Provident Fund Board is decided. In CWP No.12941 of 2005, it has been prayed that a writ in the nature of certiorari be issued and communication (Annexure P-12) dated 13th July, 2005 conveyed by the Central Provident Fund Commissioner, during the pendency of CWP No.9004 of 2005, whereby request of the petitioner for waiver of damages under Section 14B of the 1952 Act has been rejected by the Central Provident Fund Board, be quashed. Furthermore, it has been prayed that respondent No.3-Assistant Provident Fund Commissioner be directed not to recover the amount. Briefly stated, M/s Rubber Reclaim Company of India (P) Ltd. (hereinafter referred to as, ‘the Company’) was incorporated under the provisions of Indian Companies Act, 1956 in the year 1960 with the aid and assistance of Punjab Financial Corporation. It is claimed by the Company that it brought a new technology in the country for reclaiming rubber from used rubber, thus saved valuable foreign exchange by undertaking the production of rubber through the process of reclamation. According to the counsel, it has also contributed to maintain ecological balance as the rubber which is a waste rot, is put to constructive use. The Company suffered heavy losses in the year 1990. Its entire net-worth was eroded and a reference was made to the Board of Industrial and Financial Reconstruction (hereinafter referred to as, ‘BIFR). A scheme was sanctioned by BIFR in the year 1994 and various reliefs and concessions were granted to the Company by waiver of penal interest and rescheduling of installments of the term loan. Tax exemption was also granted by the Government of Haryana. On 30th October, 2002, BIFR declared the Company to be a sick industrial Company under Section 3 (1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as, ‘SICA’). 2 Civil Writ Petitions No.9004 and 12941 of 2005 Due to the monetary constraint, the Company could not deposit the provident fund deducted from the salaries of its employees during the period 1988 to 2003. Later-on, the payments were made, however, the Company received a notice towards payment of interest and damages for delayed payment under Sections 7(Q) and 14(B) of the 1952 Act. The petitioner-Company made a representation for waiver of interest and damages, pleading therein that it has been declared as a sick industrial Company and the rehabilitation exercise is being undertaken and the Company is in the process of taking concrete steps to satisfy its liability. The Assistant Provident Fund Commissioner passed an order (Annexure P-6) dated 5th May, 2005, after affording opportunity of personal hearing to the representatives of the Company on 28th September, 2004; 25th January, 2005; 18th March, 2005 and 15th April, 2005; holding that the Company is liable to pay Rs.4,76,912/- as damages for the delayed payment along with an interest of Rs.1,97,067/- under Section 7(Q) of the 1952 Act. Against the order (Annexure P-6), the Company submitted a representation to the Central Provident Fund Board. CWP No.9004 of 2005 was filed praying that till the representation is decided, the recovery be not effected. As during the pendency of the writ petition, the representation was rejected, another petition viz. CWP No.12941 of 2005 was filed praying that the order whereby representation of the Company was rejected, be quashed. Written statement has been filed by the Central Provident Fund Commissioner to both the writ petitions. A preliminary objection has been raised therein that the order, which has been annexed as Annexure P-6 with CWP No.9004 of 2005, is an appealable order and an appeal shall lie to the Employees Provident Fund Appellate Tribunal, New Delhi 3 Civil Writ Petitions No.9004 and 12941 of 2005 under Section 7-I of the 1952 Act, therefore, both the writ petitions cannot be entertained as the petitioners have got alternative remedy of appeal. Mr. Pawan Kumar Mutneja, Advocate appearing on behalf of the petitioners, has submitted that since the Company has been declared as a sick industrial Company, the action on the part of the respondents is violative of the provisions of Section 22 of SICA, as it provides that no proceedings for execution, distress or the like against any of the properties of an industrial company or for appointment of a receiver in respect thereof can be initiated and no suit for recovery of money or for enforcement of security shall lie or be proceeded with except with the consent of the Board. It has been submitted that Section 8 of the 1952 Act, which provides for the mode of recovery of money due from the employer in the provident fund, cannot be proceeded with, without the sanction of BIFR. In support of this argument, learned counsel has further submitted that the 1952 Act was framed in the year 1952, whereas SICA was framed in the year 1985 and SICA being a specialized Act would apply to the Companies, which have been declared as sick. It has been contended that a Company can take refuge under Section 22 of SICA, as the same shall supersede the provisions of the 1952 Act and the scheme framed thereunder. In support of this contention, reliance has been placed upon a judgment rendered by a Single Bench of Madras High Court in ‘Essorpe Mills Ltd. v. Central Provident Fund Commissioner and others’ 104(2001) Company Cases 588. I am afraid, this argument cannot be accepted. A Division Bench of this Court, to which I was party, in Civil Writ Petition No.12561 of 2006 titled as ‘M/s S.B. Packagings Ltd. v. Provident Fund Commissioner’ decided on 8th September, 4 Civil Writ Petitions No.9004 and 12941 of 2005 2008, considered the ratio of law laid down in Essorpe Mills Ltd.’s case (supra), and observed as under: “The judgment of the Madras High Court in Essorpe Mills Ltd.’s case (supra), is clearly distinguishable, in as much as the writ petitioner has sought restraint order in respect of adjudication of the proceedings under Section 7A of the E.P.F. Act. It was held that the adjudication proceedings under Section 7A of the E.P.F. Act, have not been barred or prohibited nor the contributions to be paid under the EPF Act, are suspended. In the said case, it was conceded by the learned counsel for the respondents that since the matter is pending before the BIFR, the respondents will not take any distress or coercive action against the assets of the Company for the enforcement of the arrears, except by following the procedure prescribed under Section 22 of the SICA. The question of stay of coercive or distress action against the Company, during the pendency of the proceedings before the BIFR, was conceded. But in the judgments referred to above, the question has been specifically dealt with and answered to hold that the proceedings under the E.P.F. Act cannot be stayed, in view of the amendment in section 14B of the EPF Act, vide Act 33 of 1988 with effect from 1.9.1991, dealing with the situation, where the Company has approached the BIFR.” The view formulated by a Division Bench of this Court in ‘M/s S.B. Packagings Ltd.’s case (supra) also finds support from a judgment rendered by a Full Bench of Madras High Court in ‘Gowri Spinning Mills (P) Ltd. v. Assistant Provident Fund Commissioner, Salem and another’ 2007-II-LLJ 202, wherein it was held as under: “14. Both the statutes are special statues. Whereas the object of enactment of the SICA was to provide for the revival and rehabilitation of sick industrial companies, the object of the EPF Act, as indicated hereinbefore, was a measure to provide social security to the employees. The contribution of the employees is not a tax due. It is also not an amount recoverable under a contract. The moneys, which 5 Civil Writ Petitions No.9004 and 12941 of 2005 have been deducted from the wages of the employees as well as the amounts, which the employer is required to pay as its contribution, belongs to the employees, and constitute their rightful and just entitlement for the eventual payment of provident fund benefits. 15. In our opinion, the provision of Section 22(1) of the SICA has no application to the provident fund dues and the provisions of the EPF Act would not come within the purview thereof. The provident fund and other dues payable under the EPF Act are part of the legitimate statutory settlement of the workers. The employer is obligated to pay the contribution of the employees as well as his contribution to the Fund, which is set up under the Act, and the Scheme framed thereunder. The employees’ contribution together with the employer’s contribution is required to be paid into the Fund by the employer within the stipulated period. These amounts whether by way of contribution of the employee or the contribution of the employer, are moneys which belong to the employee. An account which is required to be maintained in the name of each member of the provident fund, contains contribution of the employee, the employer as well as the interest which has been credited. Provident fund is the foundation of an important measure of social security provided to employees of those establishments to whom the Act applies. In the aforesaid situation, an employer cannot refuse to comply with the statutory mandate to pay the contribution made by the employees as also his share, which was by way of social security scheme. Although the object of the SICA is laudable, but, in our view, the same should not deprive the hard earnings of the employees. It does not and cannot stay the recovery proceedings for recovery of money to which employees are entitled by way of social security scheme. The money does not belong to the company, it belongs to the employees. These moneys can be withdrawn by the employees in certain eventualities even prior to the attainment of age of superannuation. The Scheme makes provision for withdrawal from the Fund and for the grant of advances from the Fund in special cases.” 6 Civil Writ Petitions No.9004 and 12941 of 2005 Counsel for the petitioners has further placed reliance upon a judgment of a Single Bench of this Court rendered in Civil Writ Petition No. 14811 of 2008 titled as ‘Regional Provident Fund Commissioner, Karnal v. M/s Kay Iron Works Pvt. Ltd.’ decided on May 27, 2010 to contend that while considering the application for waiver, a discretion has been vested in the Commissioner or the officer authorized, to consider the number of defaults, the period of delay, the frequency of defaults and the amount involved. The authorities are also to consider the default on the part of employer taking its financial constraint into view. The Single Bench of this Court had further placed reliance upon ‘Employees’ State Insurance Corporation v. H.M.T. Ltd. and another’ 2008 (3) SCC 35, to observe as under: “In view of the above, it can safely be said that the power to impose damages under Section 14-B of the EPF and MP Act is a quasi judicial power. Section 14-B of the EPF Act does not mandate that an order of damages may not follow in the event of every default, meaning thereby that it confers discretion upon the Commissioner or the officer authorized to impose damages not exceeding the amount of arrears. The exercise of discretion mandates proper appreciation and consideration for coming to a decision. Para-32-A of the EPF Scheme being in the form of subordinate legislation cannot override the principle legislative provisions and, therefore, it can only be termed to be of guiding nature with no mandate attached thereto, especially when it itself uses the expression ‘may’ while invoking the powers of the Commissioner or officer authorized to recover from the employer by way of penalty such damages. Accordingly, the first contention of counsel for the petitioner that Para-32-A of the EPF Scheme leaves no discretion with the Commissioner or officer authorized to reduce or waive the imposition of damages, cannot be sustained.” 7 Civil Writ Petitions No.9004 and 12941 of 2005 To rebut this argument, Mr. Kamal Sehgal, Advocate appearing on behalf of the respondents, has submitted that the considerations noticed for waiver will depend upon the facts and circumstances of each case, and therefore, the facts pleaded are required to be proved by the petitioners and they constitute disputed questions of fact and the same cannot be entertained in a writ jurisdiction, especially when the petitioners have a statutory remedy of appeal. I have given my due consideration to the arguments advanced. In my view, in both the present writ petitions, there is no merit. The action on the part of respondents for recovery of provident fund dues from the petitioners is in conformity with the law and the petitioners are not entitled to any protection under Section 22 of SICA. However, to determine as to whether the Company is entitled to waiver of damages and interest, the best course for it is to urge the same before the Appellate Tribunal. Hence, a liberty is granted to the petitioners to avail of the remedy of filing an appeal, if so advised, and raise all arguments before the appellate authority as to whether the petitioners are entitled to waiver of damages and interest, and if so, to what extent. Since the petitioners had not availed of the remedy of filing the appeal before approaching this Court and in case now the petitioners prefer an appeal within two months from the date of receipt of a certified copy of this order, no argument shall be raised by the respondents that the appeal is barred by limitation. Hence, both the writ petitions are dismissed with liberty aforesaid. However, there will be no order as to costs. [KANWALJIT SINGH AHLUWALIA] JUDGE October 13, 2010 rps 8