CWP No.7026 of 2010 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No.7026 of 2010 Date of Decision 15.9.2011 Vikram Bhatia ..Petitioner Versus Employees Provident Fund Organisation and others. .. Respondents .. CORAM : HON'BLE MR.JUSTICE RAJIVE BHALLA Present : Mr. R.S.Bajaj, Advocate for the petitioner. Mr. Sanjay Tangri, Advocate for respondents no. 1 to 3. Mr. Amrit Dhawan, Advocate for respondent no.4. RAJIVE BHALLA, J ( ORAL) This order shall dispose of Civil Writ Petition Nos. 5980 and 7026 of 2010 as they involve adjudication of common questions of fact and law. For the sake of convenience, facts are being extracted from Civil Writ Petition No.7026 of 2010. The petitioner, in CWP No. 7026 of 2010, challenges notice dated 27.2.2009 (Annexure P-1) and the petitioner, in CWP No. 5980 of 2010, challenges notice dated 11.1.2010 (Annexure P- 8) requiring them to show cause why they should not be arrested and their properties should not be attached for failure to pay amounts payable under the Employees Provident Funds and Miscellaneous CWP No.7026 of 2010 2 Provisions Act, 1952 (hereinafter referred to as the “Act”). The petitioners also challenge orders that form the basis for issuance of these show cause notices. The Assistant Provident Fund Commissioner issued a notice, dated 31.3.2008, calling upon respondent no.4 M/s Metro Plywood, Mand Road, Leather Complex, Jalandhar, through its proprietor Shri Ravinder Kumar Gossain, to remit provident fund, pension fund, deposit linked Insurance fund contributions, administrative charges on provident fund etc. due from March 2003 onwards. Shri Ravinder Kumar Gossain, proprietor of M/s Metro Plywood, put in appearance before the Assistant Provident Fund Commissioner and made a statement, on 4.3.2008, that the premises were on lease with Shri Vikram Bhatia of M/s Vishwa Timber Products from March, 2003 to June 2007. The Assistant Provident Fund Commissioner directed a subordinate officer to inspect the premises. Vide order dated 31.3.2008 (Annexure P-2), the Assistant Provident Fund Commissioner directed the "establishment", M/s Metro Plywood, Mand Road, Leather Complex, Jalandhar, to deposit the amount due within 15 days of receipt of the order. As the amount assessed was not deposited, show cause notices were issued to Ravinder Kumar Gossain and Vikram Bhatia, calling upon them to deposit the amount so assessed, failing which their properties would be attached and they would be arrested. Vikram Bhatia filed a reply denying any involvement in “the establishment” or possession of premises. Ravinder Kumar Gossain, maintained his stand that the premises was leased out to Shri Vikram CWP No.7026 of 2010 3 Bhatia, but as proprietor of M/s Shree Sham Sports Manufacturing Company, instead of as proprietor of M/s Vishwa Timber Products. The Assistant Provident Fund Commissioner adjourned the case and directed Vikram Bhatia to submit proof that he is not the proprietor of M/s Shree Sham Sports Manufacturing Company. Vikram Bhatia filed copies of Income-tax returns for the years 2009 and 2010 showing that proprietor of M/s Shree Sham Sports Manufacutring Company is Vishwa Mittar Bhatia. On 23.9.2009 the Assistant Provident Fund Commissioner ordered that notice of recovery be issued against Ravinder Kumar Gossain, in accordance with CP-2, CP-16, and CP-26 and the matter against Vikram Bhatia be kept pending. On 11.11.2009 the Assistant Provident Fund Commissioner held that both Ravinder Kumar Gossain and Vikram Bhatia are jointly and severally liable for payment of the dues and, therefore, ordered initiation of recovery proceedings. Mr. R.S.Bajaj, Advocate, for Vikram Bhatia submits that in the absence of any finding, in the order under implementation, that the petitioner is the proprietor or partner of the "establishment”, the "employer”, or that premises were leased out to him, liability to pay the amount assessed in the order dated 31.3.2008 cannot be fastened upon the petitioner. Even if it is presumed that the respondents have a right to determine the identity of the proprietor, of “the establishment”, or of the "employer", while implementing order dated 31.3.2008 (Annexure P-2), the absence of any evidence to establish that the petitioner is the proprietor of the "establishment”, the "employer” or its lessee, the impugned orders and notices are illegal, void and should, therefore, be quashed. CWP No.7026 of 2010 4 Mr. A.S.Gill, Advocate, for Ravinder Kumar Gossain, the petitioner, in Civil Writ Petition No. 5980 of 2010, submits that the petitioner's stand that premises were leased out to Vikram Bhatia of M/s Vishwa Timber Products from March 2003 to June, 2007, is recorded in the original order, but no conclusive finding was recorded for or against this plea. It is further argued that though the respondents have the right to determine the identity of proprietor of “the establishment” or “the employer” while implementing the order dated 31.3.2008, they can only do so after recording a finding as to the identity of proprietor of the "establishment" or the "employer". The respondents, however, seek to recover provident fund dues from the petitioner without deciding as to who was in possession of the premises from 2003 to 2007. It is further submitted that as Ravinder Kumar Gossain was not in possession of the premises from 2003 to 2007, he cannot be held liable along with Vikram Bhatia for payment of dues assessed in the order dated 31.3.2008. Counsel for respondents no.1 to 3 submits that the petitioners are trying to evade responsibility by setting out an oral lease deed, thereby confusing the issue. Ravinder Kumar Gossain has referred to the lessee as Vikram Bhatia of M/s Vishwa Timber Products or M/s Shree Sham Sports Manufacturing Company, establishing the falsity of his plea. The petitioners have shifted their stand time and again but as the original coverage form is signed by Vikram Bhatia, they are both jointly and severally liable for payment of dues assessed under order dated 31.3.2008. I have heard counsel for the parties, perused the impugned CWP No.7026 of 2010 5 order, the show cause notices, the representation filed by the petitioner and the order passed thereon, Annexure R-1/6. A perusal of the order dated 31.3.2008 reveals that though Ravinder Kumar Gossain raised a plea that he had leased out the premises to Vikram Bhatia of M/s Vishwa Timber Products, from 2003 to 2007, he could not produce any evidence to support this plea. The Assistant Provident Fund Commissioner, however, directed payment of Provident Fund. During enforcement, of the order dated 31.3.2008, it came to light that the premises were in possession of M/s Shree Sham Sports Manufacturing Company. In response to a notice issued for enforcing order dated 31.3.2008, Vikram Bhatia put in appearance and raised a plea that Vishwa Mittar Bhatia is the proprietor of M/s Shree Sham Sports Manufacturing Company, Jalandhar. In support of this plea, he filed an Income-tax return. The Assistant Provident Fund Commissioner, Jalandhar, passed an order dated 11.11.2009, which reads as follows: " Sh. Gupta, Advocate submits that Mr. Bhatia could not appear before the Recovery Officer as he is out of country and shall be returning back with 7/8 days. The issue was discussed in detail at length and found that both Sh. Ravinder Gossain and Sh. Vikram Bhatia, Principal Employer and Contractor are jointly and severally responsible as informed by the authorised officer. The representation filed by the Ld. Advocate is not maintainable for jurisdiction. Hence liable to be rejected. Recovery proceedings be taken up as per law. CWP No.7026 of 2010 6 Issue W/A against both the persons as stated above." This order forms the foundation for notice of arrest and attachment of properties of the petitioners The order holds Ravinder Kumar Gossain and Vikram Bhatia jointly and severally liable for payment of dues as principal employer and contractor, respectively. Apart from a sentence that "the issue was discussed in detail at length...." no material has been referred to in support of the finding that Vikram Bhatia and Ravinder Kumar Gossain are jointly and severally liable as contractor and principal employer, respectively. In addition, no reasons have been assigned while recording this finding. Vikram Bhatia has specifically pleaded that he has no concern with M/s Shree Sham Sports Manufacturing Company, Jalandhar, whereas Ravinder Kumar Gossain has pleaded that he had leased out the premises to Vikram Bhatia of M/s Vishwa Timber Products from 2003-2007. The respondents have not decided these pleas. The power to require the "employer" or the "establishment" to discharge its liability, undoubtedly, rests with authorities under the Act. The liability, however, can only be fastened on an identified "employer" or "establishment". The orders dated 31.3.2008 and 11.11.2009 do not contain any reasons for holding that Vikram Bhatia is a contractor or that the premises were not leased out to him. The liability of Vikram Bhatia flows from an allegation, levelled by Ravinder Kumar Gossain that, the former was in occupation of the premises between 2003 to 2007 as proprietor of M/s Vishwa Timber Products. Vikram Bhatia has denied this allegation. The department or Ravinder Kumar Gossain has CWP No.7026 of 2010 7 introduced another entity viz., M/s Shree Sham Sports Manufacturing Company as the firm responsible for discharging liability. The respondents were, therefore, required to ascertain the identity of the firm in possession during 2003 to 2007 and while doing so, decide the pleas raised by the petitioners. The authorities, under the Act, exercise quasi judicial powers that may in a given circumstance the exercise of these powers may lead to imprisonment. The authorities are required to refer to material on record, assign reasons for and against the defence raised and by a perceptible process of reasoning, pass an order deciding liability. The impugned show cause notices and the order dated 11.11.2009, do not refer to any material or reason against Vikram Bhatia or Ravinder Kumar Gossain for holding that Vikram Bhatia and Ravinder Kumar Gossain are jointly and severally liable, as contractor and principal employer. The use of the words "discussed in detail" or "jointly and severally liable" does not absolve authorities under the Act of their statutory obligation to identify the employer or the proprietor of the `establishment' and only thereafter fasten liability. In this view of the matter, the writ petitions are partly allowed and the order dated 11.11.2009, show cause notices dated 27.2.2009 (Annexure P-1) in CWP No. 7026 of 2010 and dated 11.1.2010 (Annexure P-8), in CWP No. 5980 of 2010, respectively, are quashed. The matter is remanded to the Assistant Provident Fund Commissioner, Jalandhar, who shall determine the identity of the firm/company in occupation of the premises from 2003-2007, the identity of the "establishment/employer" and whether Vikram Bhatia, CWP No.7026 of 2010 8 Vishwa Mittar Bhatia, or Ravinder Kumar Gossain are liable. The petitioners shall deposit a sum of Rs. 2 lac each with the Assistant Provident Fund Commissioner, Jalandhar, which shall be refunded to them in case they are held not liable for payment of dues under the Act. The needful will be done, within four weeks from receipt of a certified copy of this order. No order as to costs. 15.9.2011 ( RAJIVE BHALLA ) VK JUDGE