IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 25.07.2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.Nos.17187, 17188, 17190 and 17191 of 2011 and M.P.Nos.1,1,1 and 1 of 2011 Sri Golden Sizing Mills, 3/100,Salem Main Road, T.Kailasampalayam, Tiruchengode Taluk, Namakkal District reprsented by its Managing Partner, P.Senthil .. Petitioner in W.P.Nos.17187 and 17188 of 2011 SuperSizing Mills 2/230,Unjapalayam Animoor Post, Tiruchengode Taluk, Namakkal District represented by its Partner N.Muthusamy .. Petitioner in W.P.Nos.17190 and 17191 of 2011 Vs. 1.The Union of India, Ministry of Labour and Employment Department, Nirman Bhavan, New Delhi. 2.The Assistant Provident Fund Commissioner, The Employees' Provident Fund Organization, Sub Regional Office, Annasalai, SJ.Plaza, Swarnapuri, Salem. 3.The Principal Secretary to Government, Labour and Employment Department, Fort St. George, Chennai. .. Respondents in all writ petitions W.P.Nos.17187 and 17190 of 2011 are preferred under Article 226 of the Constitution of India praying for the issue of a writ of declaration to declare Section 7(A) of the Employees' Provident Fund https://hcservices.ecourts.gov.in/hcservices/ and Miscellaneous Provision Act as unconstitutional, ultravires and violative of Articles 14 and 19 of the Constitution of India and also against Article 246 of the Constitution of India. W.P.Nos.17188 and 17191 of 2011 are preferred under Article 226 of the Constitution of India praying for the issue of a writ of declaration to declare that G.O.Ms.No.5, Labour and Employment (H1) Department dated 23.1.2009 issued by the third respondent is arbitrary, without jurisdiction and ultravires to Section 19A of the EPF Act and consequently to direct the respondents to return all the documents unlawfully, illegally seized from the petitioner. For Petitioner : Mr.N.Umapathi in all writ petitions For Respondents : Mr.M.Gopikrishnan, CGC for R-1 in all writ petitions Mr.V.Subbiah, Spl.G.P. For R-3 in all writ petitions R2-NA - - - - COMMON ORDER The first two writ petitions were filed by one Sri Golden Sizing Mills represented by its Managing Director. The third and fourth writ petitions were filed by one Super Sizing Mills represented by its Partner. In W.P.Nos.17187 and 17190 of 2011, the prayer is for a declaration that Section 7-A of the Employees' Provident Fund and Miscellaneous Provision Act as unconstitutional, ultravires and violative of Articles 14 and 19 of the Constitution of India and also against Article 246 of the Constitution of India.In W.P.Nos.17188 and 17191 of 2011, the challenge is to the order passed by the State Government in G.O.Ms.No.5, Labour and Employment department, dated 23.1.2009 as arbitrary, without jurisdiction and ultravires to Section 19A of the EPF Act and seeks for a consequential direction to return all the documents unlawfully seized from the petitioners. 2.The contentions raised by the petitioners in all the writ petitions are that they are engaged in the business of Sizing and Warping of cotton yarn and they are small units engaging less than 7 persons. They are not involved in the manufacturing of products of textiles so as to come within Schedule I prescribed under Sections 1 (3)(a) and 1(3)(b) of the EPF Act. An inspection was conducted by the PF department and certain records were directed to be produced. The respondent Enforcement officers had clarified that the petitioners are engaged in textiles which is included in Schedule I. They are employing more than 19 persons. The respondents had also allotted code numbers and that legal notices were also issued by them. Notwithstanding the same, they directed the petitioners to produce records. The first writ petitioner had earlier filed a writ https://hcservices.ecourts.gov.in/hcservices/ petition in W.P.No.6441 of 2007 to challenge their earlier order. The petitioner was directed to approach the authorities to decide the applicability of the Act. A review petition was also filed which was allowed by this court. But, when the case came up for hearing, this court relied upon a Government Order in G.O.Ms.No.5, Labour and Employment Department, dated 23.1.2009 and directed the petitioners to make representations to the authorities. Thereafter, on being legally advised to challenge the order, they have filed the present writ petitions. 3.It was contended that under Section 13 of the EPF Act, it was the appropriate Government which should appoint and notify the persons, but the impugned order came to be issued by the Principal Secretary to the Government, which is arbitrary to the provisions of Section 19. The officers appointed by the Central Board are subordinates to the Central Government. The State Government cannot appoint the officers by clothing the State Government officers with the power as an Inspector under the Act. Further under Section 7A empowering the authorities to determine the applicability of the Act was also unwarranted as the authorities under the Act have no technical expert to decide the question. Bringing Sizing mills within the definition of "textile" was erroneous. Under Article 246 of the Constitution, powers have been listed for respective legislatures to make laws. Since the petitioners' industries fall under List- II of Schedule VII of the Constitution, the officers appointed under Section 5-D of the EPF Act cannot adjudicate disputes relating to the State Government. In the present case, since the appropriate Government is the State Government, the State Government must appoint its own officers and cannot notify the officers appointed under the Central Government. The petitioners have also filed written arguments repeating the similar contentions raised in the affidavits filed in support of the writ petitions. 4.Mr.N.Umapathi, learned counsel also relied upon a judgment of the Supreme Court in Regional Provident Fund Commissioner, Karnataka Vs. Workmen represented by the General Secretary, Karnataka Provident Fund Employees' Union and another reported in 1984 (Supp) SCC 418. In that judgment, it was stated that regarding an industrial dispute between the management and the workmen of the Regional Provident Fund Organization, the appropriate Government is the Central Government under Section 2(a) of the Industrial Disputes Act, 1947 as the PF authorities are functioning by and under the authority of the Central Government. Therefore, the State Government by virtue of Article 246 cannot notify the officers appointed under Section 5D of the EPF Act. 5.The contentions raised by the petitioners have already been squarely answered by this court vide its judgment in Sree Gokulam Sizing Mills Vs. The Regional Provident Commissioner reported in 2011 (2) CWC 29. The questions relating to Sections 1(3) and 7-A of EPF Act and G.O.Ms.No.5, Labour and Employment Department, dated 23.01.2009 have been answered against the Sizing Mills. This Court https://hcservices.ecourts.gov.in/hcservices/ in W.P.No.4231 of 2007 and batch cases, by a common order dated 16.6.2011 had answered the application of the Act to the Sizing Mills. In paragraphs 3 to 10, this court had observed as follows: 3.It was the contention of the petitioners that they were engaged in the business of sizing and warping of cotton yarn. It is an unit engaging 8 persons and at no point of time, they had engaged more than 10 workers. Under Section 1(3) of the EPF Act, the Act applies to an establishment, which is a factory engaged in any industry specified in Schedule I. 4.In Schedule I of the EPF Act, the following entry has also been made. "Any industry engaged in the manufacture of any of the following namely:- x x x x x x x x x x x x x x x "Textiles (made wholly or in part of cotton or wool or jute or Silk, whether natural or artificial." Therefore, it is contended that doing the work of sizing or warping of cotton yarn will not come under the term ‘textile’. 5. The second contention was that an order under Section 7-A of the EPF Act can be made only by an authority such as the Central Provident Fund Commissioner, Deputy Provident Fund Commissioner,Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner. In respect of Section 13, where a provision for the appropriate Government to appoint by notification in the Official Gazette Inspectors have been made for the purpose of the Act and the Scheme including Pension or the Insurance Scheme. Under Section 13(2) of the Act, the Inspector so appointed has been empowered for the purpose of enquiring into the correctness of any information furnished or for the purpose of ascertaining whether any of the provisions of the Act have been complied with. It is only that Inspector who can seek for information from the employers and examine the said information and he is empowered to https://hcservices.ecourts.gov.in/hcservices/ exercise such power which are required to calling for and decide the said issues. Therefore, the power of calling for information can be exercised only by the authority constituted under Section 13. In respect of the petitioner Mills, the appropriate Government is only the State Government in terms of Section 2A of the EPF Act. 6. But in the present case, the impugned notices were issued by the authorities who were not an Inspector appointed by the State Government which is the appropriate Government and they cannot make any Inspection of the records and pass an order in terms of the Section 7-A of the Act and any order passed pursuant to the information received or inspection conducted by the incompetent authority is illegal and void. 7. The third contention of the petitioners was that the activity carried on by the Petitioners Mill comes under the definition of the term 'textile'. The State Government while declaring Minimum wages under the head employment textile mills vide Entry No.88 made in G.O.Ms.No.1 Labour and Employment Department dated 03.01.2007 had given the extended definition of the term Textile and it reads as follows:- "88.Employment in Textile Mills :-including Composite Mills, Spinning Mills, Weaving Mills, Open ended Mills, and the various processes in the above said Mills like blow room, carding, drawing, fly frames, spinning, winding, doubling, reeling, packing, Warping-Sizing and other processes in the textile mills, whether carried out singly or together." 8. In view of the above, the contention that they are not covered by the provisions of the EPF Act under the relevant entry Textiles cannot be accepted. The further contention that they have less than 10 workers is a question of fact which will have to be decided before the authorities. On that ground an order under Section 7A of the EPF Act cannot be challenged. Even if any error had crept in, the Act provides for remedial measure by way of review under Section 7-B and further appeal under Section 7-I before the EPF Tribunal. 9. The contentions raised by the petitioners were not maintainable. As against the impugned order, the petitioners have a right of appeal under Section 7-I of the EPF Act. 10. In the light of the same, the writ https://hcservices.ecourts.gov.in/hcservices/ petitions challenging the impugned orders cannot be maintained. In this context it is necessary to refer to the judgment of the Supreme Court in Raj Kumar Shivhare Vs. Assistant Director, Directorate of Enforcement and another reported in 2010 (4) LW 1 has held that the statutory forum is created for redressal of grievance that too in a fiscal statute, a writ petition should not be entertained. In that case, an appeal itself was available to the High Court. In repelling that contention, in paragraphs 44 and 45, it was observed as follows: "44.Therefore, principle laid down in the Ratan's case (supra) applies in the facts and circumstances of this case. If the appellant in this case is allowed to file a writ petition despite the existence of an efficacious remedy by way of appeal under Section 35 of FEMA this will enable him to defeat the provisions of the Statute which may provide for certain conditions for filing the appeal, like limitation, payment of court fees or deposit of some amount of penalty or fulfillment of some other conditions for entertaining the appeal. (See para 13 at page 408 of the report). It is obvious that a writ court should not encourage the aforesaid trend of by-passing a statutory provision. 45.Learned counsel for the appellant relied on a decision of this Court in Monotosh Saha Vs. Special Director, Enforcement Directorate and another (2008) 12 SCC 359. That was a decision entirely on different facts. In that decision Saha preferred an appeal before the appellate tribunal with a request for dispensing with requirement of pre-deposit, but the tribunal directed the deposit of 60% of the penalty amount before entertaining the appeal. When an appeal was preferred before the High Court under Section 35 of the FEMA, the same was dismissed by the High Court holding that no case for hardship was made out either before the tribunal or before it. In the background of those facts, this Court observed that since pursuant to this Court's interim order Rs.10 lacs have been deposited with the Directorate, the appellant was directed to furnish further such security as may be stipulated by the tribunal and directed that on such deposit tribunal is to hear the appeal without requiring further deposit." 6.The last contention that officers appointed under Section 7A https://hcservices.ecourts.gov.in/hcservices/ are not technically qualified to decide such matter also cannot be accepted. The Supreme Court in Organo Chemical Industries v. Union of India reported in (1979) 4 SCC 573 while dealing with the powers conferred on the authorities to levy damages under Section 14-B had held in paragraphs 30 to 33 as follows: "30.Counsel for the petitioners has turned the constitutional fusillade on Section 14-B by charging it with many-sided, in-built arbitrariness and therefore liable to be fatally shot down by Article 14. The provision is simple and the contention is familiar. The offending words of Section 14-B are that “the Provident Fund Commissioner may recover from the employer such damages, not exceeding the amount of arrear, as it thinks fit to impose”. Within the limit of 100 per cent, the enforcing agency is vested with naked and unguided power to inflict any quantum of damages as he fancies and this blanket authority is instinct with discriminatory possibility, a vice to which Article 14 is very allergic. No reasons need be given, no appellate or revisional review is prescribed and no judicial qualification is required for the Commissioner. This tiny statutory tyrant must be slain if equal justice under the law were to be part of our fundamental rights package. So runs the argument — traditional, attractive and near-lethal. Indeed, if executive fiats released from legal restraints, were free to run amok, our freedoms would be frothy boasts ! Sedulous scrutiny of this submission of counsel is our solemn duty since I share with him the pensive thought that arrogance of power dressed in little, brief authority is the undoing of our constitutional order. And yet, here the mini-Nero portrait is too naive to meet with approval. 31.A shower of precedents has rained on Article 14 but the cardinal principles have sunk so deep into the constitutional consciousness of the juristic community that recapitulation of citations is an act of supererogation. I desist from it. 32.The power to affect citizen's rights, especially by way punitive impost or damages for wrongdoing, is quasi-judicial in character even if exercised by executive echelons. This Court has underscored the importance of injecting the norms of natural justice when statutory functionaries affect the lights of a person. The most recent of the cases which lay bare the elementals of this branch of jurisprudence are: (1) Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India7; (2) Maneka Gandhi (Mrs) v. Union of India8 and (3) Mohinder Singh Gill v. Chief Election Commissioner, New Delhi9. https://hcservices.ecourts.gov.in/hcservices/ 33.In Siemens case this Court observed: (SCC p. 986, para 6) “It is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. That has been laid down by a long line of decisions of this Court ending with N.M. Desai v. Testeels Ltd.10” (emphasis supplied) Fair play in Administration is a finer juristic facet, at once fundamental and inviolable and natural justice is an inalienable functional component of quasi- judicial acts. Here, it is indubitable that the imposition of damages on a party, after a statutory hearing, is a quasi-judicial direction. This Court has impressed the requirements of natural justice on such jurisdictions and one such desideratum is spelling out reasons for the order made, in other words, a speaking order. The inscrutable face of a sphinx is ordinarily incongruous with a judicial or quasi-judicial performance. It is, in my view, an imperative of Section 14-B that the Commissioner shall give reasons for his order imposing damages on an employer. The constitutionality of the power, tested on the anvil of Articles 14 and 19, necessitates this prescription. Such a guarantee ensures rational action by the officer, because reasons imply relevant reasons, not capricious ink and the need for cogency rivets the officer's mind to the pertinent material on record. Moreover, once reasons are set down, the order readily exposes itself to the writ jurisdiction of the court under Article 226 so that perversity, illiteracy, extraneous influence, mala fides and other blatant infirmities straight get caught and corrected. Thus, viewing the situation from the conspectus of requirements and remedies, statutory agencies may be inhibited and the scare of arbitrary behaviour allayed once reasons are required to be given." 7.On the question of power to be exercised by the authorities under Section 7A, the Supreme Court had an occasion to deal with the same in F.C.I. v. Provident Fund Commissioner reported in (1990) 1 SCC 68. In paragraphs 8 and 9, the Supreme Court had held as follows: "8.It is of importance to remember that the Commissioner while conducting an inquiry under Section 7-A has the same powers as are vested in a court under the Code of Civil Procedure for trying a suit. The section reads as follows: https://hcservices.ecourts.gov.in/hcservices/ “7-A Determination of moneys due from employer— (1) The Central Provident Fund Commissioner, any Deputy Provident Fund Commissioner or any Regional Provident Fund Commissioner may, by order determine the amount due from any employer under any provision of this Act (the scheme or the Family Pension Scheme or the Insurance Scheme as the case may be) and for this purpose may conduct such inquiry as he may deem necessary. (2) The officer conducting the inquiry under sub- section (1) shall, for the purposes of such inquiry, have the same powers as are vested in a court under the Code of Civil Procedure, 1908, for trying a suit in respect of the following matters, namely: (a)enforcing the attendance of any person or examining him on oath; (b)requiring the discovery and production of documents; (c)receiving evidence on affidavit; (d)issuing commissions for the examination of witnesses and any such inquiry shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228, and for the purpose of Section 196 of the Indian Penal Code.” 9.It will be seen from the above provisions that the Commissioner is authorised to enforce attendance in person and also to examine any person on oath. He has the power requiring the discovery and production of documents. This power was given to the Commissioner to decide not abstract questions of law, but only to determine actual concrete differences in payment of contribution and other dues by identifying the workmen. The Commissioner should exercise all his powers to collect all evidence and collate all material before coming to proper conclusion. That is the legal duty of the Commissioner. It would be failure to exercise the jurisdiction particularly when a party to the proceedings requests for summoning evidence from a particular person." 8.When the constitutional validity of the provisions came to be challenged before the Supreme Court, those petitions were grouped together. Before hearing those cases, the Parliament had amended the EPF Act providing for a Tribunal under Section 7D with a right of appeal under Section 7-I. Therefore, the Supreme Court had held that the aggrieved party can work out their rights in the appeal before the Tribunal vide its judgment in Sumedico Corporation v. R.P.F. Commissioner reported in (1998) 8 SCC 381 and in paragraphs 1 to 3, https://hcservices.ecourts.gov.in/hcservices/ it was observed as follows: "1.These two appeals are moved by a common appellant that has felt aggrieved by order dated 8-12-1982 under Section 7-A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 passed by the authorities functioning under the Act against the present appellant. Civil Appeal No. 5540 of 1987 arises out of a writ petition which the appellant moved before the High Court of Gujarat challenging the aforesaid Section 7-A order on diverse grounds including the ground that Section 7-A was ultra vires the provisions of the Constitution of India. The High Court repelled the challenge to the vires of the provision by the impugned order and also made observations on the merits of the Section 7-A order. The other civil appeal is moved directly by the appellant against the Section 7-A order before this Court. As the controversy ultimately centres round the Section 7-A order itself which is the order of the first authority, these appeals were tagged together for disposal. 2.Pending these appeals, the legislature itself has amended the provisions of the Act by inserting Section 7- D providing for remedy of an appeal before an Appellate Tribunal. Not only that, but by notifications dated 30-6- 1997 the Tribunal is already constituted and it is functioning at Delhi. Copies of the relevant notifications are taken on record. In view of this development, therefore, the question of challenge to the vires of Section 7-A on the ground that there was no appeal provided under the Act does not survive and it has become academic. 3.Now remains the question about the merits of the order under Section 7-A of the Act. So far as this question is concerned, it is true that the appellant in the first instance went to the High Court and the High Court made certain observations on the merits of the order. But, in our view, interest of justice will be served if we relegate the appellant to the statutory remedy available now to it to approach the Tribunal constituted under Section 7-D of the Act. We, therefore, relegate the appellant to the remedy of this statutory appeal which shall be filed by the appellant within a period of two months from today. If such appeal is filed within that time, the Tribunal will decide the same on merits after hearing the parties concerned." https://hcservices.ecourts.gov.in/hcservices/ 9.In view of the above, the writ petitions filed by the petitioners are misconceived and bereft of any legal reasons. Accordingly, all writ petitions will stand dismissed. However, there will be no order as to costs. Consequently connected miscellaneous petitions stand closed. Sd/ Deputy Registrar /true copy/ Sub Asst.Registrar vvk To 1.The Union of India, Ministry of Labour and Employment Department, Nirman Bhavan, New Delhi. 2.The Assistant Provident Fund Commissioner, The Employees' Provident Fund Organization, Sub Regional Office, Annasalai, SJ.Plaza, Swarnapuri, Salem. 3.The Principal Secretary to Government, Labour and Employment Department, Fort St. George, Chennai. +4ccs to Mr.N.Umapathi, Advocate Sr 45318,45319 +1cc to Mr.M.Gopikrishnan, Advocate Sr 44981 +1cc to Gunasekar Central Government Counsel Sr 45491 BKY(CO) km/9.8. W.P.Nos.17187, 17188, 17190 and 17191 of 2011 https://hcservices.ecourts.gov.in/hcservices/