1 W.P. No.9780/2010 IN THE HIGH COURT OF JUDICATURE OF BOMBAY, BENCH AT AURANGABAD WRIT PETITION NO.9780 OF 2010 M/s Ashok Sahakari Sakhar Karkhana Ltd., Ashoknagar, Post Karegaon Factory, Tq. Shrirampur, District Ahmednagar, through its Authorised Signatory Mr. P.J. Bidkar ... PETITIONER VERSUS The Regional Provident Fund Commissioner, Bhavishya Nidhi Bhavan, Plot No.11, M.I.D.C., Satpur, Nashik – 422 007 ... RESPONDENT ..... Shri V.N. Upadhye, Advocate for the petitioner Shri K.B. Choudhary, Standing Counsel for the respondent ..... CORAM : S.S. SHINDE, J. DATED : 9th August, 2011. Date of reserving judgment : 28.7.2011 Date of pronouncing judgment : 9.8.2011 JUDGMENT : 1. Rule. Rule made returnable forthwith and heard finally with the consent of learned counsel for the parties. 2 W.P. No.9780/2010 2. This Writ Petition is filed challenging the order dated 5.8.2010, passed by the Employees’ Provident Fund Appellate Tribunal, New Delhi in Appeal No. ATA 813 [9] 2004. 3. It is the case of the petitioner that, it is a cooperative society registered under the provisions of Maharashtra Cooperative Societies Act, 1960 having its registered office. The petitioner is engaged in manufacturing of sugar from sugarcane. The petitioner has commenced its business prior to 20 years back. The petitioner used to employ 500 employees and other staff. 4. The petitioner’s establishment is an establishment under the provisions of Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the said Act), having its Code No.MH/1903. The petitioner could not pay its wages for the month of April 1973 to February 2002 in time, as a result of which, it could not deposit the share of employees’ and employer’s contributions to the funds within 15 days of the close of each of the month. It is the case of the petitioner that, as on today no amount is due and payable in respect of the above said period. 3 W.P. No.9780/2010 5. The respondent issued a summons on 22.1.2003 to show cause as to why damages as envisaged under Section 14-B of the said Act be not recovered from the petitioner. The petitioner, through its legal officer appeared and submitted detailed reply, giving full detailed account of inter alia put forth difficulties faced by it and requested to consider the matter sympathetically. 6. The respondent passed an order on 6.9.2004, determining the amount of levy of damges and interest, and thereby confirmed the indications expressed in the notice/ summons dated 22.1.2003, and further directed the petitioner to remit the said amount within a period of 15 days from the receipt of the order. It is the case of the petitioner that the respondent did not consider the defences put forth by the petitioner in proper perspective. Only cursorily reference has been made about submissions of the say in writing by the establishment in the impugned order. 7. Being aggrieved and dissatisfied with the order passed by the respondent on 6.9.2004, the petitioner filed Writ Petition No. 6837/2004, wherein this Court initially granted ad-interim stay to 4 W.P. No.9780/2010 the execution and operation of the order impugned therein and later on disposed of the same, granting liberty to the petitioner to prefer appeal as contemplated under Section 7(I) of the said Act. Accordingly, appeal bearing No. ATA 813 (9) of 2004 was filed by the petitioner before the learned Employees Provident Fund Appellate Tribunal, New Delhi (hereafter referred to as the “learned Tribunal”). 8. It is the case of the petitioner that, on 5.8.2010, the Tribunal was pleased to dismiss the appeal, thereby confirming the order passed by the respondent. Hence this Writ Petition. 9. The learned counsel appearing for the petitioner submits that, 50% of the amount has been deposited by the petitioner with the respondent by way of compliance of the order passed by the learned Tribunal. The learned counsel submitted that, during the course of the enquiry, the petitioner appeared and protested the proposed levy of damages and penalty. However, those defences were not considered by the respondents and order came to be passed by the authority. The said order was challenged before the Tribunal by way of statutory appeal under Section 7(1) of the said Act. The said appeal also came to be dismissed. It is the contention of the counsel for the petitioner that, 5 W.P. No.9780/2010 the Tribunal has dealt with the contentions of the petitioner in a very casual manner and non speaking order is passed by the Tribunal. The said order is passed even in absence of counter by the respondent nor record was called for or filed by the respondent. The learned counsel submits that, there was no data or reason or material before the respondent to believe that the employer has earned large or huge profits by investing the amount of contribution elsewhere. The learned counsel invited my attention to the grounds from the petition and submitted that, the Tribunal erred in not appreciating the words “may recover” appearing in Section 14- B of the said Act, which provides penalty for default, but at the same time, it presupposes mens rea – existence of mens rea or actus rues to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum. It is further submitted that, the Tribunal ought to have considered that a penal provision should be construed strictly. Only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situation. It is further submitted that, the Tribunal has erred in not considering that the legislation does not provide that adjudication for the purpose of levy of penalty proceeding would be a mere formality or imposition of penalty as also computation of quantum thereof became a foregone conclusion. Ordinarily, even such a 6 W.P. No.9780/2010 provision would not be held to providing for mandatory imposition of penalty, if the proceeding is an adjudicatory one or compliance of the principles of natural justice is necessary thereunder. It is further submitted that, the order passed by the Tribunal is non speaking and also mechanical and it does not indicate application of mind. In support of aforesaid contention of the counsel for the petitioner, the learned counsel placed reliance on reported judgment of the Supreme Court in case of Employees State Insurance Corporation Vs. H.M.T. Ltd. & anr., reported in 2008 AIR SCW 725. It is further submitted that, the Tribunal failed to appreciate that there was absolutely no delay more so intentional and petitioner had deposited the amounts immediately on disbursement of the amount of salary/ wages to its employees and delay had been occasioned because of the various factors such as shortage of rainfall, sugarcane cultivation area and as a result of which less utilisation of crushing capacity. It is further submitted that, Section 14-B of the said act does not envisage mandatory levy of damages, it does not contemplate computation of quantum of damages in the manner prescribed under the Regulation Legislature limited the jurisdiction of the authority to levy i.e. not exceeding the amount of arrears. When a discretionary jurisdiction has been conferred by reasoning of enabling provision, same cannot be construed as imperative. Subordinate legislation cannot 7 W.P. No.9780/2010 override the principal legislative provisions. In support of the aforesaid contention, the learned counsel for the petitioner pressed into service the reported judgment of the Delhi High Court in case of Hi-Tech Vocational Training Centre Vs. Assistant Provident Fund Commissioner [ W.P. (C) 10387/2006 ]. 10. It is further submitted that, the initiation of the enquiry is after lapse of considerable time and, therefore, such enquiry after a period of limitation is bad. In support of this contention, the learned counsel appearing for the petitioner relied upon the report judgment of the Supreme Court in case of Santoshkumar Shivgonda Patil & ors. Vs. Balasaheb Tukaram Shevale & ors., reported in 2009 (6) Bom.C.R. 664. Learned counsel appearing for the petitioner further submitted that, the order passed by the respondent is non speaking order and such order cannot be sustained. In support of aforesaid contention, the learned counsel for the petitioner placed reliance on the reported judgment of this Court in case of Bhatkuli Taluka Co-op. Agricultural Sale and Purchase Society Ltd. Vs. The Regional Provident Fund Commissioner, reported in 2007 (3) ALL MR 249. It is further submitted that, being a statutory appeal, it was expected from the appellate authority that it will call for the records and decide the case in consonance with the grounds raised in the appeal. 8 W.P. No.9780/2010 Therefore, according to the learned counsel appearing for the petitioner, this Writ Petition may be allowed. 11. On the other hand, learned counsel appearing for the respondent submits that, from April 1973 till February 2002, there is a default by the establishment in payment of contribution towards Employees Provident Fund. On 22.1.2003, notice to show cause why interest and damages under section 7-Q and 14-B respectively was issued to the petitioner. The establishment submitted its reply stating therein that the delayed payment of contribution is admitted by the establishment, the arterial reason for the said delayed contribution was due to the financial crisis and want of funds, the establishment pleaded that due to the Government Policies, the Karkhana could not get permission to dispose the sugar and since the delay is negligible and unintentional, exemption from payment of interest and damages was pleaded. The learned counsel for the respondent submits that, the above pleadings are absolutely ill founded and vague and no documentary evidence was placed on record in that regard by the petitioner. It is further submitted that, the respondent passed order fixing the liability to pay interest and damages under Section 7-Q and 14-B of the Act to the tune of Rs. 13,60,053/-. It is further submitted that, as per paras 32-A, 5 and 8-A of the Employees Provident Fund Scheme, Employees Family 9 W.P. No.9780/2010 Pension and Employees Deposit Linked Scheme respectively, the employer has to remit the dues within 15 days of the close of every month and the employer has delayed the payment for the period from April 1973 to February 2002. Therefore, considering the default committed by the employer, the length of delay and its frequency, the loss of interest suffered by the organization and hence the liability is fastended. 12. It is further submitted that, the contention of the petitioner in appeal that delay occasioned due to shortage of rainfall, sugarcane cultivation area and as a result of which less utilisation of crushing capacity and the contention of the petitioner that the respondent has not taken into consideration the social content of the provision, belated claim is causing considerable inconvenience and insecurity is concerned, same contention has been answered by the Hon’ble Supreme Court in the case of M/s Hindustan Times Ltd. Vs. Union of India, reported in AIR 1998 SC 688. It is the contention of the counsel for the respondent that, the petitioner has made vague pleadings explaining the delay in making the contribution and attributed its failure to do the same because of the wrong zoning policies of the Government, no sanction by the Government to dispose of the sugar, etc. is not sufficient ground to reject the case. The petitioner has to plead and 10 W.P. No.9780/2010 prove the prejudice caused to it due to the delay, initiation of the recovery proceedings. It is further submitted that, the case of the petitioner is squarely covered by the judgment of the Hon’ble Supreme Court in case of M/s Hindustan Times (cited supra) and the facts and legal issues raised in this petition are liable to be rejected in view of paras 13, 14, 15, 21, 22, 24, 25, 26, 27 and 28 of the said judgment. The learned counsel further submits that the Employees Provident Fund and Miscellaneous Provisions Act is a complete Code in itself and the true legislative intent of the provisions of the Act have been laid down by the Hon’ble Supreme Court in the case of Organo Chemical Industries & anr. Vs. Union of India & ors., reported in AIR 1979 SC 1803 and further in the case of M/s K. Streetlite Electric Corporation Vs. Regional Provident Fund Commissioner, Haryana, reported in AIR 2001 SC 1818. It is further submitted that, the intention behind introducing Section 14-B of the Act levying damages has been elaborately discussed by the Hon’ble Supreme Court in para 35 of the judgment in the case of Organo Chemicals (cited supra) and also in para 13 of the judgment in case of Hindustan Times (cited supra), the case of the petitioner is fully covered and all the points raised in this petition are answered by the authoritative pronouncements and, therefore, this petition may be rejected. It is further submitted that, the petitioner did not file on record any evidence in support of 11 W.P. No.9780/2010 its case that the establishment has faced difficulties and financial crisis due to lack of sanction by the Government to sell the sugar stock etc., nothing was placed on record either before the respondent/ authority or before the Tribunal in documentary evidence to substantiate the pleadings. Therefore, the petition is devoid of any merits and same may be dismissed with costs. 13. I have given due consideration to the submissions by the counsel appearing for the petitioner and the counsel appearing for the respondent. Both the sides agree that matter can be disposed of at the admission stage, therefore, matter is taken up for final hearing. The counsel for the petitioner as well as counsel for the respondent have placed on record the written notes of arguments. I have carefully perused the order passed by the Employees Provident Fund Appellate Tribunal, New Delhi. Upon careful perusal of the order of the Tribunal, it does not reflect that the Tribunal, before passing such order, has called for record from the Regional Provident Fund Commissioner for adjudication of the appeal. Further, it does not reflect from the order that, counter affidavit was filed on behalf of the respondent. Therefore, the adjudication of the appeal by the Tribunal appears to be in absence of summoning record from the respondent herein and in absence of counter affidavit by the respondent. From perusal of the impugned 12 W.P. No.9780/2010 order, it appears that, the appellate Tribunal has addressed mainly two issues raised by the petitioner, firstly the financial problem faced by the establishment and delay in initiating the enquiry/ proceedings. The careful perusal of para 6 of the order would make it clear that the tribunal has dealt with the aspect of default and financial problem faced by the establishment and further the point of delay in starting the proceedings. Except these three points, the Tribunal has not dealt with other aspects of the matter. These three points are also addressed by cryptic discussion and concluded in one paragraph. The Hon’ble Supreme Court, in case of Organo Chemical Industries (cited supra) held that :- “The power of the Regional Provident Fund Commissioner to impose damages under Section 14-B is a quasi-judicial function. It must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard. The discretion to award damages could be exercised within the limits fixed by the Statute. Having regard to the punitive nature of the power exercisable under Section 14-B and consequences that ensue therefrom, an order under Section 14-B must be a ‘speaking order’ containing the reasons in support of it. The guidelines are provided in the Act and its various provisions, particularly in the word ‘danages’ the liability for which in Section 14-B arises on the ‘making of default’. While fixing the amount of damages, the Regional Provident Fund Commissioner usually takes into consideration various factors viz., the number of defaults, the period of delay, the frequency of defaults and the amounts involved. The word ‘damages’ in 13 W.P. No.9780/2010 Section 14-B lays down sufficient guidelines for him to levy damages.” (Emphasis supplied) 14. In case of M/s Hindustan Times Ltd. (cited supra), the Hon’ble Supreme Court held in para 28 that :- “The authority under section 14-B has to apply his mind to the facts of the case and the reply to the show cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard; the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved. 15. Therefore, it follows from the aforementioned to authoritative pronouncements of the Hon’ble Supreme Court, that the Commissioner, for initiating proceedings under Section 14-B usually takes into consideration the number of defaults, the period of delay, the frequency of defaults and the amounts involved. From careful perusal of the order passed by the Tribunal, there is no any discussion about how many defaults the petitioner has committed, what is the delay and what is the frequency of defaults and the amounts involved. The entire reasoning and discussion in the order of the appellate Tribunal is general in nature. As stated earlier, it appears that, no record was called by the Tribunal from Provident Fund Commissioner and in absence of such record and 14 W.P. No.9780/2010 counter affidavit by the respondent/ authority, the appeal came to be dismissed by cryptic reasoning. 16. The contention of the petitioner that, the legislature have limited the jurisdiction of the authority to levy penalty i.e. not exceeding the amount of arrears has also not been considered by the appellate Tribunal. The another contention of the petitioner has also not been gone into that the penal provision should be construed strictly and only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations. Therefore, taking overall view of the matter and upon careful perusal of the impugned order of the Tribunal, I am of the considered opinion that the appellate Tribunal has not dealt with all the points raised by the petitioner and in absence of calling record from the Provident Fund authority and in absence of any reply by the Provident Fund authority, by cryptic reasoning, has dismissed the statutory appeal filed by the petitioner. Therefore, for the foregoing reasons, the impugned order of the Tribunal cannot be sustained. However, the issues raised by the petitioner cannot be finally decided in this Writ Petition since the petitioner will have to produce documents/ evidence before the appellate Tribunal in support of its contentions. Therefore, in the facts and circumstances of this case, it would be 15 W.P. No.9780/2010 appropriate to quash and set aside the order of the Tribunal and to remit the matter back to the Tribunal for fresh consideration. In the result, the writ petition is allowed. The impugned order, dated 5.8.2010, passed by the Employees Provident Fund Appellate Tribunal, New Delhi in Appeal No. ATA No.813[9]2004, is quashed and set aside. The Appeal No. ATA No.813[9]2004 is restored to its original file before the Employees Provident Fund Appellate Tribunal, New Delhi. Rule is made absolute to above extent. 17. It is needless to mention that, while hearing Appeal No. ATA No.813[9]2004 de novo, the Employees Provident Fund Appellate Tribunal, New Delhi shall hear the said appeal afresh by giving reasonable opportunity to the petitioner and also to the respondent authority and then pass the appropriate order. It is needless to mention that, till the appeal is finally adjudicated, the 50% amount deposited by the petitioner will remain with the respondent. The appellate Tribunal shall make endeavour to hear and dispose of the appeal as expeditiously as possible, however, within one year from the first date of hearing of the appeal. ( S.S. SHINDE, J. )