THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.14707 OF 2005 ORDER: M/s.Modern Beedi Factory (MBF) is a ﬁrm engaged in beedi industry. It is governed by provisions of Employees’ Provident Funds & Miscellaneous Provisions Act 1952 (the Act, for brevity) and Employees’ Provident Funds Scheme (the Scheme, for brevity). For the period from 01.4.1997 to 31.3.1998, MBF did not remit contributions to their account code No.AP/5222. The Regional Provident Fund Commissioner, Nizamabad, (Regional Commissioner, for brevity) conducted enquiry under Section 7A of the Act. By order dated 11.8.1998 dues payable were determined at Rs.4,57,138.40 ps and as requested by MBF, facility for paying amount in ﬁve monthly instalments was granted by proceedings dated 16.10.1998 informing employer that default would entail in payment of damages as determined under Section 14B of the Act. When there was delay on the part of MBF in payment of contribution for the period from April 1997 to February 2000, action was initiated under Section 14B of the Act. By an order dated 04.9.2000, MBF was directed to pay damages of Rs.1,82,684/-. This was questioned by MBF before EPF Appellate Tribunal, New Delhi, (the Tribunal, for brevity), who by their order dated 11.2.2005, appeal being ATA No.548(1)2003, was disposed of holding that damages under Section 14B of the Act cannot be levied. Learned Tribunal however held that MBF would be liable to pay interest at 12% per annum on the amount determined with eﬀect from 11.2.1998. Aggrieved by the said order, Regional Commissioner ﬁled present writ petition. It is contended that learned Tribunal failed to consider that MBF failed to comply with provisions of the Act and therefore damages would be attracted, that while granting instalments facility MBF was informed about levy of damages for delayed payments and that the order of learned Tribunal suﬀers from error in law. Lastly it is contended that under Para 32-A of the Scheme read with Section 14B of the Act even where instalment facility is granted, damages can be imposed. Second respondent (MBF) ﬁled counter aﬃdavit. It is stated that they are complying with provisions of the Act but due to several reasons including marketing problems workers’ wages could not be disbursed in time. Therefore enquiry was initiated under Section 7A of the Act treating MBF as a defaulter though there was no default in making EPF remittances. Without taking into consideration mitigating circumstances pointed out during the hearing Regional Commissioner passed orders for payment of Rs.4,57,138/-. As it is a heavy burden, MBF requested for instalment facility which was granted by order dated 16.10.1998. In obedience thereto entire amount was cleared by 15.3.1999. In spite of the same, order dated 04.9.200 under Section 14B of the Act was passed for payment of damages, which was set aside by EPF Tribunal. The power conferred on Regional Commissioner under Para 32-A of the Scheme read with Section 14B of the Act, is discretionary and in all cases it is not necessary nor warranted to impose damages. Having granted instalment facility, levy of damages is unfair, unjust and unreasonable. This Court heard rival submissions of learned Counsel. In this proceedings for a Writ of Certiorari, core question is whether EPF Tribunal misdirected itself in setting aside order for payment of damages on the ground that MBF was granted facility to pay dues in instalments. There is no dispute that when PF contribution was not remitted for the period from April 1997 to March 1998, Regional Commissioner determined the amount due from establishment. On a request made, MBF was allowed instalment facility under Section 7A of the Act by order dated 16.10.1998. MBF accordingly paid amount and cleared dues by 15.3.1999. Action under Section 14B of the Act was initiated a year thereafter and a show cause notice dated 12.5.2000 was issued. The plea before Regional Commissioner was that grant of instalment facility is a mitigating circumstance while considering question of damages under Section 14B of the Act, which reads as under. 14B. Power to recover damages:- Where an employer makes default in the payment of any contribution to the fund the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of Sec.15 or sub-section (5) of Section 17 or in the payment of any charges payable under any other provisions of this Act or any Scheme or Insurance Scheme or under any of the conditions speciﬁed under Section 17, the Central Provident Fund Commissioner or such other oﬃcer as may be authorized by the Central Government by notiﬁcation in the Oﬃcial Gazette in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme. Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard. Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be speciﬁed in the Scheme. Though both the Counsel made reference to Para 32-A of the Scheme, the same does not deal with power to recover damages. It only gives rate of interest on delayed payment to be recovered by way of penalty/damages. Even to appreciate the contention that Para 32-A of the Scheme is only discretionary and not mandatory, acceptance of the same would depend on the contours of power under Section 14B of the Act. Section 14B of the Act involves exercise of quasi-judicial power and levy of damages is not necessarily proportionate to the loss incurred by employee in as much as it was partly compensatory and partly penal. (See Organo Chemical Industries v Union of India[1]). While exercising powers under Section 14B of the Act, what are factors to be taken into consideration? I n M/s.Hindustan Times Ltd. v Union of India[2], Supreme Court dealt with such a question and laid down as follows. The authority under Section 14B 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; default on the part of the employer based on plea of power-cut, ﬁnancial problems relating to other indebtedness or the delay in realisation of amounts paid by the cheques or drafts, cannot be justiﬁable grounds for the employer to escape liability; there is no period of limitation prescribed by the legislature for initiating action for recovery of damages under Section 14-B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under Section 14-B would be taken; mere delay in initiating action under Section 14- B cannot amount to prejudice inasmuch as the delay on the part of the Department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. Section 14B of the Act as interpreted by Supreme Court is compensatory as well as penal. Therefore unless EPF authorities make out a case that there was gross willful default by establishment, Section 14B of the Act is not attracted. If Section 14B of the Act is considered to be an invariably enforceable Rule, there would not have been any scope for a hearing in quasi-judicial proceedings and aﬀording an opportunity to the defaulting establishment. The beginning words in Section 14B of the Act “where an employer makes default in the payment of contribution to the fund … … …” would indicate that there should be such default on volition and not a default due to mitigating circumstances. Secondly when Regional Commissioner permitted MBF facility of payment of determined contribution in instalments, that itself would indicate that establishment had justiﬁable mitigating circumstances for making default. In such a situation penalty clause or compensatory element are not attracted. In view of this conclusion, it is not necessary to go into scope of Para 32-A of the Scheme and the said question is left open to be decided in appropriate case. In that view of the matter, learned Tribunal was correct in setting aside order for damages on the ground that MBF was granted instalment facility, damages cannot be levied under Section 14B of the Act. Learned Tribunal has appreciated facts correctly and applied law correctly and in such an event petition for judicial review would not lie. The writ petition is misconceived and is accordingly dismissed without any order as to costs. ______________ (V.V.S.RAO,J) .10.2008 NOTE: L.R. Copy be marked. (By order) YS [1] (1979) 4 SCC 573 : AIR 1979 SC 1803 [2] (1998) 2 SCC 242 : AIR 1998 SC 688