IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 22ND NOVEMBER 2011 / 1ST AGRAHAYANA 1933 WP(C).No. 30854 of 2010(F) -------------------------------------- PETITIONER(S): ----------------------- EMPLOYEES PROVIDENT FUND ORGANISATION, REP. BY ASSISTANT PROVIDENT FUND COMMISSIONER, SUB-REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, P.B.NO.1895, KALOOR, COCHIN-682 017. BY ADVS. SRI.S.GOPAKUMARAN NAIR (SENIOR) SRI.M.CHANDRABOSE RESPONDENT(S): ------------------------- M/S. FLOR DECOR, MANAPPURAM, CHERTHALA, ALAPPUZHA – 688 524. BY ADVS. SRI.M.D.SASIKUMAR SRI.K.S.HARIHARAPUTHRAN SRI.GEORGE MATHEW SRI.DIPU JAMES SMT.K.V.RAMYA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: VPV WPCNO.30854/2010 APPENDIX PETITIONER'S EXHIBITS: EXT.P1: COPY OF THE APPEAL NO.ATA 532(7)/2005 DATED 21.3.2005. EXT.P2: COPY OF THE PROCEEDINGS DATED 21.3.2005. EXT.P3: COPY OF THE ORDER DATED 8.7.2005. EXT.P4: COPY OF THE JUDGMENT DATED 5.10.2005 IN W.P.(C) NO. 28166/2005. EXT.P5: COPY OF THE ORDER DATED 2.2.2010. EXT.P6: COPY OF THE JUDGMENT IN W.A.NO.2182/2006. EXT.P7: COPY OF THE DECLARATION. EXT.P8: COPY OF THE ACKNOWLEDGEMENT. EXT.P9: COPY OF THE COVERAGE NOTICE DATED 8.7.1997. RESPONDENT'S EXHIBITS: NIL /TRUE COPY/ P.A. TO JUDGE VPV C.K.ABDUL REHIM, J. ------------------------------------------- W.P.(C) No.30854 of 2010 ------------------------------------------- Dated this the 22nd day of November, 2011 J U D G M E N T ---------------------- Employees Provident Fund Organisation is the petitioner. Ext.P5 order issued by the Employees Provident Fund Appellate Tribunal is under challenge in this writ petition. 2. The establishment of the respondent was directed to pay contributions under Section 6 of the Act read with Part 38 of the Employees Provident Fund Scheme, 1962 and also the contributions payable under other schemes, with respect to the period from 7/1995 to 1/1999. Damages and interest due under Section 14B was also directed to be paid for the said period. The respondent submitted a representation before the Assistant provident Fund Commissioner seeking waiver of damages payable under Section 14B. Considering such representation Ext.P2 order was issued by the Assistant Provident Fund Commissioner wherein the respondent was directed to pay damages under W.P.(C).30854/10 -2- Section 14B for the period from 7/1995 to 1/1999 totalling to Rs.51,998/-. Aggrieved by Ext.P2 order the respondent preferred an appeal before the Employees Provident Fund Tribunal. Initially the appeal was dismissed for default through Ext.P3 order. In a writ petition filed by the respondent, this court directed the Tribunal to restore the appeal and dispose of the same on merits, subject to conditions imposed, as per Ext.P4 judgment. Thereafter, the matter was considered on merits by the Tribunal and Ext.P5 order was issued. 3. The Tribunal observed that the respondent was served with notice alleging default in payment of contributions for the period from 7/95 to 1/99, only at a belated stage, on 8.7.1997. It was contended before the Tribunal that since the coverage became effective only from 1997 onwards, the respondent was not liable for payment of arrears from 1995 onwards. The Tribunal observed that, since there occurred delay in issuing coverage letter, the default prior to issuance of such letter is not intentional on the part of the respondent. Hence the matter was remanded directing the calculation of damages excluding W.P.(C).30854/10 -3- the period from 1995 to 1997. In this regard the Tribunal relied on the decisions of this court in E.S.I. Corporation Vs. Bharat Hotel (2000 (2) KLJ 689) and Indian Telephone Industries Ltd. Vs. Asst. P.F. Commissioner & ors (2006 (3) KLJ 698). 4. Contention of the petitioner organisation is mainly to the effect that, the Appellate Tribunal ought to have found that the respondent establishment stands covered from 30.5.1995 onwards and that they have defaulted in remitting the statutory dues under the Act and Scheme due for the period from 7/95 to 1/99. The fact that any belated payment will attract penal damages under 14B as prescribed under 32A of the EPF scheme, has omitted notice of the Tribunal, is the contention. Further contention is that even though the establishment commenced production in 1987, the coverage was extended only from 30.5.1995 onwards, as the establishment satisfied the requirement for coverage undisputedly from that date onwards. According to the petitioner, the establishment was duty bound to enroll the beneficiary members from their date of eligibility, without waiting for getting any W.P.(C).30854/10 -4- coverage notice. It was incumbent upon the respondent to deduct the statutory contributions from the wages of the employees and to remit the same along with their share of contribution before the authority. When there is delay in effecting such remittance, the establishment is liable to indemnify the organization with respect to the various benefits due to the subscribers, from the due date of coverage onwards, which they are entitled to claim regardless of the actual date of remittance. Due to the delay in remittance recurring loss will be caused to the petitioner organization and the same need be indemnified. According to the petitioner, the organization was fully justified in levying penal damages at the rate prescribed in paragraph 32 of the Provident Fund Scheme. 5. A further contention raised by the petitioner organization is that the power to waive or even to reduce the amount of penal charges vested with the Regional Provident Fund Commissioner, has been regulated by providing a table appended to paragraph 32A, prescribing specific rates of penal damages which can be waived corresponding to the period of delay. According to the W.P.(C).30854/10 -5- petitioner, the discretionary power for waiver is vested only with the Central Board of Trusteesof the EPF Organization, going by the provisions in Section 14B read with 32B. Therefore the appellate Tribunal ought to have found that the Assistant Provident Fund Commissioner is right in rejecting the request for waiver. 6. While evaluating the disputed issued, I find that; the respondent establishment was liable to be covered from 1995 onwards. But since the coverage was not issued on any earlier point of time than on 8.7.1997, the default occurred prior to issue of such coverage notice was not intentional, was the contention raised by the respondent before the Tribunal. Since there was no intentional default in payment of the contributions the authority should have exercised discretion vested under Section 14B for limiting the damages with respect to the period from the date of issuance of the coverage notice was the argument. Per contra, contention of the petitioner organization was that the Assistant Provident Fund Commissioner, who is the original authority, was not vested with any such discretion to limit levy of damages for any particular period, but such W.P.(C).30854/10 -6- power is vested only with Central Board of Trustees. 7. A perusal of the relevant provision under Section 14B will be beneficial in this regard. It provides that when an employer makes default in payment of the contributions under different schemes, the Commissioner or such authority empowered in that behalf may recover from the employer such damages not exceeding the amount of arrears, as may think fit to impose. The second proviso to Section 14B confers powers on the Central Board of Trustees to reduce or withdraw damages levied under that section, in relation to an establishment which are sick industrial companies. When the statute empowers the Commissioner or the authorised officer with a discretionary power to recover damages as it may think fit to impose, it cannot be said that such authority is not vested with powers to limit the damages for any particular period. As contended by the learned counsel for respondent, I am of the considered view that the second proviso is applicable only with respect to the cases of sick industrial companies. In the case at hand, the Appellate Tribunal found that the default in payment of contribution was not intentional and W.P.(C).30854/10 -7- hence waiver of damages for the period till issuance of coverage notice can be allowed. It relied upon a Division Bench decision of this court in Bharat hotel's case (cited supra). It is held therein that, if the delay occurred due to bonafide reasons, the damages can be waived on the facts of each case as imposition of damages is penal in nature and the elements of mens rea is necessary, unlike the statutory obligation to pay interest for delayed payment of contribution. The petitioner had produced Ext.P6 judgment in W.A.No.2182/2006 where the findings entered by the learned Judge in Indian Telephone Industries case (cited supra) has been reversed. But on the facts of that case it is an establishment which is a sick industrial company. What is held by the Division Bench is that the specific power conferred on the Central Board of Trustees cannot be exercised by the Commissioner of Provident Fund. 8. Learned counsel for petitioner had drawn my attention to a decision of the Hon'ble Supreme Court in M/s. K.Streetlite Electric Corporation Vs. Regional Provident Fund Commissioner Haryana (AIR 2001 SC 1818), wherein it is held that order imposing damages W.P.(C).30854/10 -8- cannot be set aside on the grounds of delay in initiating the proceedings under Section 14B, unless prejudice is pleaded or proved by employer. It is a case where the establishment stood covered and the employer had failed to remit the contribution. But the authority failed in imposing damages. The court held merely because the proceedings under Section 14B was at a belated stage it could not be contended that the imposition of damages is not sustainable. 9. In the case at hand, it is not in dispute as to the fact that the respondent establishment was liable to be covered from 7/95 onwards. But contention is that the coverage was brought to the notice of the respondent only on 8.7.1997, when a notice was issued. Therefore, according to the respondent, the non-payment of contribution was not intentional till such date. Hence the respondent is seeking for a waiver of the damages, till the date of issuance of the coverage notice. 10. Question arises as to whether the Commissioner has got power to limit imposition of damages to a lesser period than that of the default. Going by the wordings of W.P.(C).30854/10 -9- Section 14B which confers power on the Commissioner to impose damages of any amount not exceeding the amount of arrears as he may think fit to impose, I am of the opinion that the Commissioner was well within his power to limit the imposition of damages to any lesser period. In this case the Appellate Tribunal having considered all factual aspects of the case found that the delay caused in remittance of contribution was not intentional. By virtue of the discretion left under Section 14B, the damages can be limited to a particular period. It cannot be held that the appellate authority is not vested with such a power, when the original authority has been conferred with a discretion under Section 14B as mentioned above. Therefore I am of the considered opinion that, even though the contention of the petitioner that the respondent establishment was liable to be imposed with damages for the entire period cannot be discarded in toto, the limitation now made in exercise of the discretion is in no manner illegal, irregular or perverse. This court is not sitting in appeal against the impugned order of the Appellate Tribunal. Unless the decision of the Tribunal is so illegal, perverse or contrary to the provision, W.P.(C).30854/10 -10- interference is not warranted on the factual matrix of the issue. 11. Hence I decline to interfere with the order passed by the Appellate Tribunal, which according to me is well within its powers. In the result the writ petition deserves no merit and the same is accordingly dismissed. Sd/- C.K.ABDUL REHIM, JUDGE. okb True copy P.A to Judge