IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR MONDAY, THE 22ND AUGUST 2011 / 31ST SRAVANA 1933 OP.No. 8586 of 1993(V) ---------------------- PETITIONER(S): --------------- FEDERAL BANK LTD., P.B. NO.103, ALUVA - 683 101, REPRESENTED BY ITS DEPUTY GENERAL MANAGER (PERSONNEL) SHRI P.K. SIVADASA MENON. BY ADV. SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE RESPONDENT(S): --------------- 1. THE REGIONAL PROVIDENT FUND COMMISSIIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, P.B. NO.1895, COCHIN - 17. ADDL. R2: K. CHANDRA BABU, S/O. N.K. KUNJU PILLAI, AGED 35, RESIDING AT RAGAM, ALUVA. ADDL.R3: JOHN CHERIYAN DEPUTY GENERAL MANAGER, (ACCOUNTS) FEDERAL BANK LTD., THOTTAKKATTUKARA, AVALUA - 3, ADDL.R4: THE FEDERAL BANK OFFICERS' ASSOCIATION, REPRESENTED BY ITS GENERAL SECRETARY, ALWAYE - 683 101. ADDL.R5; FEDERAL BANK RETIRED OFFICERS, FORUM (FBROF) FBOA CENTRE, FBOA BUILDING, ALUVA - 683 101, REP. BY ITS PRESIDENT, MR. K.V. KURIAKOSE, AGED 71, S/O. POTHEN VARKEY. (ADDL.R2 AND R3 IMPLEADED AS PER ORDER I N CMP NO.18936/1993 DT.27.10.1993 (ADDL.R4 IMPLEADED AS PER ORDER IN CMP NO.24035/1995 DT.18.8.1995 (ADDL. R5 IMPLEADED AS PER ORDER IN 3347/2010 DT.15.6.2010) ADV. SRI.N.N.SUGUNAPALAN, SENIOR ADVOCATE SRI.MATHEW ZACHARIAH FOR SRI.P.F.THOMAS, SENIOR ADVOCATE SMT.SREELEKHA PUTHALATH FOR SRI.E.M.MURUGAN FOR ADDL.R2 SRI.E.M.MURUGAN FOR ADDL.R5 SRI.T.A.JOY FOR ADDL.R5 SMT.SUMATHY DANDAPANI, SENIOR ADVOCATE FOR R5 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 19/7/2011, THE COURT ON 22/08/2011, DELIVERED THE FOLLOWING: APPENDIX EXT.P1-TRUE COPY OF LETTER DT.2.3.1985 EXT.P2-TRUE COPY OF LETTER DT.20.4.1985 EXT.P3-TRUE COPY OF ORDER DATED 7.9.1992 EXT.P4-TRUE COPY OF LETTER DT.8.1.1993 EXT.P5-TRUE COPY OF LETTER DT.26.3.1993 EXT.P6-TRUE COPY OF LETTER DT.29.3.1993 EXT.P7-TRUE COPY OF LETTER DT.16.4.1993 EXT.P8-TRUE COPY OF LETTER DATED 21.4.1993 EXT.P9-TRUE COPY OF LETTER DATED 11.5.1993 EXT.P10-TRUE COPY OF LETTER DT.25.5.1993 EXT.P11-TRUE COPY OF LETTETR DT. 8.6.1993 EXT.P12-TRUE COPY OF LETTER DATED 11.6.1993 EXT.P13-TRUE COPY OF LETTER DT.11.6.1993 EXT.P14-TRUE COPY OF LETTER DT.17.6.1993 EXT.P15-TRUE COPY OF STATEMENT SHOWING THE PARTICULARS OF THE EMPLOYEES OF THE PETITIONERs EXT.P16-TRUE COPY OF LIT OF EMPLOYEES EXT.P17-TRUE COPY OF APPLICATIOIN FOR WITHDRAWAL OF SECOND INSTALMENT TO R2 FROM 19.4.1993 EXT.P18-TRUE COPY OF PROSECUTION NOTICE DATED 16.2.1985 EXT.P19-TRUE COPY OF DO. DATED 16.2.1985 EXT.P20-TRUE COPY OF LETTER DATED 27.7.1993 SENT BY THE FIRST RESPONDENT TO THE PETITIONER. EXT.P21-TRUE COPY OF STATEMENT OF PARTICULARS OF EMPLOYEES EXT.P22-TRUE COPY OF STATEMENT REGARDING THE EMPLOYEES AND THE WITHDRAWALS. EXT.P23-TRUE COPY OF LETTER DATED 19.10.1993 SENT BY THE PETITIONERs EXT.P24-TRUE COPY OF STATEMENT OF ACCOUNTS EXT.P25-TRUE COPY OF MINUTES OF PROCEEDINGS AND DISCUSSIONS HELD ON 2.11.2006 BY THE PETITIONER BANK AND ASST. PROVIDENT FUND COMMISSIONER EXT.P26-TRUE COPY OF DO. HELD ON 20.11.2006 EXT.P27-TRUE COPY OF VALUATION REPORT EXT.P28-TRUE COPY OF CHART SHOWING THE RATE OF INTEREST APPLICABLE TO FEDERAL BANK EMPLOYEES PROVIDENT FUND TRUST. EXT.P29-TRUE COPY OF QUOTATION OF THE SECURITIES TAKEN FROM THE WEBSITE EXT.P30-TRUE COPY OF JUDGMENT IN WP NO.30578/2000 OF KARNATAKA HIGH COURT EXT.P31-TRUE COPY OF STATEMENT OF FIMMDA, PDAI & BLOOMBERG GOIng EXT.P33-TRUE COPY OF STATEMENT OF AMOUNT RECEIVABLE. (NO DOCUMENT MARKED AS EXT.P32 SEEN IN THE FILE) RESPONDENTS' EXTS: EXT.R1-TRUE COPY OF W.P.NO.505/1983 OF HIGH COURT OF JUDICATOR, BOMBAY. EXT.R1(A)-TRUE COPY OF THE STATEMENT ISSUED TO THE SUBSCRIBER FORM NO.23 YEAR 1991-1992 ANNEXURE A AND B PRODUCED ALONG WITH CMP 33487/1995 ANNEXURE A- TRUE COPY OF LETTER DATED 16.10.1995 ANNEXURE B-TRUE COPY OF LETTER DATED 9.11.1995 ANNEXURE A TO C PRODUCED ALONG WITH CMP 397/1996 ANNEXURE A-TRUE COPY OF LETTER DATED 9.11.1995 ANNEXURE B-TRUE COPY OF LETTER DATED 6.12.1995 ANNEXURE C-TRUE COPY OF COMMUNICATION SENT BY R1 ON 2.1.1996 ANNEXURE A TO C PRODUCED ALONG WITH THE STATEMENT DT. 23.10.1997 ANNEXURE A- TRUE COPY OF CALCULATION SHEET ANNEXURE B-TRUE COPY OF LETTER DATED 16.10.1995 ANNEXURE C-TRUE COPY OF LETTER DATED 9.11.1995 ANNEXURE A TO C PRODUCED ALONG WITH THE STATEMENT DATED 17.1.2008 ANNEXURE A- DETAILS OF THE INTEREST CALCULATED AND PAID ANNEXURE B-TRUE COPY OF DETAILS OF THE PAYMENTS GIVEN BY R2 ANNEXURE C- DO. DO. ANNEXURE I PRODUCED ALONG WITH IA 17009/2006 - STATEMENT OF THE ASSISTANT PROVIDENT FUND COMMISSIONER (LEGAL) KOCHI. ANNEXURE I AND II PRODUCED ALONG WITH IA 3347/2010 ANNEXURE I - TRUE PHOTO COPY OF JUDGMENT DATED 3.4.2009 IN OP 981/96 OF THIS COURT. ANNEXURE II-PHOTO COPY OF THE COMMUNICATION DT.6.1.2010 OF R2 EXT.R1(A)-PRODUCED IN IA 1765/2011 - TRUE COPY OF REPORT SUBMITTED BY THE CHARTERED ACCOUNTANT ANNEXURE R1(A) PRODUCED IN IA 6711/2011 - TRUE COPY OF CALCULATION STATEMENT OF P.F. DUES IN RESPECT OF FEDERAL BANK ANNEXURE III PRODUCED ALONG WITH THE AFFIDAVIT FILED BY THE RESPONDENT ON 11.4.2011 - TRUE COPY OF CALCULATION SHEET FOR ARRIVING AT THE AMOUNT DUE FOR TRANSFER ANNEXURE R1 PRODUCED IN IA 7800/2011 - COPY OF LETTER DATED 23.5.2011 RECEIVED FROM CHARTERED ACCOUNTANT EXT.R5(A)-TRUE COPY OF JUDGMENT DATED 3.4.2009 IN OP 891/1996 OF THIS COURT EXT.R5(B)-TRUE COPY OF COMMUNICATION DATED 6.1.2010 OF R1 // TRUE COPY // P.S. TO JUDGE T.R. Ramachandran Nair, J. - - - - - - - - - - - - - - - - - - - - - - - - O.P. No. 8586 of 1993-V - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 22nd day of August, 2011. JUDGMENT This writ petition is filed by the petitioner Bank seeking to quash Ext.P13 communication and for appropriate directions to the first respondent. The entire dispute relates to the transfer of accumulations of Employees Provident Fund Scheme, Family Pension Fund, Administrative charges, Employees Deposit Linked Insurance Scheme and EDLI administrative charges of the employees of the petitioner Bank as well as interest payable to them. 2. The background of the dispute as averred in the writ petition is the following. The petitioner is a Banking company governed by the Banking Regulation Act which is engaged in the business of banking. It has got branches spread over the entire State of Kerala as well as other different States all over India with more than 5000 employees on its rolls. Earlier, the branches of the petitioner Bank were confined within the State of Kerala. It was covered by the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short 'the Act'). The Bank was remitting the contribution to the concerned Provident Fund Authorities. After the Bank started to open branches outside the State of Kerala, the provisions of the Act became inapplicable. But in spite of the same, the first OP 8586/1993 2 respondent was enforcing the provisions of the Act and contributions were being collected. This resulted in the Bank raising objections in the matter. As per Ext.P1 dated 2.3.1985 detailed objections were raised by the Bank in the matter. By Ext.P2 communication, the Bank was informed by the respondent that the matter has been referred to the Government of India for their opinion. Therefore, the petitioner Bank was compelled to remit the contributions even thereafter. Finally, the dispute was resolved by the Central Government under Section 19A of the Act, by Ext.P3 order dated 7.9.1992. After hearing both sides, the Government of India held that the Act ceased to apply to the petitioner Bank on the date when the objection was made by the petitioner before the Regional Provident Fund Commissioner, Kerala. 3. Even though so many further correspondences ensued, and in spite of the request made by the Bank, the transfer of accumulations of the provident fund and family pension fund, etc. was not effected. Those communications have been produced as Exts.P4 to P14. In Ext.P13 communication, the Bank was informed that the transfer of accumulations will be on the basis of credit as on 30.9.1992 since it was in September, 1992 the Government of India has given the order of de-coverage. They were further informed that the contributions received under the Family OP 8586/1993 3 Pension Fund and Employees Deposit Link Insurance upto September, 1992 will not be refunded to the establishment. 4. Various contentions have been raised in the writ petition. 5. The first respondent has filed counter affidavit and statements and the petitioner has filed reply affidavits at various stages. This Court passed an interim order in C.M.P.No.15304/1993 directing the first respondent to transfer 85% of the Provident Fund accumulations to the Federal Bank Employees Provident Fund Trust within a period of three weeks from the date of receipt of a copy of the order. By another order dated 25.9.1995 in C.M.P.No.26115/1995 this Court, after recording the submission of the learned counsel for the first respondent that the entire amount collected by the Regional Provident Fund Commissioner, Ernakulam from the petitioner Bank by way of provident fund contribution and family pension fund would be returned with accumulation of interest, if any, directed the respondent to refund the same within a period of two months from the said date. 6. The first respondent transferred an amount of Rs.17,63,00,000/- on 6.9.1993 stating that the same is 85% of the Provident Fund accumulations at the close of 30.9.1992, which was encashed by the Bank on 10.9.1993. After the second interim order was passed, the first respondent issued two cheques for Rs.1,72,12,776/- and Rs.27,20,000/- OP 8586/1993 4 dated 25.10.1995, being part of the remittance of contribution of provident fund, family pension fund, etc. for the period from October, 1992 to May 1993. This was encashed on 27.10.1995. On 16.1.1996 the first respondent sent securities with face value of Rs.2,66,00,700/-. 7. Even though various statements were filed, the parties could not agree on the amounts to be transferred and the disputes persisted on various grounds. This Court thus passed an interim order dated 25.10.2006, after hearing the parties and after noticing the pending disputes. It was ordered as follows: “In order to find a possible solution to the dispute arising for decision in this case, it is necessary that the Bank may depute two officers to meet Sri Ranjay Mooshahary, Assistant Provident Fund Commissioner (Legal), Employees Provident Fund Organisation, Sub Regional Office, Kochi within two weeks. The Bank shall produce their statement of accounts. The Assistant Commissioner, Provident Fund, shall also make available the statement of accounts to be perused by the Bank Officials so as to enable both sides to have access to the records maintained by each other and if possible, to file a joint statement or separate statement, as the case may be, within a period of two weeks thereafter.” 8. Thereafter, along with the affidavit dated 27.11.2006 the Bank produced the minutes of the discussions held in the meetings on 2.11.2006 OP 8586/1993 5 and 20.11.2006, as Exts.P25 and P26, apart from Ext.P24 statement of accounts showing the balance amount due from the Employees Provident Fund Organisation as on 30.9.1992. The E.P.F. Organisation also filed a statement on 30.11.2006 and produced Annexure I statement of the Assistant Provident Fund Commissioner (Legal). After considering various aspects, this Court passed an interim order on 10.7.2007. With regard to the undisputed portions of amounts, it was agreed during hearing that the first respondent can be directed to transfer the said amounts within a stipulated time. Rs.27,34,294/- had to be transferred to the Federal Bank Employees Provident Fund Trust and an amount of Rs.18,13,526/- was to be paid to the Federal Bank being administrative charges and Bank's contribution under the EDLI Scheme for the period from October, 1992 to May, 1993. This Court directed the first respondent to transfer the above amounts to the Federal bank Employees Provident Fund Trust immediately, at any rate, before the expiry of one month from the date of the order. But there were further disputes in the matter and ultimately this Court on agreement of parties, passed an interim order on 23.11.2010. This Court was of the view that the various disputes between the petitioner and the first respondent require an examination of the accounts including the amounts transferred and the various contributions thereof. Both parties agreed that OP 8586/1993 6 the task could be entrusted to a Chartered Accountant, as the matter requires deeper examination of accounts in respect of thousands of employees and the same cannot be done evidently by this Court and they agreed that M/s. Arun & Ramadas, Chartered Accountants, Sree Govind, Manakkeparambil Lane, Azad Road, Kaloor can be appointed to go into the entire accounts and file a report before this Court to enable this Court to finally pronounce on the contentions raised between the parties. This Court directed the petitioner to transfer all the records available to them and both parties were directed to furnish the respective claims before the Chartered Accountants in writing for enabling them to arrive at the correct figures. 9. The Chartered Accountants filed a report on 9.3.2011 after verifying the accounts. Thereafter, the first respondent filed a fresh calculation statement with a verified petition dated 6.4.2011. The same was produced along with an affidavit on 11.4.2011. This Court on 12.4.2011 by an interim order, directed the same to be produced before the Chartered Accountants for their additional report. Accordingly a second report has also been filed by the Chartered Accountants on 24.6.2011. Thereafter the case was posted for final hearing. 10. Heard learned Senior Counsel for the petitioner Shri M. Pathrose Mathai, learned Senior Counsel Shri N.N. Sugunapalan, appearing for the OP 8586/1993 7 first respondent and learned Senior Counsel Smt. Sumathi Dandapani, appearing for additional fifth respondent who is the President of Federal Bank Retired Officers Forum who supported the arguments raised by the learned Senior Counsel appearing for the Bank. 11. The main dispute is with regard to the liability of the first respondent to pay compound interest as per Para 60 of the Employees Provident Fund Scheme, 1952 (for short 'the Scheme') and the liability to transfer Family Pension Fund, Employees Deposit Link Insurance, Administrative Charges, etc. 12. Learned Senior Counsel for the petitioner submitted that the first respondent was bound to transfer all the amounts in terms of the interim orders passed by this Court and in terms of the provisions of the Act and the Scheme. It is pointed out that both parties were directed to file separate statements as per the interim order dated 25.10.2006 and in Annexure I produced along with the statement dated 30.11.2006 of the first respondent, objections were raised for the first time regarding the transfer of family pension fund, even though it is against the undertaking given before this Court and which was recorded in the interim order dated 25.9.1995. It is submitted that at the time when the discussions were made as directed by this Court pursuant to the said interim order, on some of the points OP 8586/1993 8 agreement could be reached and thus they remained undisputed. It is pointed out that even though in Annexure I statement filed by them, it was mentioned that going by the notification GSR 79 dated 25.2.2000 of the Government of India, the provisions of the Act is applicable to the Federal Bank, the same was under challenge before this Court by the petitioner Bank and certain other Banks in O.P.No.25270/2000 wherein an interim order of stay was granted and subsequently the writ petition itself was allowed. It is submitted that the delay in transferring of the accumulations as well as other amounts will attract payment of compensation by way of interest. The amount belong to the individual employees who had contributed along with the contributions made by the Bank. The Bank has formed the Trust and the accumulations transferred, had to be utilised for settling the claims. My attention was invited to the various provisions of the Act by the learned Senior Counsel for the petitioner and it was submitted that the final claim arrived at by the Chartered Accountants in the report dated 9.3.2011, as transferable by the first respondent, is liable to be transferred by the first respondent Organisation with interest till actual date of payment. In this context, learned Senior Counsel relied upon the principles stated by the Apex Court in Sandvik Asia Ltd. v. Commissioner of Income Tax I, Pune and others [(2006) 2 SCC 508] regarding the OP 8586/1993 9 liability to pay compensation for the delayed payment of the principal amount as well as interest. 13. Learned Senior Counsel for the first respondent, Shri N.N. Sugunapalan submitted that the Bank raised the objection with regard to the de-coverage of Act, by Ext.P1 dated 2.3.1985. Ext.P3 order was passed in the year 1992. The de-coverage ordered by the Government of India thus excluded the Bank and its employees from the operation of the Act. Therefore, the provisions of the Act ceased to be in operation from the date on which the Bank objected, viz. 2.3.1985. Therefore, from the said date in 1985 onwards, Para 60 of the Scheme does not apply. It is pointed out that in the light of the exclusion, the same deprives any benefit under the Act and the Scheme. It is therefore submitted that under the Manual of Accounting Procedure only simple interest is calculable. Hence, on the basis of the same, it can be seen that excess amount has been transferred already. It is thus submitted that para 60 of the Scheme only applies to a covered employee. Learned Senior Counsel submitted that the principles stated in Sandvik Asia Ltd.'s case {(2006) 2 SCC 508) will not apply to the facts of this case. Reliance was also placed on the decision of this Court in Life Insurance Corporation of India v. Sindhu (2006 (2) KLT 785 - SC), State of Haryana and others v. M/s. S.L. Arora and Company (AIR OP 8586/1993 10 2000 SC 1511) and Dhananjay Malik and others v. State of Uttaranchal and others [(2008) 4 SCC 171 in support of the plea. 14. Learned Senior Counsel appearing for the additional 5th respondent Smt. Sumathi Dandapani supported the arguments raised by the learned Senior Counsel for the petitioner. It is submitted that the first respondent has delayed the payment due to the real beneficiaries of the Scheme even after the Trust was created by the Bank pursuant to the order passed by the Govt. of India as per Ext.P3. Purposeful delay has been caused in implementation of the orders of the Government and transfer of the Fund to the Trust. Many of the employees retired and they could not get the entire benefits also. It is pointed out that reliance placed on the Manual of Accounting Procedure cannot be accepted in the light of the provisions of the Act and the Scheme. 15. First I will refer to the respective stand taken by the parties in the various correspondences produced in the writ petition. Ext.P1 is dated 2.3.1985 wherein the Bank has raised serious objections about the notice claiming damages under Section 14B of the Act and the enhanced rate of contribution. It was pointed out that the Act has ceased to apply to the Bank already as it is having branches in several States in India and the Central Government has not made applicable the provisions of the Act to the OP 8586/1993 11 Banking Companies which are having branches in more than one State. Accordingly, it was informed that the claim is unjust and unenforceable. By Ext.P2, the first respondent informed the Bank that the matter has been referred to the Govt. of India for their considered opinion and on getting details, a reply will be furnished. 16. Ext.P3 is the order passed by the Central Government in a petition filed by the Bank under Section 19A of the Act praying for a declaration that the provisions of the Act are not applicable to the petitioner Bank ever since 19.1.1973 when it opened branches in more than one State. The same is a detailed order which considers the respective stand taken by both parties. Finally, it was declared that the Act ceased to apply to the petitioner Bank on the date when the objection was made by the petitioner before the Regional Provident Fund Commissioner, Kerala. 17. By Ext.P4, the Bank informed the first respondent about the formation of the Trust and obtaining of approval under the Income Tax Act and requested for various actions at the end of the first respondent including transfer of provident fund contributions by employees and Bank and the accumulations thereon, the total amounts contributed by the employees and Bank towards Family Pension Scheme and accumulations thereon and the total contributions made and accumulations thereon in OP 8586/1993 12 connection with Deposit Linked Insurance Scheme minus payments effected. By Ext.P5 communication dated 26.3.1993 the Bank was informed that steps are being taken in the matter and pending a final decision on modalities of transfer the bank was requested not to forward any more applications from the employees from 1.4.1993. In the reply as per Ext.P6, the Bank maintained that so long as the first respondent retains the provident fund account of the employees and other connected accounts, they cannot stop dealing with applications of employees and further informing that the Bank will do so till the transfer of PF accumulations to the Trust. In Ext.P7, the first respondent informed the Bank about the proposal to immediately transfer 50% of the accumulations on an adhoc basis and further directing the Bank not to send any loan/settlement applications. In the reply Ext.P8, the Bank highlighted the fact that no effective steps have been taken in the matter to transfer the amounts and to provide the details required for administering the fund and that unless and until the full amount and the particulars of remittance, withdrawal, etc. are furnished, the Bank would not be able to dispose of the claims and other applications for loans submitted by the employees of the Bank. The proposal to transfer 50% of P.F. accumulation was also not agreed and it was further informed that what is required is to transfer the full amount and OP 8586/1993 13 to furnish its details for enabling the petitioner to proceed with the matter. Finally, the Bank reiterated their stand that what is required is to transfer the funds with the first respondent and to furnish the details for enabling the Bank to administer the scheme effectively, as partial transfer of funds would not serve any purpose. It was also informed that till the matter is settled as above, the petitioner has no other alternative but to send the application for loans, etc. of the employees to meet their lawful claims. 18. In Ext.P9 it was informed by the first respondent that the if the Bank do not want to continue the Schemes under the Act or no reply is received before 4.6.1993 it will be presumed that the Bank is not interested in the continuation of the Scheme and in that event the first respondent will be closing the accounts of the members as on 30.9.1992, i.e. the month in which 19A petition was heard and judgment pronounced by the Central Government. It is offered that 85% of the total accumulations of the members would be transferred by cash to the trustees with memberwise details before 25.6.1993 and the balance amount would be transferred in the shape of securities by the Head Office of the first respondent. It is further informed that the contributions made by the petitioner beyond 30.9.1992 would be refunded with interest as provided in the rules. In Ext.P10, the Bank wanted implementation of Ext.P3 by complying various steps as OP 8586/1993 14 suggested therein. It was also informed that until the PF, Family Pension and Deposit Linked Insurance Scheme accumulations and full particulars of the amounts standing to the credit of each employee are transferred/furnished to the Bank, the first respondent will continue to pay interests thereon and meet payments/withdrawals/liabilities arising under each of them as and when they arise or as they continue. By Ext.P11, it was informed by the first respondent that the P.F. balance as on 30.9.1992 will be transferred. By Ext.P12, the Bank informed that the order should be implemented not partially, but fully by transferring the P.F. balance and related amounts. Finally, Ext.P13 was issued by the first respondent. 19. Learned Senior Counsel appearing for