IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.SURENDRA MOHAN FRIDAY, THE 18TH DAY OF JUNE 2010/28TH JYAISHTA 1932 WP(C).No. 12909 of 2010 (K) --------------------------- PETITIONER(S) : --------------------- M/S.L.F HOSPITAL, ANGAMALI, ERNAKULAM, REPRESENTED BY ITS DIRECTOR. BY ADVS. SRI. J.JULIAN XAVIER SRI. FIROZ K.ROBIN RESPONDENT(S) : ------------------------ 1. ASSISTANT PROVIDENT FUND COMMISSIONER, KOCHI. 2. THE RECOVERY OFFICER, EMPLOYEES PROVIDENT FUND ORGANIZATION, SUB REGIONAL OFFICE, KALOOR. 3. THE REGISTRAR, EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, SCOPE MINAR, CORE-11, 4TH FLOOR, LAXMI NAGAR DISTRICT CENTRE, LEXMI NAGAR, NEW DELHI-110 092. BY ADVS. SRI. S. GOPAKUMARAN NAIR (SR.) SRI. M. CHANDRA BOSE THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18-06-2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: NS WP(C).No. 12909 of 2010 APPENDIX PETITIONER(S) EXHIBITS : EXT.P1 : COPY OF THE COMMUNICATION DATED 17.11.2000. EXT.P2 : COPY OF THE COVERING LETTER. EXT.P3 : COPY OF THE PROCEEDINGS DATED 23.06.2004 ISSUED BY THE 1ST RESPONDENT. EXT.P4 : COPY OF THE APPEAL DATED 14.08.2004 CHALLENGING EXT.P3 ORDER ISSUED UNDER SECTION 14B OF THE EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT FILED BEFORE THE 3RD RESPONDENT. EXT.P5 : COPY OF THE DATED 1.02.2010. RESPONDENT(S) EXHIBITS : NIL / TRUE COPY / NS P.A. TO JUDGE K. SURENDRA MOHAN, J ---------------------------------------------- W.P.C.NO.12909 OF 2010 ----------------------------------------------- Dated this the 18th June, 2010 J U D G M E N T The petitioner has filed this writ petition challenging Exts.P3 and P5 proceedings of the respondents by which damages have been imposed on the establishment under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 'Act' for short). 2. The facts of the case are not in dispute and are summarised as under. The petitioner is a hospital and is a covered establishment under the Act. The establishment has been remitting the contributions payable under the Act without any delay or default. According to the petitioner, as per Ext.P1 communication dated 17.11.2000, the petitioner was informed about the enhancement in the rate of contribution under the Act from 10% to 12% with effect from 22.9.1997. Pursuant to Ext.P1 communication, the petitioner remitted the difference in the amount for the period from 22.9.1997 to 28.2.1998 as per Ext.P2 covering letter. According to the petitioner, the petitioner was not aware of the amendment enhancing the contribution from 10% to WPC No.12909/2010 2 12%. Immediately on coming to know of the enhancement that was made by an amendment to the Act preceded by an ordinance, the petitioner had immediately remitted the difference in the contribution that was due and payable. 3. Subsequently, the first respondent by proceedings dated 23.6.2004 imposed an amount of Rs.23,487/- as interest on the difference in contribution that was paid by the petitioner pursuant to Ext.P1, under Section 7Q of the Act. The petitioner was also served with Ext.P3 proceedings by which an amount of Rs.67,738/- was imposed as damages under Section 14B of the Act. A true copy of the said proceedings dated 26.03.2004 is Ext.P3. The petitioner, being aggrieved by the imposition of damages over and above the interest that was charged for the delayed payment, challenged Ext.P3 proceedings before the third respondent by preferring an appeal against the same. The said appeal is Ext.P4. 4. In Ext.P4, the petitioner took elaborate grounds questioning the manner in which Ext.P3 proceedings were issued. It was pointed out by the petitioner that damages under Section 14B did not automatically follow every instance of non-compliance with the provisions of the Act. According to the petitioner, default in payment of contribution was a condition precedent for imposing WPC No.12909/2010 3 damages under the said provision. Since the petitioner was prompt and regular in the payment of contributions, it is submitted that the petitioner was not liable to be imposed with damages. The petitioner also pointedly referred to a decision of this Court, to substantiate the above contention. However, without considering any of the above contentions raised by the petitioner, it is alleged that Ext.P4 appeal has been dismissed and Ext.P3 proceedings have been confirmed by Ext.P5 order of the Tribunal. This Writ petition is filed challenging Ext.P5. 5. According to the counsel for the petitioner, there was no default on the part of the petitioner in remitting the contributions under the Act, as as to attract the levy of damages under Section 14B of the Act. It is also pointed out that either in Ext.P3 or in Ext.P5 is there any finding as to any default on the part of the petitioner. Therefore, in the absence of any finding regarding default, it is submitted that the action of the respondents in imposing damages on the petitioner is without any justification. The petitioner also places reliance on three decisions of this Court in support of his above contentions. Therefore, he prays for setting aside Exts.P3 and P5 proceedings. 6. The counsel for the respondents 1 and 2 has filed a WPC No.12909/2010 4 statement justifying the impugned proceedings. It is submitted that though the amendment was introduced only in March 1998, by which the rate of contribution payable under the Act was raised from 10% to 12%, it is pointed out that the amendment was preceded by an ordinance that came into effect on 22.9.1997. Since the ordinance was given very wide publicity, it is not open to the petitioner to plead that they were ignorant of the same. In fact, ignorance of law cannot be accepted as a valid excuse. According to the counsel, since there was omission on the part of the petitioner to remit the contribution in time, the respondents were perfectly within their powers to levy the damages. According to the counsel, only 50% of the arrears has been levied as damages though 100% could have been imposed. 7. The counsel for the petitioner meets the above contention by submitting that for the delayed payment, interest has already been charged under Section 7Q of the Act which has also been paid by the petitioner. Since damages are imposed over and above the interest, as an additional levy, it cannot be imposed as a matter of course, but can be recovered only where circumstances justify imposition of the same. 8. I have heard the counsel for the petitioner as well as the WPC No.12909/2010 5 counsel for the respondents. I have also considered the rival contentions of the parties. 9. It is not in dispute that the petitioner's establishment is a covered establishment and that contributions in respect of the said establishment were being remitted regularly and without any default. The alleged default that is the subject matter of the impugned proceedings occurred consequent to an amendment of the Act by which the contribution payable was enhanced from 10% to 12%. The petitioner had already remitted the contribution payable, worked out at the rate of 10%. However, upon coming into force of the amendment, contributions at the enhanced rate became due, which had to be worked out at 2%, being the enhancement effected. The case of the petitioner is that the fact that the rates had been enhanced by amendment was brought to the notice of the petitioner only by Ext.P1 communication dated 17-11-2000. Shortly thereafter, on 29-11-2000, as per Ext.P2 the difference in contribution payable has also been remitted by the petitioner. It is not in dispute that the petitioner has also paid interest on the amount of difference in contribution that was payable as stated above, consequent to the amendment. However, the grievance of the petitioner is regarding the amount imposed as WPC No.12909/2010 6 damages on him over and above the interest. Therefore, the only question to be considered is whether the impugned action of the respondents in imposing damages on the petitioner under Section 14B of the Act is sustainable or not. 10. The amount of damages has been imposed by Ext.P3 proceedings of the first respondent. The reason for imposing damages according to the first respondent is, non-compliance of the statutory requirements of the welfare legislation. Therefore, the first respondent has proceeded on the assumption that non- compliance of the statutory requirements of the welfare legislation 'attracts damages by way of penalty under Section 14B'. The above understanding of the law is erroneous as evident from the precedents on the point. The appeal Ext.P4 has been dismissed by Ext.P5 holding that the petitioner's contention that he was not aware of the amendment effected was not acceptable since ignorance of law is not an excuse. 11. Section 14B of the Act no doubt confers power on the authority to impose damages, where the employer commits default in payment of the contribution. The question as to whether an employer has committed default in payment of the contribution due would depend on the facts of each case. Factors like the previous WPC No.12909/2010 7 conduct of the employer in remitting contribution, the reason for the delay in making payments and various other relevant factors would have to be considered before the authority can take a decision to impose damages. The word 'default' presupposes the existence of a mental element on the part of the employer influencing his conduct in not paying the contributions due or delaying the same. The above factors would have to be taken into consideration by the authority deciding to impose damages. 12. While considering an identical question a Single Bench of this Court has in Cannanore Shop v. Regional P.F.Commissioner {1992(2) KLT 95}, held as follows:- “Under S.14B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, penalty can be imposed. The authority has to consider relevant facts. Whether the employer is in the habit of making payment regularly, nature, number and frequency of the defaults, the period of the delay involved, the amounts involved and all other consideration have to be taken into account. The authority is required to apply its mind on the facts and circumstances of the case.” 13. While considering a similar issue another Single Bench of this Court has also taken a similar view in the decision in Indian Telephone Industries Ltd. v. Asst. P.F.Commissioner {2006(3) KLJ WPC No.12909/2010 8 698}. According to the above decision, in order to justify imposition of damages on an employer the employer should have acted deliberately in defiance of the law or should have been guilty of contumacious conduct, dishonesty or should have acted in conscious disregard to its obligation. The Single Bench has cautioned that penalty is not to be imposed merely because it is lawful to do so. The discretion conferred on the authority has to be exercised judicially, on a consideration of all the relevant circumstances. 14. As already noticed above, in the present case the damages as per Ext.P3 has been imposed without considering or taking into account any of the above parameters laid down by this Court. The first respondent has mechanically imposed the damages without taking into account the fact that the petitioner was an employee who was regularly remitting the contributions. It is not in dispute that, for the relevant period also he had remitted contributions at the pre-enhancement rates and that the difference in contribution that was demanded had become due consequent to an amendment which was effected in March 1998. Immediately on the fact being brought to the notice of the petitioner, the difference in contribution was also remitted as per Ext.P2. The petitioner has WPC No.12909/2010 9 also remitted interest on the delayed contribution under Section 7Q of the Act. In the above circumstances there was no justification for the imposition of damages on the petitioner, as per Ext.P3. The appellate tribunal has also failed to advert to or to consider any of the relevant factors. 15. For the above reasons, Exts.P3 and P5 are held to be unsustainable. In the result this writ petition is allowed, the impugned proceedings Exts.P3 and P5 are set aside. Sd/- K. SURENDRA MOHAN Judge jj /True copy/ P.S.to Judge WPC No.12909/2010 10