IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN WEDNESDAY, THE 9TH JUNE 2010 / 19TH JYAISTHA 1932 WP(C).No. 12399 of 2010(Y) -------------------------- PETITIONER: --------------- THE QUILON AUTOMOBILE EMPLOYEES CO-OPERTIVE SOCIETY LIMITED, NO.Q-797, REPRESENTED BY ITS SECRETARY, KADAMBANAD, PATHANAMTHITTA DISTRICT. BY ADV. SRI.V.CHITAMBARESH, SENIOR ADVOCATE SRI.T.C.SURESH MENON SRI.JIBU P THOMAS SRI.P.S.APPU SRI.A.R.NIMOD SRI.C.A.ANOOP RESPONDENTS: --------------- 1. THE EMPLOYEES PROVIDENT FUND ORGANISATION, REPRESENTED BY ITS CENTRAL PROVIDENT FUND COMMISSIONER, BHAVISHYANIDHI BHAVAN PATTOM, THIRUVANANTHAPURAM. 2. THE ASSITANT PROVEDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANISATION, BHAVISHYANIDHI BHAVAN, PATTOM, THIRUVANANTHAPURAM. ADV. SRI.N.N.SUGUNAPALAN, SENIOR ADVOCATE FOR R1 & 2 SMT.T.N.GIRIJA, SC,EPF ORGANISATION FOR R1 & 2 THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 09/06/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.SURENDRA MOHAN, J. --------------------------- W.P.(C) No. 12399 OF 2010 -------------------------- Dated this the 9th day of June, 2010 J U D G M E N T The petitioner is the Quilon Automobile Employees Co- operative Society Ltd., a Co-operative Society registered under the provisions of the Kerala Co-operative Societies Act, 1969. The petitioner is a society of drivers, mechanics and conductors, who have joined together to conduct a bus service. The society had 19 buses earlier but is running at a loss at present. According to the petitioner, because of financial stringency, the contributions payable under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act' for short) could not be remitted in time. The second respondent thereupon initiated proceedings under Section 7Q and Section 14B of the Act. Thereafter, Ext.P1 statement has been served on the petitioner demanding an amount of Rs.7,07,714/- as interest under Section 7Q and an amount of Rs.12,34,892/- as damages under Section 14B of the Act. 2. The petitioner, thereupon, approached the first respondent seeking waiver of the damages under the second proviso to Section WPC No.12399/2010 2 14B of the Act. However, the petitioner complaints that no orders have been passed on Ext.P2 till date. 3. The counsel for respondents 1 and 2 has filed a statement pointing out that in continuation of Ext.P1, Annexure R1 order has also been passed levying damages on the petitioner. According to the counsel for the petitioner, Annexure R1 order has been passed without hearing the petitioner and no copy of the order was served on the petitioner at any point of time. The above fact is disputed by the counsel for respondents 1 and 2. 4. It is also pointed out by the counsel for the petitioner that the petitioner being a Co-operative Society of workers, the establishment itself is for the benefit of the workers. The contributions paid by both the petitioner as well as the employees enure to the benefit of one and the same class of persons, the workers. Therefore, this is a case where the differentiation between an employer and employee is absent. Since the society has been suffering heavy losses, the damages that are sought to be recovered are also borne by the workmen for whose benefit the Act itself has been brought into force. It is further submitted that the levy of such a huge amount of WPC No.12399/2010 3 Rs.12,34,892/- as damages and interest to the tune of Rs.7,07,714/- that is charged, would fasten a liability of about Rs.20,00,000/- on the petitioner society which would certainly end in its liquidation. It is pointed out that such a situation would also adversely effect the workers. Therefore, the above aspect was an important factor that should have been taken into account by the authority while exercising the discretion under Section 14B of the Act. 5. The counsel for the petitioner relies on the decision of this Court in Puthiyara Tile Works v. Union of India [2003 (3) KLT S.N. 74 (Case No.101)]. In the said decision, while considering the scope of the power conferred by Section 14B of the Act, A.K.Basheer,J. has held as follows: “”The words “may recover” occurring in S.14B will clearly show that the authority under the Act is vested with the discretion to decide whether damages are liable to be recovered from the defaulter, and if so to what extent. Penalty would not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial reach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Though the quantum of damages that can be levied has been indicated in the statute, the question as to whether any recovery of damages has to be made by way of penalty is entirely at the discretion of the WPC No.12399/2010 4 authority which proposes to impose such a penalty. The said discretionary power vested in the authority has to be exercised in a fair, reasonable and just manner. If the authority which is vested with the discretionary power as indicated in S.14B does not act with an open mind, the entire adjudicatory process will lose its authenticity and judicial approval. Though this Court in exercise of its discretionary jurisdiction under Art.226 of the Constitution of India will not go into the question of the quantum of damages proposed to be recovered from the petitioner in terms of the statutory mandate, the decision making process, especially with reference to the exercise of the discretionary power vested with the authority which takes such a decision, can always be subjected to judicial scrutiny.” 6. While exercising the discretion under Section 14B, all relevant factors that mitigate the liability would have to be considered by the authority. The award of damages cannot be undertaken as a mechanical process to be adopted in all cases. Depending on the facts of each case, the authority is vested with the discretion to decide whether or not to levy the damages. The quantum of the damages to be levied would also have to be determined depending on the facts and circumstances of each case. If the exercise of discretion is not in accordance with the above principles, certainly the matter can be subjected to judicial scrutiny in exercise of the jurisdiction under Article 226 of the Constitution of India. 7. In the present case, Ext.P1 statement does not disclose any reasons. Annexure R1 order also does not show that the exercise of WPC No.12399/2010 5 discretion was just, fair and reasonable. Therefore, Annexure R1 order cannot be said to be issued pursuant to a proper exercise of the discretion under Section 14B of the Act. Since Annexure R1 is a continuation of Ext.P1, the same can only be construed as part of and supporting Ext.P1 order. In that view of the matter, though the petitioner has not specifically sought for quashing Annexure R1, which according to him was not served on him at all, both Ext.P1 and Annexure R1 are liable to be set aside. This writ petition is accordingly allowed. Ext.P1 and Annexure R1 order are set aside. It is made clear that this judgment does not preclude the respondents from passing fresh orders, if necessary, in the light of the above principles. K.SURENDRA MOHAN (JUDGE ) vps WPC No.12399/2010 6 WPC No.12399/2010 7