Arcot Textile Mills Ltd vs Reg. Provident Fund Commissioner & Ors

3. The facts giving rise to the present appeal, bereft of unnecessary details, are that the appellant-company has a textile factory at Kallakurichi and it was established in the year 1964 and with passage of time it took steps for modernization but it suffered a setback in the year 1997 due to slump in the cotton industry affecting the industrial base in South India. The financial constraints compelled the company to make a reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and the BIFR by order dated 4.5.1999 declared the appellant-company as a sick industrial company and appointed Industrial Development Bank of India (IDBI) as the Operating Agency. Because of the prevalent situation, the appellant-company defaulted in making contributions towards the Provident Fund and delay occurred in remitting the dues under the Act. On 3.10.2007, the appellant had paid a sum of Rs.83,01,037.80 (Rupees eighty three lacs one thousand thirty seven and eighty paise) being arrears of the Provident Fund contribution to the Regional Provident Fund Commissioner, the 1st respondent herein. A letter was also sent by the company stating that the appellant-company had become a sick industry and a scheme for rehabilitation of the company had been submitted to the BIFR and the same was pending consideration. On 23.10.2007, the Assistant provident Fund Commissioner, Trichy, the second respondent herein, issued a demand requiring the appellant to deposit a sum of Rs.94,27,334/- towards interest under Section 7Q of the Act for belated remittances. On receipt of the said letter the appellant replied that the report stated to have been annexed with the calculation had not been sent along with the notice and the same may be provided to it to reconcile the accounts. In the meantime, certain proceedings went on before the BIFR and, eventually, a joint meeting was held between the Operating Agency, the company and the employees of the establishment and it was agreed that the amount due towards the Provident Fund shall be paid in a phased manner. On 3.3.2008, an order came to be passed under Section 8F of the Act demanding the amount of interest and an order was passed by the Assistant Provident Fund Commissioner taking certain coercive measures to realize the amount.

4. Being grieved by the aforesaid action the appellant approached the High Court in WP No. 7046 of 2008. The learned single Judge, by order dated 25.3.2008, granted an interim stay subject to the appellant’s depositing 25% of the interest amount within 10 days and in pursuance of the said order the appellant deposited Rs.34,00,000/- before the Competent Authority under the Act. When the writ petition came up for hearing on 21.4.2011, the learned single Judge came to hold that it was appropriate to approach the tribunal under Section 7I of the Act and, accordingly, dismissed the writ petition.

5. The said order of the learned single Judge was assailed before the Division Bench which concurred with the view expressed by the learned single Judge opining that the order impugned charging interest on the belated payment of Provident Fund is appealable and, accordingly, granted liberty to the appellant to move the appellate authority. The said order is the subject-matter of challenge in this appeal by special leave.

19. Coming to the case at hand, it is evident that the appellant had sent a communication dated 3.10.2007 to the Regional Provident Fund Commissioner submitting that that establishment could not pay the provision fund dues from 1998 due to financial crisis, etc. and it was remitting Rs.83,01,037.80 (Rupees eighty three lacs one thousand thirty seven and eighty paise only) from 1998 to April 2006. Under these circumstances, there was no adjudication with regard to liability as the appellant company had accepted the fault on its own. As it appears the respondent does not have any cavil with regard to the dues payable towards the provident fund by the appellant to the company. What is disputed is that the third respondent issued a demand notice on 23.10.2007 requiring the appellant to remit a sum of Rs.94,27,334/- towards interest under Section 7Q of the Act for the belated remittances made from December 1998 to April 2006. The letter stated a computation sheet was attached to said demand notice which was rebutted by the petitioner by sending a communication stating that it was not sent and it may be provided so that they may reconcile the accounts. The demand notice manifestly has been issued in exercise of power under Section 7Q of the Act and is an independent action and against such an order or issue of demand no appeal could have been filed. Therefore, the conclusion of the learned Single Judge as well as by the Division Bench on the said score is not sustainable.

28. Regard being had to the discussions made and the law stated in the field, we are of the considered opinion that natural justice has many facets. Sometimes, the said doctrine applied in a broad way, sometimes in a limited or narrow manner. Therefore, there has to be a limited enquiry only to the realm of computation which is statutorily provided regard being had to the range of delay. Beyond that nothing is permissible. We are disposed to think so, for when an independent order is passed making a demand, the employer cannot be totally remediless and would have no right even to file an objection pertaining to computation. Hence, we hold that an objection can be filed challenging the computation in a limited spectrum which shall be dealt with in a summary manner by the Competent Authority.

29. In the present case, it is manifest from the record that the appellant had already deposited a sum of Rs.34,00,000/- before the Competent Authority and sought for supply of the calculation sheet the basis on which the computation had been made so that it could reconcile the accounts. We think it appropriate to direct that the computation sheets shall be provided to the appellant within three weeks and it shall file its objection within two weeks therefrom and thereafter the Competent Authority shall fix a date for reconciliation of the accounts. However, regard being had to the fact that the Act is a piece of social welfare legislation, we direct the appellant to deposit a further sum of Rs.16,00,000/- within a period of four weeks from today. If the amount is not deposited within the time stipulated hereinabove, the entire amount would be leviable and the right to file objection shall stand extinguished.

30. Consequently, the appeal is allowed to the aforesaid extent and the judgment and order passed by the Division Bench and that of the learned single Judge of the High Court are set aside. In the facts and circumstances of the case, there shall be no order as to costs.

October 18, 2013.