BHATTAR SOLVENT V. A.P.FUND COMMNR.

WP(C)/4835/2004

AI Insights

The case revolves around M/s. Bhatter Solvent Extraction Udyog Ltd., which sought to quash an order imposing damages for delayed payments of provident fund contributions under Section 14-B of the Employees' Provident Fund and Miscellaneous Provision Act, 1952. The petitioner argued that the order was made without application of mind and that the imposition of interest was illegal. The court, however, found that the authority had properly considered the circumstances, including the admission of delay by the petitioner, and had followed the legal provisions correctly. The court also addressed the issue of the availability of an alternative remedy through an appeal, deciding to proceed on merits due to the long pendency of the case.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 726132 (HC-CUTTACK)
• Appeal Type: Others
• Pronouncement Date: 29-03-2016
• Assessment Year: misc
• Other Referred Cases: Hirday Narain vrs. Income-tax Officer, Bareilly, Durga Enterprises (P) Ltd. and another vrs. Principal Secretary, Government of U.P. and others, Hindustan Times Ltd. Vrs. Union of India and Others, Gandhidham Spinning & Mfg. Co. Ltd, vs. Regional Provident Fund Commissioner & Another, S.T.G.. P&D Mill Prakriya vs. Regional Provident Fund Commissioner, Bombay, M/s Super Processors vs. Union of India & another, M/s Sushma Fabrics Pvt. Ltd, vs. Union of India & another
• Laws Referred To: Employees' Provident Fund and Miscellaneous Provision Act, 1952, Industrial Dispute Act, 1947, Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P K PARHI; G MOHANTY
• Assessee Lawyers: SOMANATH MISHRA; G TRIPATHY
• Keywords: Alternative remedy; Application of mind; Damages; Interest; Provident fund
• Section: 14(b); 7(I); 7-Q; 25-FFA

Judgement Text

" ORISSA HIGH COURT : CUTTACK. W.P.(C) No.4835 of 2004 In the matter of an application under Articles 226 & 227 of the Constitution of India. -------------- M/s. Bhatter Solvent Extraction Udyog Ltd. ……… Petitioner. -Versus- Assistant Provident Fund Commissioner. ……… Opp. Party. For Petitioner : M/s. Somanath Mishra and G.Tripathy. For Opp. Party : M/s.P. K. Parhi & G. Mohanty PRESENT : THE HONOURABLE SHRI JUSTICE S.N. PRASAD ---------------------------------------------------------------------------- Date of hearing and Judgment :- 29.03.2016 ---------------------------------------------------------------------------- S. N. Prasad, J. The petitioner has approached this court for quashing Anexure-4 which is an order passed by the authority u/s.14-B of the Employees‟ Provident Fund and Miscellaneous Provision Act, 1952. 2. The brief facts of the case of the petitioner is that the petitioner being registered under the Companies Act, 1956 covered under the purview of Employees‟ Provident Fund and Miscellaneous Provision Act, 1952 (hereinafter referred to as „The Act, 1952), paid the contribution regularly but due to the ill health of the Director who is the owner of the factory, some delay has been caused in 2 making payment of the EPF dues for the period from 3/89 to 2/93. The company was closed down w.e.f. 20.01.1996 after giving notice to the appropriate Government as required u/s.25-FFA of the Industrial Dispute Act, 1947. The petitioner has paid the EPF dues for the period 1990-91 till the date of closure, however there was some delay in making the payment. The opposite party issued a notice on 01.10.2003 U/s.14-B of the Act, 1952 for imposing damage for the period from 12/90 and 2/96. In pursuance to the said notice the representative of the petitioner – establishment had appeared and opportunity of personal hearing was given. But according to the petitioner the authority without appreciating the difficulties, which the petitioner was facing, has passed an order U/s.14-B of the Act, 1952 which was communicated vide letter dtd.12.04.2004 which is impugned in this writ petition on the ground that the order is without application of mind and the authorities have passed the order without appreciating the fact that the petitioner – establishment has already been closed since 1996. The other ground taken by the petitioner is that the direction of opposite party to pay interest @ 12% per annum over and above the damages is also illegal. 3. The opposite party put his appearance and filed detailed counter affidavit, inter alia therein it has been stated that the order was passed for belated remittance of dues during the period from 3/91, 5/91, 6/91, 2/92, 4/96, 5/94, 6/94, 12/94 to 2/96. It has been stated that the petitioner has admitted the delay in payment of statutory dues. In view of such statement it has been contended that the writ petition is devoid of any merit. 4. Heard the learned counsels for the parties and perused the documents on record. 3 Since the learned counsel representing opposite party has raised the question regarding maintainability of the writ petition on the ground of availability of alternative remedy of appeal as provided U/s.7-I of the Act, 1952, hence before going further it would be necessary to adjudicate this issue. 5. There is no denial about the fact that there is provision of appeal as provided under Section 7-I of the Act 1952 which is being reproduced herein below:- “7-I. Appeals to Tribunal – (1) Any person aggrieved by a notification issued by the Central Government, or an order passed by the Central Government or any authority, under the proviso to sub-section (3), or sub- section (4) of Section 1, or Section 3, or sub-section (1) of Section 7-A, or Section 7B or Section 7C, or section 14B, may prefer an appeal to a Tribunal against such notification or order. (2) Every appeal under sub-section (1) shall be filed in such form and manner, within such time and be accompanied by such fees, as may be prescribed.” 6. This writ petition has been filed on 20.04.2004, notice has been issued on 13.05.2004 with an interim order which is being reproduced herein below: ”Misc. Case no.4928 of 2004, order no.3 dtd.13.5.04 There shall be stay of operation of the demand of damages as at Annexure-4 subject to the petitioner depositing a sum of Rs.30,000/- (Rupees thirty thousand) in two equal installment, i.e. Rs.15,000/- by 31st of May, 2004 and the balance Rs.15,000/- by 15th of June, 2004.” 7. There is no denial in the settled proposition of law that if there is any alternative remedy of appeal available under the statute, the High Court sitting under Article 226 of the Constitution of India should not interfere since the same will amount to snatching of power of the appellate authority but 4 however, there is no straight jacket formula rather it is self- imposed restrictions. 8. This writ petition is pending since 20.04.2004 and as such about 12 years the matter is pending before this Court and if after lapse of about 12 years, this writ petition will be held to be not maintainable on the ground of availability of alternative remedy of appeal that too after notice being issued and in interim order has been passed, it would not be proper for this Court to do at this stage. In this regard reference may be made to the judgment of the Hon‟ble Supreme Court in the case of Hirday Narain vrs. Income-tax Officer, Bareilly reported in AIR 1971 SC 33 wherein their lordships has been pleased to hold which is being quoted herein below:- “we are unable to hold that because a revision application could have been moved for an order correcting the order of the Income-tax Officer under Section 35, but was not moved, the High Court would be justified in dismissing as not maintainable the petition, which was entertained and was heard on merit.” Further in the case of Durga Enterprises (P) Ltd. and another vrs. Principal Secretary, Government of U.P. and others reported in (2004) 13 SCC 665 wherein their lordships has been pleased to hold that the writ petition was pending for a long period of thirteen years and summarily dismissed on the ground that there is remedy of civil suit by the High Court and should not have dismissed without deciding the writ petition on merit. 9. This Court has passed an interim order to the effect that not to take any coercive steps and as such ratio laid down by the Hon‟ble Supreme Court as referred hereinabove is applicable with the facts and circumstances of this case, hence after the matter being pending for last 12 years with an interim order it 5 would not be proper for this Court in summarily rejecting the writ petition on the ground of availability of alternative remedy otherwise question of limitation will arise and also in order to avoid further litigation and most important consideration is that the legal claim of the beneficiaries is subjudice since last 12 years, hence it would be appropriate to decide the matter on merit. In view of this, instead of directing to seek alternative remedy of appeal before the Tribunal, the writ petition is being decided on merit. 10. So far as the case on merit is concerned, the petitioner has two-fold grounds. i.e.: (i) The order passed by the authority U/s.14-B is without any application of mind. (ii) The opposite party has directed to pay interest @ 12% per annum over and above the damages is illegal and arbitrary. 11. So far as the first ground is concerned it needs to refer the provision as contained in Sec.14-B of the Act, 1952 which is reproduced herein below:- “14.B. Power to recover damages.- Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of Section 15 of in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under Section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme.” 6 From perusal of the provision as contained in Sec.14-B of the Act it is evident that the provision has been made which includes punitive sum quantified according to the circumstances of the case. Levy of penal in shape of damage is perfectly within the area of implied powers as would be evident from the provision as contained in Sec.14-B of the Act. The provision has been made to give warning to employers in general not to commit a breach of the statutory rule but simultaneously it is also required that while passing an order the authority ought to have pass the order on the basis of cogent evidence and after providing opportunity of being heard to the party concerned and to pass a speaking order. From perusal of the order passed by the authority u/s.14-B which is impugned in this writ petition it is evident that after assessing the liability fixed U/s.7-A it transpires to the authority that the employer has delayed in depositing the amount and in view thereof a show cause notice was issued for initiation of proceeding U/s.14-B of the Act which was replied by the petitioner, an opportunity of personal hearing was also offered to him, the proceeding was fixed on several dates. The representative of the petitioner – establishment had appeared and admitted the delay with the submission that the establishment is not functioning at present, hence the authorities after hearing the establishment and admission on its part in causing delay in depositing the amount has come to a conscious finding that the establishment had delayed in payment of the statutory dues without any valid reason and as such the interest has been imposed strictly in consonance with the provision made in the Act, 1952. The other ground taken by the petitioner in this case is that the notice U/s.14-B was issued after thirteen years and after seven years of the closure of the establishment. 7 So far as this contention is concerned, the same is not sustainable in the light of judgment rendered by Hon‟ble Apex Court in case of Hindustan Times Ltd. Vrs. Union of India and Others, (1998) 2 SCC 242 wherein while dealing with the situation of delay in issuance of notice U/s.14-B their Lordships have been pleased to hold at paragraph 25, 26 and 29 as follows:- “25. The Gujarat High Court in Gandhidham Spinning & Mfg. Co. Ltd, vs. Regional Provident Fund Commissioner & Another [1987 Lab. I.C. 659 (Guj.)] (to which, one of us Majmudar, J. was a party), laid down a principle that 'prejudice' on account of delay could arise if it was proved that it was \"irretrievable\". There it was observed that for purposes of Sec.14-B, there is no period of limitation prescribed and that for any negligence on the part of the Department in taking proceedings the employees, who are third parties, cannot suffer. It was further observed: \"The only question that would really survive is the one whether on the facts and circumstances of a given case, the show cause notice issued after lapse of time can be said to be issued beyond reasonable time. The test whether lapse of time is reasonable or no will depend upon the further fact whether the employer in the meantime has changed his position to his detriment and is likely to be irretrievably prejudiced by the belated issuance of such a show cause notice.\" It was also stated that such a defence of irretrievable prejudice on account of delay, was to be pleaded and proved in the reply to the show cause notice. We may add that if such a plea is rejected by the department, it cannot be raised in the High Court unless specifically pleaded. The above principle of prejudice laid down by Gujarat High Court in Gandhidham Spinning & Mfg. Co. Ltd. (Guj.) has been followed by the Bombay High Court in S.T.G.. P&D Mill Prakriya vs. Regional Provident Fund Commissioner, Bombay [1996 (72) FLR 823 (Bom.)]; M/s Super Processors vs. Union of India & another [1992 Lab. I.C.808 (Bom.)]. 26. A different aspect of prejudice was referred to in M/s Sushma Fabrics Pvt. Ltd, vs. Union of India & another [1991 Lab. I.C.1946 (Bom.)] by a learned Single Judge of the Bombay High Court. It was stated that in some cases there could be serious prejudice on account of abnormal delay in taking proceedings under section 14B, either because the records or accounts of the defaulter are lost or on account of the concerned personnel acquainted with the facts of a by-gone period no 8 longer being available for unearthing the facts. But such pleas must be raised before the department and strictly proved. In case such facts are proved it is possible in some cases that there is irretrievable prejudice. 29. From the aforesaid decisions, the following principles can be summarised: The authority under Section14-B has to apply his mind to the facts of the case and the reply to the show cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard; the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on pleas of power cut, financial problems relating to other indebtedness or the delay in realisations of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no period of limitation prescribed by the legislature for initiating action for recovery of damages under section 14B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under section 14B would be taken; mere delay in initiating action under section 14B cannot amount to prejudice inasmuch as the delay on the part of the department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action under section 14B, he had changed his position to his detriment to such an extent that if the recovery is made after a large number of years, the prejudice to him is of an \"irretrievable\" nature: he might also claim prejudice upon proof of loss of all the relevant records and/or non-availability of the personnel who were, several years back in charge of these payments and provided he further establishes that there is no other way he can reconstruct the record or produce evidence; or there are other similar grounds which could lead to \"irretrievable\" prejudice; further, in such cases of \"irretrievable\" prejudice, the defaulter must take the necessary pleas in defence in the reply to the show cause notice and must satisfy the concerned authority with acceptable material; if those pleas are rejected, he cannot raise them in the High Court unless there is a clear pleading in the writ petition to that effect.” In the present case no doubt there is delay of thirteen years in initiating action and the damages are levied because of 9 delay in release of the amount but no plea of any irretrievable prejudice either in the reply to the show cause or in the writ petition has been taken and as such applying the ratio laid down by the Hon‟ble Apex court in the case referred herein above the contention raised by the petitioner in this respect is not sustainable. After going through the order it is evident that the authorities have applied their mind and the process has been followed for providing adequate and sufficient opportunity of being heard and in the proceeding the default has been admitted by the petitioner establishment, hence it cannot be said as has been argued by the learned counsel for the petitioner that the order passed by the authorities U/s.14-B is without any application of mind. 12. So far as the second ground is concerned, it needs to refer the provision as contained in Sec.7-Q of the Act for appreciating the argument advanced on behalf of the petitioner since it has been submitted by the petitioner that the authority while imposing damage U/s.14-B has exceeded its jurisdiction when there is a separate order of interest having been passed U/s.7Q of the Act, 1952. For appreciating this argument the provision of Sec.7-Q needs to be referred which is being reproduced herein below:- “[7Q. Interest payable by the employer.—The employer shall be liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment: Provided that higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank.]” 10 Merely because the interest has been inflicted upon the establishment in exercise of power conferred U/s.7-Q upon the authority, it cannot be said that the power conferred U/s.14- B cannot be resorted to. The provision as contained U/s.7Q which has been inserted with the statute w.e.f. 01.07.1997 conferring power upon the Regional Provident Fund Commissioner to impose interest on the petitioner from the date when the amount is leviable upon the establishment while Sec.14-B provides power upon the authorities to penalize a defaulting employer as also to provide reparation for the amount of loss suffered by the employee, thus it is not only a warning to employers in general not to commit breach of the statutory requirements of Sec.6, but at the same time, it is meant to provide compensation or redress to the beneficiaries for the loss sustained by them. While sec.14-B comes into play by imposition of damages for default in payment of contribution, Sec.7-Q comes into play when an employer does not deposit any amount due from him under the Act from the date when the said amount became due and payable till the date of its actual payment. Thus both the sections operate in different fields and the areas of their operation do not overlap. In view of this situation the submission made on behalf of learned counsel for the petitioner in this regard is not fit to be acceptable. Since the Act 1952 is a beneficial legislation which was passed with an object of making some provisions for the future of the industrial worker after his retirement or for his dependents in the case of his early death. The Parliamentarian, after considering various financial and administrative difficulties in old and survival pension‟s schemes and gratuity schemes, agreed to introduce the institution of contributory fund schemes in which, both the worker and the employer would contribute. Provident fund 11 scheme was considered as a means to encourage the stabilization of a steady labour force in industrial centre. The Parliamentarians were well aware of the fact that with industrial growth, although, the big employers had introduced the scheme of provident fund for the welfare of their workers, but all these schemes until then were private and voluntary and the workers of the small employers remain deprived of the benefits which were provided by big employers with an object to provide for compulsory establishment of provident fund by every employer in the industrial concerns for the betterment of the employee, the EPF Act was enacted. Considering the intention of the statute and also taking into consideration the pleading and the reasoning given in the impugned order and for the reasons aforesaid, in my considered vide, there is no merit in this writ petition. Accordingly, the case is dismissed. ……………………….. S.N. Prasad, J. Orissa High Court, Cuttack. Dated the 29th March, 2016/MKP "