Eastern Power Distribution Company of Andhra Pradesh Limited, rep. by the Accounts Officer V. Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Visakhapatnam and another

WP/11405/2011

AI Insights

The case involves the Eastern Power Distribution Company of Andhra Pradesh Limited (petitioner) challenging the orders of the Assistant Provident Fund Commissioner (respondent) regarding penalties and interest for delayed contributions to the Employees Provident Fund (EPF). The petitioner argued that the interest rate applied was incorrect and that both the employer and employee should be liable for the penalties and interest. However, the court upheld the respondent's decision, confirming that the interest was correctly calculated at 12% per annum and that only the employer is liable for the penalties and interest under the EPF Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 799311 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 14-02-2023
• Assessment Year: misc
• Other Referred Cases: AIR 1970 SC 253, (2007) 6 ScC 329, (2008) 3 SCC 35, (2014) 15 SCC 263, (2017) 3 SCC 110, (2008) 13 SCC 369
• Laws Referred To: Employees Provident Fund and Miscellaneous Provisions Act, 1952
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: P REDDY
• Assessee Lawyers: METTA RAO
• Keywords: Damages; Employer Liability; EPF Act; Interest; Penalty
• Section: 14B; 7Q

Judgement Text

"HIGH COURT OF ANDHRA PRADESH * * * * WRIT PETITION No.11405 OF 2011 Between: Eastern Power Distribution Company of Andhra Pradesh Limited, rep. by the Accounts Officer .....PETITIONER AND Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Visakhapatnam and another. .....RESPONDENTS DATE OF JUDGMENT PRONOUNCED: 14.02.2023 SUBMITTED FOR APPROVAL: THE HON'BLE SRI JUSTICE RAVI NATH TILHARI 1. Whether Reporters of Local newspapers may be allowed to see the Judgments? Yes/No 2. Whether the copies of judgment may be marked to Law Reporters/Journals Yes/No 3. Whether Your Lordships wish to see the fair copy of the Judgment? Yes/No _________________________ RAVI NATH TILHARI, J 2 * THE HON'BLE SRI JUSTICE RAVI NATH TILHARI + WRIT PETITION No.11405 OF 2011 %14.02.2023 # Eastern Power Distribution Company of Andhra Pradesh Limited, rep. by the Accounts Officer ….Petitioner Versus $ Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Visakhapatnam and another. …..Respondents ! Counsel for the Petitioners: Sri Metta Chandra Sekhar Rao ^ Counsel for 1st respondent: ---- ^ Counsel for 2nd respondent: Sri P. Rama Bhoopal Reddy < Gist : > Head Note: ? Cases Referred: 1. AIR 1970 SC 253 2. (2007) 6 ScC 329 3. (2008) 3 SCC 35 4. (2014) 15 SCC 263 5. (2017) 3 SCC 110 16. (2008) 13 SCC 369 3 THE HON’BLE SRI JUSTICE RAVI NATH TILHARI WRIT PETITION No.11405 OF 2011 JUDGMENT: Heard Sri Metta Chandra Sekhara Rao, learned counsel for the petitioner and Sri P.Rama Bhoopal Reddy, learned Standing Counsel for the respondent Nos. 1 and 2. 2. This writ petition under Article 226 of the Constitution of India has been filed by the „Eastern Power Distribution Company of Andhra Pradesh Limited, represented by the Divisional Electrical Engineer (Operation)‟ in short APEPDC Limited, for the following reliefs: “This Hon‟ble Court may be pleased to issue an appropriate Writ order or direction more particularly one in the nature of WRIT OF CERTIORARI and call for the records relating to and connected with orders of the Hon‟ble Employees Provident Fund Appellate Tribunal dated 08.03.2011 passed in ATA No.303(1) of 2009 and proceedings A.P /VP/PD Cell/ VSP/ CC51/ AP/ 45010/2009/3084 dated 13.02.2009 of the 1st Respondent and quash or set aside the same as illegal arbitrary without jurisdiction and competence and pass appropriate orders”. 3. The petitioner A.P.E.P.D.C.L was formed in February, 1999 and came under the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (in short, “the EPF Act”) working in the company in the year 2003, with effect from February, 1999. As the company did not deposit its contribution from February, 1999 to January, 2007 in time and there was considerable delay, the 4 proceedings under Sections 7Q and 14-B of the EPF Act were initiated. After holding enquiry and affording the opportunity of hearing to the petitioner, the 1st respondent-Assistant P.F. Commissioner passed the order dated 13.02.2009. 4. The 1st respondent by the impugned order dated 13.02.2009 imposed damages by way of penalty for the total amount of Rs. 14,366/- + Rs. 79/- for the period for the months of 9/2006, 10/2006 and 01/2007 under Section 14B of the EPF Act. 5. The 1st respondent also determined that the petitioner shall have to pay interest @ 12% for the due period totaling to an amount of Rs.2,26,784/- under Section 7Q of the EPF Act. 6. The petitioner‟s appeal was dismissed by the 2nd respondent finding no infirmity in the order of the 1st respondent. 7. The applicability of the EPF Act to the petitioner establishment was not disputed before the appellate Tribunal nor that the establishment was covered with retrospective effect and the dues were deposited. The same has also not been questioned in the present writ petition. 8. Sri Metta Chandra Sekhar Rao, learned counsel for the petitioner raises the following arguments to challenge the impugned orders: (i) That the higher rate of interest i.e @ 37% has been applied whereas Section 7Q of EPF Act provides for a simple interest @ 12%; ii) The Employer and Employee both are liable for payment of interest and penalty but the entire liability has been fastened on the petitioner Employer only. 5 9. Sri P.Rama Bhoopal Reddy, learned standing counsel submits that the damages/penalty has been imposed as per Section 14B and the interest has been calculated as per Section 7Q of the EPF Act @ 12% and not @ 37%. He further submits that only the Employer is liable for penalty and interest. Consequently the impugned orders are perfectly legal and valid. 10. I have considered the submissions advanced by the learned counsels for the parties and perused the material on record. 11. The first submission of the learned counsel for the petitioner is that the authority has calculated interest @ 37%, where as Section 7Q of the EPF, Act provides for a simple interest @ 12% per annum. 12. The first point for consideration is as to what rate of interest has been applied and if it is contrary to Section 7Q of the EPF Act. 13. Section 7Q of the EPF Act provides as under:- “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.” 14. Section 7 Q of EPF Act, thus provides for the liability of payment of simple interest @ 12% per annum, or at such higher rate as may be specified in the scheme with the limitation that such higher rate of 6 interest shall not exceed the lending rate of interest charged by any scheduled bank. 15. It is not the case of any of the parties that some higher rate of interest i.e. higher than 12%, is specified in the scheme. 16. Learned Counsel for the petitioner referred to para 4 of the impugned order dated 13.02.2009 to contend that the interest @ 37% has been applied. 17. Para 4 of the impugned order dated 13.02.2009 reads as under: “4. NOW, THEREFORE, I.R.K. Kondru, Assistant Provident Fund Commissioner, in exercise of powers conferred on me by the notifications of the Government of India in the Ministry of Labour No.S.O.1553, dated 17.04.2002 issued under Section 14-B of the Act read with Para 32-A of the Employees‟ Provident Fund Scheme, 1952, Para-5 of the Employees‟ Pension Scheme, 1995 and Para 8- A of the Employees‟ Deposit Linked Insurance Scheme, 1976 hereby order to impose a total amount of Rs.14,366+Rs.79/- as damages for the period as discussed above payable by the establishment at the rates specified below. The amount of damages in respect of each account is furnished below: Period of delay Rate Less than 2 months 17% per annum 2 months to less than 4 months 22% per annum 4 months to less than 6 months 27% per annum More than 6 months 37% per annum (limited to amount of arrear) 7 18. It is evident that Para 4 of the order dated 13.02.2009 relates to the imposition of damages by way of penalty. It does not relate to the interest part. As per the table in para 4 supra, the damages are payable at the different specified rates considering the different period of delay. 19. Regarding interest, para 5 of the order dated 13.02.2009 is relevant. It reads as under : “The employer is also liable to pay an amount of Rs. 2,26,784/- towards interest under Section 7Q of the Act at the rate of 12% for the belated remittance of the dues for the period of notice……….” 20. From para 5, it is evident that the interest has been calculated @ 12% per annum and not @ 37%. 21. The calculation of the amount of interest has not been disputed by the petitioner. 22. The first submission of the learned counsel for the petitioner is without substance and fails. 23. On the point of interest, it is held that the interest has been calculated @ 12% as per Section 7Q of the EPF Act. 24. The next submission of the learned counsel for the petitioner is that the liability for the damages/penalty, and interest is of both, the employer and the employee, equally. 25. The second point for consideration is whether the Employer or Employee or both are liable for payment of damages and interest? 8 26. Section 14 B of the EPF Act reads as under:- “14B. Power to recover damages.—Where an employer makes default in the payment of any contribution to the Fund 3 [, the 2 [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 4[or sub-section (5) of section 17] or in the payment of any charges payable under any other provision of this Act or of 5[any Scheme or Insurance Scheme] or under any of the conditions specified under section 17, 6[the Central Provident Fund Commissioner or such other officer as may be authorized by the Central Government, by notification in the Official Gazette, in this behalf] may recover 7[from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme:] 8[Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:] 9[Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme]”. 27. A reading of Section 14B of the EPF Act makes it evident that the damages by way of penalty are to be recovered from the employer. Section 14B uses the expression „employer‟ and not the „employee‟. 28. Similarly, Section 7Q of EPF Act, reproduced above, also uses the expression „employer‟ only and not the „employee‟. 29. The submission of the learned Counsel for the petitioner that the employee should also have been made liable, is without substance. 30. On the second point, it is held that only the Employer is liable to pay penalty as also the interest. 9 31. Learned counsel for the petitioner, placed reliance upon the judgment of the Kerala High Court, in N.Sundararaajan Vs. The Employees Provident Fund (W.P.(C) No. 9993 of 2009 (T), to contend that the penalty will not be imposed merely because it is lawful to do so. He has referred to para 3 of the judgment in which the Kerala High Court referred to the judgment of the Hon‟ble Apex Court in Hindustan Steel Ltd. Vs. State of Orissa1 wherein it was held that: “Penalty will 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.” 32. It is not in dispute that there was failure on the part of the petitioner to perform its statutory obligation under the EPF Act in time. Further, this Court is satisfied that the penalty/damages have been imposed on consideration of the facts and circumstances of the case. The 1st respondent, has exercised the discretion vested in it, judicially, as is evident from reading of the judgment in particular the following paragraph: “According to the decision of the apex body of the E.P.F.O i.e. Central Board of Trustees in its 165th meeting held on 03.12.2003 which was communicated by the Head Quarter of EPFO, vide office letter No.Cii/Misc/inst./04/No.15921, dated 17.06.2004, the establishment is liable to remit the simple interest U/s.7Q @ 12% p.a for the period from 01.02.1999 to till the date of actual remittance of contributions i.e. 16.01.2004. 1 AIR 1970 SC 253 10 However, in the absence of E.P.F.Code No.the establishment is unable to remit the P.F contributions for the pre discovery period. Hence, the damages leviable for the period from 01.02.1999 to 06.12.2003 (the due date for remitting the past contributions after issue of coverage intimation) are waived as per the above said decision of Central Board of Trustees, EPFO. But the establishment has failed to remit the past contributions within fifteen days of issue of coverage intimation. Hence, the damages are leviable for the period from 07.12.2003 to till the date of remittance i.e. 16.01.2004. Since there is apparent delay on the part of the establishment to remit the past contributions within 15 days of issue of coverage intimation. For the subsequent period for the months of 9/2006, 10/2006 and 01/2007 the delay has been admitted. Hence, the damages are imposed accordingly. Para 32B of EPF Scheme, 1952, provides for waiver of damages under certain terms and conditions. The establishment does not fulfill the statutory conditions for waiver of damages wholly. Hence, I am unable to subscribe to the views of the establishment for waiver of damages.” 33. In Horticulture Experiment Station Gonikoppal, Coorg vs. The Regional Provident Fund Organisation Civil Appeal No(s).2136 of 2012, decided on 23.02.2022 upon which learned counsel for the respondents placed reliance, which is also a case of imposition of penalty on the Employer under Section 14-B of the EPF Act, the Hon‟ble Apex Court held that any default in the payment of EPF contribution by the Employer under the Act is a Sine Que non for imposition of levy of damages under Section 14-B of the EPF Act and mens reus is not an 11 essential element for imposing penalty/damages for breach of civil obligations/liabilities. 34. It is apt to refer paras 15 to 17 of Horticulture (supra) as under: 15. It may be noticed that Dilip N. Shroff V. Joint Commissioner of Income tax, Mumbai and another2on which reliance was placed has been overruled by this Court in Union of India and Others v. Dharmendra Textile Processors and others. For the aforesaid reasons, the view expressed by this Court in Employees State Insurance Corporation vs. HMT Ltd., and another3 may not be of binding precedent on the subject and of no assistance to the appellant(s). 16. Learned counsel for the appellant(s) further placed reliance on the judgment of this Court in Mcleod Russell India Ltd. Vs. Regional Provident Fund Commissioner, Jalpaiguri and others4 wherein the question emerged for consideration was as to whether the damages which has been charged under Section 14B of the Act 1952 would be recoverable jointly or severally from the erstwhile as well as the current managements. At the same time, the judgment relied upon in Assistant Provident Fund Commissioner, EPFO and Another vs. The Management of RSL Textiles India Private Limited through its Director5 was decided placing reliance on the judgment of this Court in Mcleod Russell India Ltd. (supra), which may not be of any assistance to the appellant(s). 17. Taking note of three-Judge Bench judgment of this Court in Union of India and Others v. Dharmendra Textile Processors and others6, which is indeed binding on us, we are of the 2 (2007) 6 ScC 329 3 (2008) 3 SCC 35 4 (2014) 15 SCC 263 5 (2017) 3 SCC 110 6 (2008) 13 SCC 369 12 considered view that any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for imposition of levy of damages under Section 14B of the Act 1952 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.” 35. This Court in the exercise of the writ jurisdiction under Article 226 of the Constitution of India, do not find any reason to interfere with the imposition of penalty which amount is also Rs.14,366+79/-. 36. In the result the writ petition is dismissed. No order as to costs. As a sequel thereto, miscellaneous petitions, if any pending, shall also stand closed. _________________________ RAVI NATH TILHARI, J Date:14.02.2023 Note: L.R copy to be marked. B/o. RMD 13 THE HON’BLE SRI JUSTICE RAVI NATH TILHARI WRIT PETITION No.11405 OF 2011 Date:14.02.2023 Rmd "