IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 25/10/2002
CORAM
THE HONOURABLE MR. JUSTICE P.K. MISRA
W.P.NO. 184 OF 1996
and
W.M.P.No. 275 OF 1996
M/s. Shanthi Garments Pvt. Ltd.,
Thanjavur 613 005. .. Petitioner
-Vs-
Regional Provident Fund
Commissioner Employees
Provident Fund Organisation,
Sub Regional Office,
P.B.No.588, Complex ‘D’ Block,
18, Madurai Road,
Tiruchirappalli 620 008. .. Respondent
Petition filed under Article 226 of the Constitution of India for the
issuance of Writ of Certiorari as stated therein.
For Petitioner : M/s. Gupta & Ravi
For Respondents : Mr.V. Vibhishanan
:J U D G M E N T
Petitioner is a private limited company incorporated under the
Companies Act, 1956 and engaged in the manufacture of hosiery items. The
petitioner furnished an investigation pro-forma dated 17.3.1989 to the
Enforcement Officer of the respondent seeking coverage under the Act. The
petitioner deposited the amount of contribution in a separate account in State
Bank of India and intimated the Enforcement Officer accordingly. However, the
Employer’s Code Number was not furnished. Subsequently the petitioner filed
W.P.No.10178 of 1991 seeking for a writ of mandamus directing the respondent
to furnish the code number. During pendency of the aforesaid writ petition, a
separate code number was furnished to the petitioner vide order dated
31.3.1993 and the petitioner was informed that the Act would be applicable to
the petitioner with effect from 31.1.1989. After allotment of code number,
the petitioner has been depositing the amount with the respondent in the
furnished code. However, the respondent issued show cause notice dated
9.10.1995 calling upon the petitioner to show cause as to why damages should
not be recovered under Section 14-B of the Act for the period from 1988-89 to
1994-95. The petitioner filed show cause mainly contending that the amount
was being deposited in a separate account in State Bank of India as code
number has not been furnished and there is no wilful default. The respondent,
however, under the impugned order has directed the petitioner to pay damages
totalling Rs.1 ,01,058/-. The aforesaid order is challenged in this writ
petition.
2. Learned counsel appearing for the petitioner has submitted
that since there was no wilful default on the part of the petitioner and since
code number had not been furnished in spite of repeated requests made, there
should not have been any direction regarding payment of damages, particularly
when the amount was being deposited by the petitioner in a separate account in
State Bank of India.
3. Learned counsel appearing for the respondent has submitted
that liability to pay contribution is the statutory liability and
nonfurnishing of code number is not an excuse and since the liability to pay
contribution is absolute, any default in making the payment within the
stipulated time would automatically attract the provisions of Section 14-B of
the Act.
4. In the decision of the Supreme Court reported in 1979(II)
LLJ 41 6 (ORGANO CHEMICAL INDUSTRIES AND ANOTHER v. UNION OF INDIA AND
OTHERS) while upholding the validity of Section 14-B of the Employees’
Provident Funds Act, 1952 it was observed as follows :-
“ . . . The expression “damages” occurring in Section 14B is, in
substance, a penalty imposed on the employer for the breach of the statutory
obligation. The object of imposition of penalty under Section 14B is not
merely “to provide compensation for the employees”. We are clearly of the
opinion that the imposition of damages under Section 14B serves both the
purposes. It is meant to penalise defaulting employer as also to provide
reparation for the amount of loss suffered by the employees. It is not only a
warning to employers in general not to commit a breach of the statutory
requirements of Section 6, but at the same time it is meant to provide
compensation or redress to the beneficiaries, i.e., to recompense the
employees for the loss sustained by them. There is nothing in the section to
show that the damages must bear relationship to the loss which is caused to
the beneficiaries under the Scheme. The word “damages” in Section 14B is
related to the word “default”. The words used in Section 14B are “ default in
the payment of contribution” and, therefore, the word “default” must be
construed in the light of Para 38 of the Scheme which provides that the
payment of contribution has got to be made by the 15th of the following month
and, therefore, the word “default” in Section 14 B must mean “failure in
performance” or “failure to act.” At the same time, the imposition of damages
under Section 14B is to provide reparation for the amount of loss suffered by
the employees.”
It was further observed :
“ . . . Nor can it be accepted that there are no guidelines
provided for fixing the quantum of damages. The power of the Regional
Provident Fund Commissioner to impose damages under Section 14B is a
quasi-judicial function. It must be exercised after notice to the defaulter
and after giving him a reasonable opportunity of being heard. The discretion
to award damages could be exercised within the limits fixed by the Statute.
Having regard to the punitive nature of the power exercisable under Section
14B and the consequences that ensure therefrom, an order under Section 14B
must be a “speaking order” containing the reasons in support of it. The
guidelines are provided in the Act and its various provisions, particularly in
the word “damages” the liability for which in Section 14B arises on the
“making of default”. While fixing the amount of damages, the Regional
Provident Fund Commissioner usually takes into consideration, as he has done
here, various factors, viz., the number of defaults, the period of delay, the
frequency of defaults and the amounts involved. The word “damages” in Section
14B lays down sufficient guidelines for him to levy damages.”
5. In 1998(2) S.C.C. 242 (HINDUSTAN TIMES LIMITED v. UNION
OF INDIAS AND OTHERS) the aforesaid view was reiterated.
6. In 1997(1) S.C.C. 241 (REGIONAL PROVIDENT FUND
COMMISSIONER v. S.D. COLLEGE, HOSHIARPUR AND OTHERS) it was observed :
“ . . . In other words, the Act envisages the imposition of damages
for delayed payments. The Act is a beneficial welfare legislation to ensure
health and other benefits to the employees. The employer under the Act is
under a statutory obligation to deduct the specified percentage of the
contribution from the employee’s salary and matching contribution, the entire
amount is required to be deposited in the fund within 15 days after the date
of the collection, every month.
Thereby the employer is under a statutory obligation to deposit the
amount to the credit of the fund every month. In the event of any default
committed in that behalf, Section 14-B steps in and calls upon the employer to
pay damages by way of penalty, the maximum of which is the accumulated
arrears. The Regional Provident Fund Commissioner is given discretion only to
reduce a percentage of damages and he has no power to waive penalty
altogether. . . .” (Emphasis added).
7. Keeping in view the ratio of these decisions, the validity
of the impugned order is to be examined. The contention of the learned
counsel for the petitioner to the effect that since there was no wilful
default on the part of the petitioner there should not have been a direction
regarding payment of damages, cannot be accepted in view of the observations
made by the Supreme Court in the last cited decision. The aforesaid decision
makes it clear that the authority has no discretion to waive the damages
altogether though it may reduce the amount possible.
9. Judged in the light of the above decisions, it is seen
that the respondent has not examined the matter in its proper perspective. It
is not disputed that the petitioner was all along willing to deposit the
contribution and was asking for supply of code number and since no code number
was furnished he was depositing the amount in a separate account in State Bank
of India. As observed by the Supreme Court, the appropriate authority has
discretion to quantify the amount of damages payable. Where the default is
wanton, the quantum of damages would obviously be higher, but where there is
no wilful default, the appropriate authority is to consider the question of
quantum in a different spirit.
9. As observed by the Supreme Court, the direction regarding
payment of damages is compensatory as well as penal in nature. Where there is
no wilful violation, quantum of damages should be more or less compensatory in
nature and where the default is continuous or intentional, damages payable in
addition to being compensatory would be penal as well. The delay in making
payments obviously should not prejudice the employees for whose benefit the
Fund is created. Where “ default” is found, but no apparent “fault”, the
quantum of damages should be compensatory rather than penal in nature.
10. Having regard to all these facts, I think interest of
justice would be served by modifying the quantum of damages payable and
directing that the extent of damages should be confined to the statutory
interest payable so that the employees would not be at loss. The respondent
is therefore directed to requantify the damages payable by confining the same
to the amount of interest payable. The petitioner should pay the revised
amount within a period of one month from the date of communication of such
fresh order.
12. The writ petition is accordingly allowed to the extent
indicated above. There would be no order as to costs. Consequently, W.M.P.
No.275 of 1996 is closed.
25-10-2002
Index : Yes
Internet : Yes
dpk
To
Regional Provident Fund
Commissioner Employees
Provident Fund Organisation,
Sub Regional Office,
P.B.No.588, Complex D Block,
18, Madurai Road,
Tiruchirappalli 620 008.