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SCA/15124/2010 22/ 22 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 15124 of 2010
To
SPECIAL
CIVIL APPLICATION No. 15134 of 2010
=========================================================
GUJARAT
ELECTRICITY BOARD (NOW GUJARAT ENERGY TRANSMISSION & 1 -
Petitioner(s)
Versus
ASSISTANT
PROVIDENT FUND COMMISSIONER & 1 - Respondent(s)
=========================================================
Appearance
:
MS
LILU K BHAYA for
Petitioner(s) : 1 - 2.
MR NIRAL R MEHTA for Respondent(s) : 1 -
2.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE H.K.RATHOD
Date
: 28/03/2011
ORAL
ORDER
Heard
learned Advocate Ms. Lilu K. Bhaya for petitioner and learned
Advocate Mr.Niral R. Mehta for respondent Assistant Provident Fund
Commissioner in each petition.
Rule.
Service of rule is waived by learned Advocate Mr.Niral R.Mehta on
behalf of respondent PF Authority in each petition. With consent of
both learned advocates, these petitions are taken up for final
hearing today.
In
this group of petitions, two orders are under challenge by
petitioner. One order is passed by Assistant PF Commissioner dated
30th June, 2004 under section 14-B of PF Act and second
order passed by Employees Provident Fund Appellate Tribunal, New
Delhi dated 14th July, 2010.
I
have considered submissions made by learned Advocate Ms.Bhaya for
petitioner and also considered submissions made by learned Advocate
Mr.Mehta for respondent in each petition. I have also perused both
orders, one passed by Assistant Provident Fund Commissioner dated
30th June, 2004 and another order passed by Appellate
Tribunal dated 14th July, 2010.
Brief
facts of present group of petitions as specified and narrated in
list of dates and events of Special Civil Application NO. 15124 of
2010, are quoted as under, just to giving back ground of matter:
LIST
OF DATES AND EVENTS
16.11.1995
The
Government of India introduced the Employees Pension Scheme, 1995
(EPS-95) w.e.f. November 16, 1995 in place of earlier FPS-71
Scheme. The said Scheme was published in the Gazette on November
16, 1995.
Dec.
95 to February, 1996
The
Regional Provident Fund Commissioner (RPFS) Vadodara intimated
GEB about the EPS-95 Scheme vide letter dated December 1, 1995.
The said pension Scheme introduced for the first time in the
country was very complex and it was necessary to understand the
Scheme before making any remittance thereunder. The RPFC Vadodara
intimated GEB on January 30, 1996 that an application could be
made for grant of exemption from EPS-95 Scheme by establishment.
A public notice dated January 25, 1996 was also issued on behalf
of Regional Provident Fund Commissioner (Exemption) Gujarat
State, inter alia, in Indian Express dated January, 28, 1996. By
the said notice, applications were invited from interested
establishments for grant of exemption from EPS-95 Scheme. The
last date for submission of exemption applications was February
15, 1996 The Board applied for grant of exemption from the
aforesaid EPS-95 Scheme under Section 17(1)(A) of the Act and
Paragraph 39 of the EPS-95 Scheme on February 08, 1996 to RPFS,
Vadodara.
Dec.2001
The
exemption application filed by the Board was duly recommended by
RPFC Vadodara, RPFC Ahmedabad and Central Provident Fund
Commissioner, New Delhi and was forwarded finally to the Ministry
of Labour, Government of India for its approval. The Ministry of
Labour, however, rejected Board exemption application in
December, 2001 without assigning any reason, that too after a gap
of 5 years and 9 months approximately.
30.6.2004/
6.7.2004
Respondent
No.1 passed order levying damages on the petitioners.
2004
Petitioners
preferred Appeal before the Employees Provident Fund Appellate
Tribunal, New Delhi.
14.7.2010
The
Employees Provident Fund Appellate Tribunal dismissed the said
appeal.
October,
2010
Hence
present petition on the grounds urged in the Memo of Petition.
Against
present petitions, affidavit in reply is filed by respondent NO.1
dated 9th February, 2011. Copy thereof has been served to
learned Advocate Ms. Lilu K. Bhaya for petitioner. Today, learned
Advocate Mr. Niral R. Mehta appearing for respondent has placed on
record affidavit of respondent in compliance of order passed by this
court dated 4th March, 2011. Copy thereof is served to
learned Advocate Ms. Bhaya for petitioner, therefore, same is taken
on record.
Controversy
between parties is whether powers which have been exercised by
Respondent Authority under Section 14B of PF Act have been properly
exercised with application of mind or not. For that, certain dates
are relevant which are as under.
Pension
Scheme is made applicable to all establishments with effect from
16th November, 1995. For claiming exemption,
advertisement has been issued by PF Authority on 25th
January, 1996 page 141, which is quoted as under:
”
NOTICE
Employees’
Pension Scheme, 1995 has come into operation from 16th
November, 1995. This Scheme is applicable to all the establishments
where Employees’ Provident Funds and Miscellaneous Provisions Act,
1952 applied. Paragraph 139 of the Employees’ Pension Scheme, 1995
provides for exemption
from the operation of this statutory scheme
to any establishments, class of establishments if the employees of
the said establishment are either members of any other pension
scheme or proose to be members of a pension scheme wherein
pensionary benefit are at par or more favourable than benefits
provided under the Statutory Scheme.
It
is, therefore, notified for information of all concerned that in
case any establishment covered under the Employees’ Provident Funds
and Miscellaneous Provisions Act, 1952,Gujarat Region proposes to
seek exemption from the operation of the Employees Pension Scheme,
1995, it may apply to
the office of the Regional Provident Fund Commissioner situated at
Ahmedabad, Baroda and Surat, as the case may be, on or before
15.02.1996.
Relaxation
will be granted to them upto 03.03.1996 before which they should
come up with their full scheme so arrange for obtaining formal
exemption.”
In
response to aforesaid advertisement issued by PF Authority,
application for exemption from pension scheme was made by petitioner
on 8th February, 1996 and that application was rejected
by PF Authority on 13th December, 2001 and copy of such
rejection was received by petitioner on 27th December,
2001. Thereafter, request was made by petitioner before PF Authority
to issue Certificate or to give permission to withdraw entire amount
from Special Deposit Scheme of State Bank of India, so it can be
deposited before PF Authority by petitioner. As per para 39 of
EPS-1995 Scheme, it is provided that pending disposal of Exemption
Application, employer’s share of contribution shall not be remitted
to Pension Fund. In view of same, petitioner did not remit Pension
Contribution to PF Authority asper provisions of Para 39 of EPS-1995
Scheme with effect from 16th November, 1995 anticipating
that petitioner’s application for exemption from EPS-1995 Scheme
would be granted by Government of India. However, during pendency of
its application for exemption, petitioner has invested requisite
amounts towards pension @ 8.33% from PF Contribution of employer
and deposited same in Board’s Employees PF Trust which in turn was
invested as per approval investment pattern prescribed by Government
of India in Special Deposit Scheme of State Bank of India along with
amount of Provident Fund. In view of that, petitioner establishment
has transferred pension contribution of trust in time and PF Trust
has in turn invested money as per prescribed investment pattern, in
Special Deposit Scheme of State Bank of India. In response to
application dated 11th January, 2002 made by petitioner
to PF Authority, PF Authority granted permission/certificate on 22nd
January, 2002 and thereafter, on 25th January, 2002,
entire amount has been deposited by Petitioner before PF Authority.
It is necessary to note that order dated 30th June, 2004
has been passed by PF Authority while exercising powers under
section 14B of Act, for that, page 21 to 24 are quoted as under:
“Annexure
A
21
Employees’
Provident Fund Organization
(Ministry
of Labour Government of India)
Sub
Regional Office
Panchayat
Nagar Chowk, University Road, Rajkot 360005
————————————————–
U/SRO/JT/920-E/DAMAGES
CELL/SO/1292/3476
Date
30.6.2004
6.7.04
by RPAD
Before
Assistance Provident Fund Commissioner
In
the matter proceedings u/s.14B of the Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952 against M/s. Gujarat Electricity
Board, Porbandar bearing PF Code No. GJ/920-G
ORDER
:
Whereas
M/s.Gujarat Electricity Board is at establishment exempted under
section 17 of the Employees’ Provident Fund and Miscellaneous
Provisions Act, 1952 bearing Code No. LGJ/320-E
Whereas
M/s. Gujarat Electricity Board was duty bound to remit Employees’
Pension Contribution within 15 days of be of the month, Gujarat
Electricity Board was delayed the payment of pension contribution
for the period 11/1995 to 2001.
A
notice under section 14B of the Act was issued vide No.GJ/RAJ/Circle
E.88/GJ/920/E/CA/2326/10930 dated 3.02.2004 and Summons were issued
under NO. GJ/920-E/CA/2371/11591 dated 4/3/2004, Shri P.H. Vyas I/C
SE and N. Doria appeared on behalf of the establishment on
19/03/2004 26/4/2004 and 12/05/2004 and finally on 12/05/2004.
Shri
Vyas filed his written submission dated 19/3/2004 mainly stating
that the GEB has applied for the exemption a accordance with the
provisions of section 17(1C) of the Act,EPS-1995. He further stated
that pending disposal of the application for exemption, the
contribution was not remitted to the pension fund. Hence GEB by law
was not to divert 8.33% contribution to the pension scheme as
required under para 39 of EPS 1995.
He
further submitted that after rejection of GEB’s exemption
application. GEB has become fully compliant as anon exempted
establishment has hence requested to drop the proceedings under
section 14B of the Act.
Accordingly,
I, DK Vyas, Assistant PF Commissioner, Gujarat State, Rajkot in
exercise of the powers conferres upon me under section 14-B of the
Employees’ Provident Fund and Miscellaneous Provisions Act, 1952,
after applying my mind to the facts presented before me, come to the
conclusion as under:
In
consonance with para 39 of the EPS-1995, the period between the date
of application of exemption and the date of disposal of application
of exemption, is not liable for damages. Hence the damages are not
levied for this period.
However,
the period from 16/11/1995 to 9/2/1996 i.e. the period between the
date of application of EPS-1995 and the date of submission of
application for exemption and 13/12/2001 to 25/01/2002 i.e.the
period between date of rejection of application and the actual date
of payment attracts liability for damages. The time allowed for
making payment i.e. one month initially and upto 31.12.2001 has not
been considered as delay.
I
feel that the ends of justice will meet if damages are levied as
follows:
Period
A/c. X Total
11/95
to 8.2.96
and
1.1.02 to
25.1.02
1,52,007 1,52,007
I
order accordingly it is further ordered that the amount of penal
damages amounting to Rs.1,26,435.00 be paid within 15 days of the
receipt of this order failing with action under section 8 of the Act
will be initiated.
Sd/-Illegible
(DK
Vyas)
Assistant
PF Commissioner
To
M/s.
Gujarat Electricity Board
Zone-II,
Rajkot.”
Similarly,
Employees’ Provident Fund Appellate Tribunal has passed order dated
14th July, 2010 page 82 to 85 which is quoted as under:
" ORDER Dated 14th July, 2010. Present
: Shri SK Gupta, Advocate for appellant.
Shri RR Rajesh, Advocate for respondent.
The
order passed by the PA Authority under section 14B of the Act
directing the appellant to deposit damage and interest is in
challenge in this appeal.
2. The
case of the appellant is that the appellant is an exempted
institution and having its own PF Trust. On 16.11.1995, the employees
Pension Scheme came into force and same was made applicable to the
applicant. The appellant applied for exemption on 8.2.1996 but
appellant’s application for exemption was rejected in the year 2002.
After taking permission, the appellant deposited the amount. So there
was no delay. Without considering the material on the record, the EPF
authority levied the penalty and interests and the order of the
authority is illegal one.
3. The
case of the respondent is that the scheme came into force on
16.11.1995, the appellant had not deposited the dues till he applied
for exemption. So the assessment and imposition of penalty and
interests is correct one.
4. It
is contended that as per para 39 of the Scheme, the appellant is not
liable to pay the contribution during the period when his application
for exemption was pending and no penalty and interests could have
been levied when the payment was made within one month of the
rejection of the application.
5. The
Ld. Advocate for the respondent supported the order.
6. It
is not disputed that Pension Scheme was made applicable to the
appellant and same came into force on 16.11.1995. As per para 39
while the application for exemption was pending, the appellant is not
bound to make the contribution and the contribution has to be made
within one month of the rejection of the application. In this case,
the appellant applied for exemption on 8.2.1996. So as per para 39 of
the Scheme, the appellant is not liable to pay the contribution after
he applied for the exemption. But the claim relates to the period in
between 16.11.1995 to 9.2.1996 i.e. the claim relates to before the
application for exemption was made. Admittedly, the appellant had not
deposited the dues. So, para 39 of the Scheme is of no help to the
appellant. As the claim relates to the period prior to the
application of exemption deposited. The appellant is liable to pay No
infirmity is noticed in the order of the authority.
7. Hence
ordered, the appeal is dismissed. Copy of order be sent to the
parties. File be consigned to record room.”
In
light of aforesaid two orders, damages has been levied by PF
Authority under section 14B of PF Act for period from November, 1995
to 8th February, 1996 and 1st January, 2002 to
25th January, 2002. Total amount has been declared as
damages to be paid by petitioner within fifteen days from receipt of
order passed under section 14B of PF Act. Total amount of damages
levied comes to Rs.12,38,496 which has been specified in respect to
each circle as under as per page 38:
Sr.No.
Name
of Circle/Power Station
Damages
Amount
Rs.
1
Amreli
(TR)
1,26,435.00
2
Jamnagar
(O&M)
1,32,416.00
3
Rajkot(O&M)
2,33,509.00
4
Bhuj
(O&M)
1,09,658.00
5
Porbandar(O&M)
1,67,629.00
6
Gondal
(TR)
1,52,007.00
7
Anjar
(TR)
90,127.00
8
Sikka
TPS
5,469.00
9
Kutch
Lignite TPS
78,440.00
10
Surendranagar
(O&M)
95,664.00
11
Junagadh
(O&M)
47,142.00
Total
12,38,496.00
Thus,
considering order passed by Appellate Tribunal and also while
keeping in mind para 39 of Pension Scheme, Appellate Tribunal has
observed that claim
relates to period in between 16.11.1995 to 9.2.1996 i.e. the claim
relates to period prior to application for exemption which has not
been deposited by petitioner. Thus, only that period has been
considered by Appellate Tribunal but subsequent period which was
considered in 14B order 1st
January, 2002 to 25th
January, 2002, that has not been
taken into account at all by Appellate Authority. Another aspect is
that advertisement/notice dated 25th
January, 1996 where period for application for exemption is given to
such establishment which is to be filed on or before 15th
February, 1996 and considering date of advertisement 25th
January, 1996 and in advertisement/notice, it is stated that
relaxation will be granted to such establishment upto 3rd
March, 1996 before which they should come up with their full scheme
so arrange for obtaining formal exemption. Meaning thereby, in
response to notice dated 25.1.1996, any establishment can file such
application on or before 15th
February, 1996, undisputedly in this case such application was made
by petitioner establishment on 8th
February, 1996 for such exemption, therefore, petitioner, in terms
of notice, entitled for such relaxation upto 3rd
March, 1996.
Therefore,
in light of this back ground, question which is to be considered by
PF Authority is levy for damages is to be imposed upon petitioner
for period in between 16th
November, 1995 to 8th
February, 1996 or not ? For that, certain aspects and factors are
required to be considered by Authority, which has been considered by
Division Bench of this Court in case of Star
of Gujarat Textile Mills Ltd. And Regional PF Commissioner and
Another, 1993-I-LLJ page 1023. Relevant
para 5 of said judgment is quoted
as under:
“5. The
fact remains that apart from the sweeping statement in the summing
up paragraph of the impugned proceedings, the factors which have
been set down as relevant to be considered while assessing the
question of imposition of damages, have not been discussed at all
by the 1st
respondent, In the pronouncement in Organo
Chemical Industries & Anr. v. Union of India & Ors., (supra)
the Supreme Court observed (p.427);
“xxx
Having regard to the punitive nature of the power exercisable under
Sec. 14B and the consequences that ensue therefrom, an order under
sec. 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 sec. 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.
xxxx”
Here,
we find that it is not a case of total omission
to make the contributions. There had been only delayed
contributions. The periods are different and the days of delay are
also different. A glance at the statement of damages,
annexed to the impugned proceedings shows that the days of delay
range from a minimum of 7 days to a maximum of 47 days but a flat
rate of 25% has been adopted by the 1st
respondent and certainly we cannot commend the impugned proceedings
on the ground that the application of the norms, as set down by the
pronouncement of the Supreme Court, referred to above, has been
done. This only exposes lack of application of mind on the part of
the 1st
respondent. As to how the functionary under sec. 14B of the Act
should discharge the obligations has been expatiated by S.
Natarajan, J. as he then was, of the High Court of Madras in KA
Subramaniam v. The Commissioner, the Regional PF Tamil Nadu &
Pondicherry States & Anr., 1979 Labour and Industrial Cases 981,
in the following terms:
“xxx
The authority empowered to impose damages has to, first of all,
decide whether the facts of a case warrant the imposition of
damages. If his assessment of the situation results in a finding
that imposition of damages is called for, then, he has to determine
the quantum of damages with reference to relevant factors, such as
the loss suffered by the affected party, the hardship caused to the
beneficiaries, the efforts taken by the enforcement machinery, to
collect the defaulted payments etc. There is, therefore, a clear
line of distinction between imposition of penalty which is penal in
nature and imposition of damages which is compensatory in nature.
Xxxxx xxxxx xxxxx”
We
cannot straightway say tht what has been done by the 1st
respondent by the impugned proceedings does not conform to what has
been recapitulated by the learned single Judge in the above
pronouncement. The petitioner has been declared as sick unit and the
1st
respondent declines to take note of it for any consideration on a
peculiar reasoning that the concerned authority BIFR has not
specifically recommended for partial or total waiver of penal
damages under the Act. When we take note of these features, we have
no other alternative but to interfere in writ powers. Accordingly,
this Special Civil Application is allowed and the matter stands
remitted back to the file of the 1st
respondent for him to reconsider the whole question, taking note of
the norms set down therefor by the pronouncements, referred to above
as well as other pronouncements throwing light on the subject.”
It
is also relevant to consider by PF Authority that mere delay in
making payments should not prejudice employees for whose benefit
fund is created. Where default is found, but no apparent fault,
quantum of damages should be compensatory rather than penal in
nature as decided by Madras High Court in case of Shanti
Garments Pvt. Ltd. v. Regional Provident Fund Commissioner,
reported in 2003 LLR 256 (Madras). Relevant
paragraph 4, 7 and 8 of said judgment are quoted as under:
“4. In
the decision of the Supreme Court reported in 1979(II) LLJ 416
(ORGANO CHEMICAL INDUSTRIES AND ANOTHER v. UNION OF INDIA AND
OTHERS), while upholding the validity of Section 14B of the
Employees’ Provident Funds Act, 1952, it was observed as
follows (page 304) :-
“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.”
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 willful default, the appropriate authority is to
consider the question of quantum in a different spirit.
8.
As observed by the Supreme Court, the direction regarding payment
of damages is compensatory as well as penal in nature. Where there
is no willful 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.”
Though
Regional Provident Fund Commissioner has power under section 14B, he
should have taken into consideration various factors as decided in
case of Regional Provident Fund Commissioner, Punjab, Haryana,
Himachal Pradesh and Union Territory, Chandigarh v.Toylor Instrument
Company (India) Ltd., reported in 1993 LLR 334. Therefore,
in this case, instead of deciding controversy between parties and
legal aspects, it is better and would meet ends of justice between
parties if PF Authority is directed to reconsider entire matter and
decide it after considering various and several factors which are
relevant with proper application of mind after giving reasonable
opportunity of hearing to petitioner.
In
view of aforesaid observations made by this Court and after
considering order passed by PF Authority under section 14B of Act as
well as order passed by Appellate Tribunal, both orders in question
are required to be quashed and set aside. Accordingly, order passed
by PF Authority dated 30th June, 2004 under section 14-B
of Act as well as order passed by Appellate Tribunal dated 14th
June, 2010 both are hereby quashed and set aside without expressing
any opinion on merits including legal aspects and let PF Authority
may decide a fresh question whether petitioner is liable to pay any
damages as required under section 14B of Act or not? It is open for
petitioner to make fresh submissions as well as produce relevant
documents before PF Authority within period of one month from date
of receiving present order and thereafter, PF Authority shall have
to pass appropriate well reasoned order in accordance with law while
considering all relevant factors as discussed by Division Bench of
this Court in case of Star of Gujarat Textile Mills Ltd. And
Regional PF Commissioner and Another, 1993-I-LLJ page 1023
and in case of Shanti Garments Pvt. Ltd. v. Regional
Provident Fund Commissioner, reported in 2003 LLR 256
(Madras) within period of six months from date of receipt of
copy of present order. Accordingly, Rule is made absolute in each
petition with no order as to costs.
(H.K. Rathod,J.)
Vyas
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