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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION Nos. 1717 & 5440 OF 2005.
*******
WRIT PETITION NO. 1717/2005.
1.National Textile Corporation
(Maharashtra North) Limited, a
Subsidiary Company of the National
Textile Corporation Limited, a
Government of India Undertaking
having its Registered Office at NTC House
15, N.M. Marg, Mumbai 400 038
through its Unit Mills namely Model Mills
Umrer Road, Nagpur through
the Unit General Manager.
2.Model Mills,
previously Unit of National Textile
Corporation (Maharashtra North), Limited,
Umred Road, Nagpur, through
its General Manager. ....PETITIONERS.
VERSUS
1.Central Board of Provident Fund,
Employees Provident Fund Organization,
Bhavishya Nidhi Bhavan, 14 Bhikaji Cama
Place, New Delhi 110 066.
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2.Director [Recovery],
Employees Provident Fund Organization
Bhavishya Nidhi Bhavan, 14 Bhikaji Cama
Place, New Delhi 110 066.
3.Assistant Commissioner of Provident
Funds and Recovery Officer, Employees
Provident Fund Organization, (Maharashtra
and Goa), Office of the Regional Provident
Fund Commissioner, Bhavishya Nidhi Bhavan,
132A, Ridge Road, Raghuji Nagar,
Nagpur.
4.Deonath s/o Maroti Parate,
aged about 50 years, Occ - Retired,
R/o. Ravi Nagar, Nagpur.
5.Ranjan V. Sagdeo,
aged Major, Occ - Retired,
R/o. Laxmi narayan Apartment,
Near Dinanath High School,
Dhantoli, Nagpur.
6.Laxmiprasad Shrivastava,
aged Major, Occ - Retired,
R/o. Near Corporation School,
Bajeria, Nagpur.
7.Suresh N. Malviya,
aged Major, Occ - Retired,
R/o. Near Gandhi Chowk,
Sadar, Nagpur.
8.Ramesh s/o Uttamrao Kshirsagar,
aged Major, Occ - Retired,
R/o. 61, Gajanan Nagar,
Wardha Road, Nagpur. ....RESPONDENTS.
INTERVENORS.
*******
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WRIT PETITION NO. 5440/2005.
1.Model Mills, Nagpur
a Unit of National Textile Corporation
(Maharashtra North), Limited,
a Subsidiary Company of the National
Textile Corporation Limited,
a Government of India Undertaking,
Umred Road, Ganeshpeth, Nagpur,
through its General Manager. ....PETITIONER.
VERSUS
1.Assistant Provident Fund Commissioner,
Provident Fund Organization, Bhavishya Nidhi
Bhavan, 132A, Ridge Road, Raghuji Nagar,
Nagpur.
2.Recovery Officer,
Provident Fund Organization, Bhavishya Nidhi
Bhavan, 132A, Ridge Road, Raghuji Nagar,
Nagpur.
3.Rashtriya Mill Mazdoor Sangh,
Baidyanath Chowk, Great Nag Road,
Nagpur - 440 003.
through its President. ....RESPONDENTS.
INTERVENOR.
-----------------------------------
Mr. M.G. Bhangde, Senior Advocate with
Mr.R.B. Puranik, Advocate for petitioners.
Mr. R.S. Sundaram, Advocate for Respondent- Department.
Mr. S. Ahirkar and Mr.R.R. Patil, Advocates
for intervenors.
------------------------------------
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CORAM : B.P. DHARMADHIKARI, J.
Date of reserving the Judgment. - 13.11.2009
Date of Pronouncement. - 08.12.2009
JUDGEMENT.
1. These petitions are between same parties and arise out of recovery of
arrears on account of Provident Fund dues. In Writ Petition No.1717 of 2005,
the petitioner has challenged order of attachment dated 14.03.2005 &
04.06.2004 and pray for a direction to Central Board of Provident Fund to
consider its application dated 09.09.2002 for waiver of damages in accordance
with the BIFR order dated 25.07.2002 under Rehabilitation Scheme. National
Textile Corporation (NTC) is the petitioner in this petition. Unit of NTC at
Nagpur by name ‘Model Mills’ is petitioner in Writ Petition No.5440 of 2005.
The challenge therein is to notice dated 15.04.2004 issued under Section 7A by
the Regional Provident Fund Commissioner, order dated 05.10.2004 based
upon it by the said Authority, and further order dated 06.09.2005 passed by
the Employees Provident Fund Appellate Tribunal, upholding that order.
2. Basic facts up to sanction of BIFR are not in dispute in the present
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matters. The NTC is a Government of India Enterprise and its Maharashtra
North Subsidiary is engaged in manufacture of Textile and Textile goods in
northern region. Government of India nationalized 109 ailing Textile mills in
Maharashtra under the Sick Textile Undertaking (Nationalization) Act, 1974
(hereinafter referred as “the 1974 Act” for short). National Textile Corporation
Limited, New Delhi was initially given responsibility of managing these 109
textile mills. However, later on 9 subsidiary companies were formed including
the petitioner and mills/units were handed over to respective subsidiaries. The
petitioner in Writ Petition No. 1717/2005 was having ownership, management
and supervision over 18 textile mills out of which 13 were located in Mumbai
and 5 in North Maharashtra. Model Mills at Nagpur is one such unit.
3. It is not in dispute that a Reference under Section 15[1] of the SICA
came to be submitted on 17.05.1993. Petitioner was declared sick under
section 3[1][o] of that Act and under section 17 [3], IDBI was appointed as
operating agency. These proceedings were registered as BIFR Case No.
536/1992. On 25.07.2002 BIFR sanctioned rehabilitation scheme under
section 18 of the 1974 Act. Said Rehabilitation Scheme also contained
constitution of Asset Sale Committee for sale of assets with the unit mills. Out
of total 18 mills, only 8 were found to be viable and Model Mills was in list of
10 un-viable mills. The viable mills were to be revived by modernization,
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renovation etc., by adopting various measures. Properties of un-viable units
were to be sold for such revival.
4. BIFR considered total cost of rehabilitation scheme, amount which
can be fetched by sale of assets and amount to be raised by NTC through loans
etc. Various financial institutions like Banks, Ministry of Textile, Government
of India, CBDT, MSEB and Tata Electric Company as also promoters were
requested to adopt various measures as suggested in the scheme and to
cooperate in the implementation of the rehabilitation scheme. It also includes
measures like bringing about settlement of Statutory dues under various
Labour Laws including Provident Fund and ESI. As a part of said exercise, vide
paragraph no.6.0 C[c][d][i] the PF and ESI dues were to be paid within two
years and relevant clause – paragraph reads as under :
“Para 6.0 C[c][v][ix]
To consider to waive the penalties and damages
levied on PF/ESI dues. To consider to pay PF and ESI
dues [after waiver damages and penalties] in 2 years,after sanction of the scheme by Board. The dues of un-
viable mills would be paid in the first year and the dues of
viable mills would be paid in second year.”
5. The appropriate Government under Industrial Disputes Act on
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01.06.2004 permitted closure of Model Mills and that order was implemented
by notice issued on 05.06.2004. In the meanwhile Assistant Provident Fund
Commissioner, has started proceedings for recovery of contribution under
Section 7A and damages under Section 14B of the Employees Provident Fund
and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the PF Act”
for short), and issued recovery certificate on 05.05.2003. The contribution
amount of Rs, 10,17,291/- and damages under section 14B worth Rs.
1,96,10,449/- were to be paid. By revenue recovery certificate dated
08.04.2004 demand was for Rs. 47,84,259/- towards contribution and Rs.
1,97,80,640/- towards damages. There was also a demand for Rs. 84,888/-
towards contribution and Rs. 1,52,129/- towards damages. There was another
R.R.C. Dated 28.04.2004. Petitioners contend that the RRC’s were satisfied
and there were no arrears of contribution towards P.F. Fund. Their effort is to
show that what is outstanding is only damages under section 14B of the PF
Act.
6. Because of the provision in paragraph no.6 quoted above, under
rehabilitation scheme, application for grant of waiver of damages was
submitted by the petitioner on 09.09.2002 before respondent no.1 Central
Board, which is still pending. On 07.06.2004 the respondent no.2 Director
[Recovery], issued notices to Regional Provident Fund Commissioners not to
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take any coercive action against the petitioner. However, on 04.06.2004 itself
respondent no.3 Recovery Officer at Nagpur had issued memo of attachment of
several movable properties. The petitioner wanted to identify certain
machinery for the purpose of its shifting to other viable mills or to buyers, but
the said exercise was not allowed to be undertaken. On 14.03.2005
immovable properties namely 5 bungalows along with land ad-measuring
6040 sq. mts. and building along with land ad-measuring 1,16,257 sq. mts.,
were attached. With the result, petitioners could not proceed further with
rehabilitation scheme sanctioned by BIFR. The process undertaken by Assets
Sale Committee to verify and identify the properties for their sale to raise
Funds for revival of viable units also got affected. In this background in Writ
Petition No.1717/2005, these orders attaching movables and immovable
properties have been challenged.
7. In Writ Petition No. 5440/2005, petitioners have pointed out that
their establishment of Model Mills is exempted from provisions of PF Act and it
has got its own scheme which has been duly recognized on 22.08.1974 which
regulates & governs the PF Fund with its Trustees. They have been making
compliances with P.F. Act and other obligations were of Board of Trustees
under Model Mills P.F. Scheme i.e. MMPF scheme and have also submitted
their accounts and returns within time to the Statutory authorities. The
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amount of contribution was invested in securities recognized by the
Government of India and members were given interest at the rates declared by
its Board of Trustees from time to time. No objection was taken in this respect
at any time by the Provident Fund officials, however, later on the Provident
Fund officials claimed that under MMPF Scheme also interest should have been
given at 12% to its members and its action of crediting interest at 10% on PF
contribution of members was illegal and unsustainable. On account of this
difference in rate of interest, various amounts were sought to be recovered and
for non payment of this difference in rate of interest , damages under section
14B were also levied.
8. Petitioners received notice under section 7A of PF Act in this respect
and on 25.08.2004, and filed their detailed submissions raising various
objections as preliminary objections. Instead of deciding those preliminary
objections, on 05.10.2004 the Assistant Provident Fund Commissioner at
Nagpur worked out demand of Rs. 4,83,43,831/- towards difference on
account of less payment of interest. This order was challenged by petitioners
by filing Appeal bearing No. ATA 107[9]/2005 before the Employees Provident
Fund Appellate Tribunal at New Delhi and, that appeal came to be dismissed
on 06.09.2005. These orders are questioned in Writ Petition No. 5440/2005.
The grievance in short is about arrears worked out on account of difference in
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rate of interest and damages thereupon.
9. In this background, I have heard Shri M.G. Bhangde, learned Senior
Counsel with Shri R.B. Puranik, learned counsel for petitioners and Shri R.S.
Sundaram, learned counsel for Respondents. Shri S. Ahirkar and Shri R.R.
Patil, learned counsel appeared for intervenors i.e. the affected employees.
10. By inviting attention to the provisions of Section 32 of the 1974 Act
and judgment of Division Bench of this Court reported at 2009 [6] Mh.L.J. 108
(Vadilal Dairy International Ltd., Mumbai .vrs. State of Maharashtra), learned
Senior Counsel has contended that the rehabilitation scheme sanctioned by
BIFR has overriding effect and in view of its paragraph no.6, the P.F.
Authorities could not have proceeded further to effect coercive recovery
without deciding application for exemption filed by the petitioners on
09.09.2002, which is still pending. He has also invited attention to provisions
of Section 14B to show the obligation to consider such waiver statutorily cast
upon the employer. Provisions of paragraph 32B of Statutory Scheme [P.F.
Scheme 1952] are also relied upon by him for this purpose. He points out that
there is valid challenge to levy of interest under section 7 [Q] of P.F. Act & to
demand of damages raised upon it and hence, notice dated 15.04.2004 or
order dated 05.10.2004 passed by the Assistant Provident Fund Commissioner
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and order dated 06.09.2005 passed by the Appellate Tribunal are
unsustainable.
11. In order to show that there was no obligation upon the Trustees
functioning under the MMPF Scheme to pay interest at 12%, apart from the
provisions of paragraph no.6 mentioned above, he has invited attention to
other clauses including paragraph nos. 6 [c][b][ix], which casts such obligation
upon the Provident Fund Officials. He has also pointed out that on 27.09.2002
in SLP (Civil) No. 16732/1997 the Hon’ble Apex Court has directed
implementation of rehabilitation scheme sanctioned by BIFR, after noticing that
it has been approved by all concerned. Thereafter also the representation
dated 09.09.2002 came to be made and it is still pending.
12. In this background, he has also invited attention to the provisions of
para no.60 of the Statutory Scheme to urge that the said para does not apply
automatically to the Model Mills PF Scheme. He has in support relied upon
the provisions of Employees Provident Fund (Amendment) Scheme, 2000
which introduced paragraph no.27AA, with clause 19 and 20 to urge that those
clauses for the first time made a departure and required Trustees of an
exempted establishment to declare interest not lower than the rate declared by
the Central Government in para no.60. The responsibility to make up the
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deficiency, if any, because of this enhanced interest was cast upon the
employer.
13. In view of the Statutory provisions, he relied upon the judgment
reported at 2007 [8] SCC 338 (Dhampur Sugar Mills Ltd. .vrs. State of U.P. and
others), to urge that the powers to waive conferred upon the Central Board of
P.F. was accompanied by corresponding duty upon it. He has stated that,
ignoring the representation pending before it and also statutory obligation, the
local authorities at Nagpur high handedly and malafidely attached the movable
properties on 04.06.2004. He points out that permission to close industry was
given by the appropriate Government on 01.06.2004 and the establishment of
Model Mills was closed on 05.06.2004. On 04.06.2004 itself the Superior P.F.
Officials from New Delhi had sent fax message to local authorities not to take
any coercive steps against the petitioners. This Fax message was confirmed by
communication dated 07.06.2004, but then this communication and Fax were
both disobeyed by the local authorities. Learned Senior Counsel states that
second attachment has been made on 14.03.2005 in further violation. He
further states no amends were made thereafter and entire working of
rehabilitation scheme was thus jeopardized by the said local officers.
14. Attention has been invited to provisions of Model Mills Scheme to
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show that the exemption granted was subject to conditions specified in the
Schedule annexed thereto and no provisions thereunder required the MM
Board of Trustees i.e. the Board of Trustees of Model Mills Provident Fund to
declare interest at same rate at which the Central Government declared in para
no.60 of the Statutory Scheme. He further pointed out that the MM Board of
Trustees consisted of equal number of representatives of employees and
employer and after its constitution, the employer ceased to have control on it.
A show cause notice to the employer and action taken against the employer, is
therefore, unsustainable. According to him, the action ought to have been
taken against the Board of Trustees and objection raised in this respect by the
Model Mills has not been looked into by the Competent Authority while
deciding Section 7A proceedings or then by the Appellate Authority.
15. He has invited attention to Clause Nos. 13 and 14 of the MMPF
Scheme to show that only obligation upon the MM Board of Trustees was to
see that the rate of PF contribution does not fall below the statutory rate. He
has further pointed out that as per its Clause 14, employer submitted Audited
Balance Sheets from time to time.
16. Attention is invited to Rules framed by the employer to regulate the
Provident Fund to show powers of MM Board of Trustees. Obligation was cast
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upon the employer to pay penal interest, if, Provident Fund contribution was
not offered to Trust, within time. Rule 8 deals with investing of P.F. Money,
and Rule 9 show that the expenses for management of Fund were to be borne
by the employer and loss only was to be borne by the Fund. Rule 23 is also
pressed into service to show how interest and income actually realized, was
required to be applied to the account of individual member annually on 31st
March. It is also pointed out that this Rule 24 enabled the MM Board of
Trustees to determine rate of interest.
17. Show cause notice dated 15.04.2004 is then pointed out to urge that
it did not point out any breach of any Rule or any provisions of the MMPF
Scheme. Provisions of Statutory Scheme in paragraph no.60 about rate of
interest and its application on monthly running balance are not at all
applicable. It is stated that, the issue is squarely covered by the judgment of
Division Bench of Calcutta High Court reported at 1996 II CLR 890 (Electric
Lamp Manufacturers (India) Ltd. .vrs. Regional Provident Fund Commissioner
and others). It is further argued that, provisions of paragraph 27AA of the
Statutory Scheme added on 06.01.2001 cannot be applied retrospectively, and
there is no such plea of retrospective application. He has relied upon the
judgment of Hon’ble Apex Court reported at (1998) 6 SCC 35 (Jiyajeerao
Cotton Mills Employees .vrs. Dev Kumar Holani and others) to urge that Model
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Mills P.F. Scheme is determinative in the matter and reference to Statutory
Scheme framed under P.F. Scheme 1952 by Respondent Department is
misconceived.
18. Lastly, it is urged that interest payable to a member under the P.F.
Scheme as benefit to show that payment of interest is in the nature of
compensation, he has relied upon judgment reported at 2009 [7] SCC 372
(Thazhathe Purayil Sarabi and others .vrs. Union of India and another ) and
2009 (11) Scale 597 (Sri Venkateswara Syndicate .vrs. Oriental Insurance
Company ). To show this nature of interest and that it could not have
retrospective effect, he has relied upon the judgment of Hon’ble Apex Court
reported at 2009 [3] Scale 115 ( M/s. Rampur Fertilizer Ltd .vrs. M/s. Vigyan
Chemical Industries ).
19. Shri Sundaram, learned counsel for respondent has stated that
properties were attached when it was found that, the petitioners were
attempting to dispose of the same without paying the P.F. dues, and he further
states that the Fax Message dated 04.06.1994 was not received by the local
authorities at Nagpur. According to him, grievance in Writ Petition No.
1717/1995 is only about excessive attachment. He invites attention to the
orders dated 16.06.2005 passed in the matter to show that, now the entire
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property is sold out and amount of Rs. 9 Crores is available for appropriation
because of Bank Guarantee. He therefore, states that representation of
petitioner made on 28.02.2005 [09.09.2005] should be directed to be
disposed of within time bound manner and the Writ Petition may thus be
disposed of.
20. Without prejudice to this stand, the learned counsel contends that
the rehabilitation scheme sanctioned by BIFR does not contain any reasons why
waiver was recommended and hence said recommendation was not at all
binding upon the respondent. He has invited attention to the provisions of
Clause 7.02 incorporating General Terms and Conditions and its sub-clause [vi]
to urge that certain additional compliances were expected from petitioners, and
petitioners have not made those compliances. Clause XII is also pressed into
service to show that the rehabilitation scheme placed embargo upon the right
of the petitioner to dispose of any movable or immovable properties.
21. In this background by placing reliance upon second proviso to
Section 14B of the PF Act, it is urged that the said provision has come into
force from 01.09.1991 and paragraph no.32-B of the Statutory P.F. Scheme
enables the Central Board to consider waiver only if reasons were recorded by
the BIFR. He argues that there is no clause or any reason in BIFR Scheme for
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waiver of P.F. Damages. He has placed reliance upon the judgment reported at
2001 [2] Mh.L.J. 169 (Ralliwolf Ltd. .vs. Regional Provident Fund
Commissioner ) to urge that the PF Contribution and Scheme has been given
precedence and priority. He has invited attention to certain charts produced
during hearing to show the nature of amount outstanding. He further states
that there were certain meetings between the parties to resolve the
controversy and invites attention to the communication dated 13.06.2007 to
show the compliances demanded from petitioners. He states that those
compliances are still not effected. He relies upon the provisions of Section
11[2] of the P.F. Act to show that the superior pedestal given to the P.F. Fund
and its recovery by the parliament. He also relies upon the judgment reported
at 2009 [13] Scale 280 (Maharashtra State Co-operative Bank ltd. .vrs. The
Assistant Provident Fund Commissioner ), to support his contentions. He
reiterates that provisions of Section 32 of the Sick Industries Companies
(Special Provisions) Act, 1985 do not override the P.F. Act in any way, and
hence, the attachment for recovery of PF dues and interest/damages cannot be
assailed.
22. In Writ Petition No. 5440/2005, Shri Sundaram, learned counsel has
contended that the exemption given to the MMPF Scheme is conditional and
subject to compliances with conditions specified in Schedule annexed to order
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dated 22.08.1974. He further states that, it is also subject to provisions of
Section 17[1] of the P.F. Act, and hence interest as per paragraph no.60 of the
Statutory Scheme is required to be paid by the MM Board of Trustees. He
points out that there is no provision about interest under that scheme. Rule 47
of the Rules, framed by the MM Board of Trustees is relied upon to state that
in absence of any such provision, the provisions of paragraph 60 of statutory
scheme about rate of interest and also about mode and manner of computing
and applying it, automatically come into play. He argues that Rule 23 of this
MMPF Rules is not in consonance with paragraph no.60. He also relies upon
the provisions of Rules 8 and 9 to urge that the petitioners should have shown
that the interest payable & earned on their investment was 10% only and not
12%. Attention is invited to provisions of Section 17[1][a] of the P.F. Act to
point out that exemption to establishment is because of enjoyment of interest
at more rate. He relies upon the provisions of sub-section [1][A][a] of said
Section to show that penalty for such violation is upon the establishment i.e.
the employer. About duties of its Board of Trustees and the obligation of such
Board , Section 17[1][B] is relied upon to show that the P.F. Act contemplates
action against Trustees only in limited situations and hence here show cause
notice was given to petitioner – employer. For same purpose provisions of
Rule 15 of the Rules framed by the MM Board of Trustees are also relied upon.
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23. Shri Sundaram, learned counsel stresses over paragraph no.27A and
27AA, as also clauses 19 and 20 as incorporated in Scheduled appended
thereto, and asserts that they have retrospective operation and it is only a
declaratory measure. He has drawn support from 1997 [3] SCC 472 (Allied
Motors (P) Ltd. .vrs. Commissioner of Income Tax, Delhi) and 1997 [1] SCC
352 (Brij Mohan Das Laxman Das .vrs. Commissioner of Income Tax, Amritsar),
to substantiate his contentions.
24.
He also states that later judgment recognizes payment of interest as a
facility formality i.e., benefit. He has attempted to distinguish the judgment
on which learned Senior Counsel has placed reliance. He has concluded his
arguments by stating that, there is no merit in either of the petitions, and also
in grievance made against the local officers by the petitioners.
25. In his reply arguments, Shri Bhangde, learned Senior Advocate has
stated that Asset Sale Committee has been constituted under BIFR
Rehabilitation Scheme and the Scheme permits sale of certain properties. He
contends that, because of this provision and Section 32, the Provident Fund
department cannot object to such sale. He has invited attention to Writ
Petition to show the other challenges in writ petition and to provisions as
contained in BIFR Scheme which requires PF Authorities i.e. Central Board to
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consider the issue of waiver. The concession in the matter of repayment as
contained in the BIFR scheme are also relied upon by him and he further states
that, properties identified for sale by Asset Sale Committee cannot be objected
to by anybody. He has in this respect attempted to distinguish the judgment of
this Court in the case of Ralliwolf Ltd. [supra], and judgment of Hon’ble Apex
Court in the case of Maharashtra State Cooperative Bank Ltd.[supra]. He has
also relied upon paragraph [c] of letter dated 13.06.2007 to assail the high
handed action of respondents.
26. While replying to the arguments of Shri Sundaram in Writ Petition
No. 5454/2005, he states that paragraph no.60 of the Statutory Provident Fund
Scheme, 1952 cannot be extended to petitioners and the controversy is
squarely covered in their favour in view of the division bench judgment of
Calcutta High Court in the case of Electric Lamp Manufactures (India) Ltd.
(supra), and the judgment of Hon’ble Apex Court mentioned above. He states
that section 17[1]-A of the P.F. Act consider criminal liability, while in present
matter, the Court is required to consider civil liability of employer. He further
argues that, there is no plea or contention that paragraph 27AA of the
Statutory Provident Fund Scheme is retrospective or only declaratory. He
states that, when liability is imposed for the first time, provision cannot be read
as retrospective or merely declaratory. He again points out that there is no
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show cause notice to petitioner that their P.F. Scheme is in conflict with the
Statutory Provident Fund Scheme or any Statutory provisions and the
impugned orders also do not contain any reasons on those lines. He states
that the validity of impugned action or orders need to be scrutinized in the
light of the reasons recorded and those reasons cannot be supplemented. He
states that because of Rule 23 in the MMPF Scheme, paragraph 60 of the
Statutory scheme cannot apply and there is no decision by the Regional
Provident Fund Commissioner on this conflict as required by Rule 47 of the
MMPF Scheme. He relies upon the judgment reported at 1970 [3] SCC 119
( M/s. D.N. Roy and others .vrs. The State of Bihar and othes) to urge that,
how show cause notice in the present matter is misconceived and also upon
the judgment reported at 2003 [5] SCC 106 (Union of India .vrs. GTC
Industries Ltd. Bombay), to show how the orders passed by the Competent
Authority or Appellate Tribunal needs to be judged. He points out that Rule 23
of the MMPF Scheme was without any objections and valid from 1974 to 1991
and it cannot became bad after 1992. He states that action of Central
Government in declaring the rate of interest at a particular rate is not
sufficient to urge that, there is any conflict between the said Rule 23 and
paragraph no.60 of the Statutory Scheme. He states that the provisions of
Section 17[1][a] of the P.F. Act do not contemplate payment of interest at rate
specified in paragraph no.60 as provident fund benefit. He further states that
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as return and accounts were furnished regularly by the MM Board of Trustees
to Provident Fund Department, burden was upon them to show that the
petitioners were receiving interest at higher rate, but were paying the same at
lower rate to the members/employees. He argues that a show cause notice
then ought to have contained such a ground and at least impugned orders
ought to have disclosed such reasons. He states that the resolution dated
01.03.1993 deciding the rate of interest to be 10% was never objected to or
challenged by the respondents.ig
28. After Shri Bhangde, learned Senior Counsel finished his reply
arguments, Shri Sundaram, learned counsel for respondents tried to urge that
after nationalization, Central Government was appropriate Government for
Model Mills and hence any separate notification about rate of interest was not
necessary. He further tried to contend that, the provisions of paragraph no.60
have been incorporated by reference in MMPF Scheme. However, because of
strong objection of petitioners and also because of absence of any such plea or
reasoning on record, Shri Sundaram, learned counsel, did not press these
arguments.
29. It will be appropriate to first consider the judgment cited by Shri
Sundaram, to show primacy given to recovery of Provident Fund dues. Said
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judgment reported at Ralliwolf Ltd. .vs. Regional Provident Fund
Commissioner [supra], shows that there the learned Single Judge was required
to consider the issue in the light of provisions of Section 22[1] of SICA and
provisions of Section 32 did not fall for consideration. Facts therein also show
that the employees were contending that, the contribution of employees is
infact deduction from wages which are due and payable to them. In
paragraph no.19, learned Single Judge has considered the powers with the
Central Board to reduce or waive damages in relation to Sick Company and in
paragraph no.20, it has been noticed that there was no provision by which the
liability of employer to pay the contribution of employer or contribution of
employee has been excused or exempted. The obligation to deduct employees
contribution together with his own contribution of employer of such sick
industry continues to subsists and the immunity conferred upon such
undertaking needed to be confined to the specifications thereof by the
Parliament and not beyond it. Consideration in paragraph no.21 shows that
the employer there had deducted contribution of employees, but the same were
not paid into the Fund and the money was unlawfully retained by the
employer. It is thus apparent that, the question of waiver of damages only was
not for consideration before this Court. The observations in paragraph no.25
show that, this court found that, the Provident Fund and other dues payable
under the PF Act are part of legitimate Statutory entitlement of workers, and
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24
stand of some footing as payment of wages. In present matter, the employer
has attempted to show that what is sought to be recovered from it is an amount
on account of difference in rate of interest and damages calculated on that
account under section 14[B]. During hearing the petitioner have also produced
charts which substantiate this stand. Charts also show that some recoveries are
stayed by the Appellate Tribunal. These details are not in dispute before me.
30. The petitioners have relied upon the Division Bench judgment in the
case of Vadilal Dairy International Ltd., Mumbai .vrs. State of Maharashtra
[supra], which squarely considers the provisions of Section 32 thereof.
Section 32 [1] gives overriding effect to the scheme made under SICA in so far
as the P.F. Act is concerned. In paragraph no.8, the Division Bench of this
Court has found that the nature thereof is clear and once scheme is sanctioned,
it has effect not withstanding inconsistent provision therewith contained in any
other law. Paragraph no.14 of that scheme before the Division Bench
contained certain observations about the relief against the Sales Tax
Department. The BIFR noticed that the said relief was in lines with the State
Government Policy and the company should follow up matter with the
Industries Department. The Division Bench has found that, even if under Sales
Tax Act it was open to the department to charge interest and impose penalty,
considering the scheme as sanctioned it would not be open to the authorities
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25
including the quasi judicial authorities under the Act to order payment of
interest or penalty contrary to that scheme. The Second Appellate Authority
under Sales Tax Act was found to have acted without jurisdiction to that
extent. It is therefore, obvious that, this judgment which considers the scheme
sanctioned under the SICA and its overriding effect because of its section 32
applies even to the facts before this Court. It needs to be mentioned that, the
recovery from petitioners in dispute before this Court is in relation to amount
on account of difference in rate of interest and damages calculated on that
account. Provident Fund dues i.e. contribution of employer or employee is not
at all in dispute.
31. The judgment of Hon’ble Apex Court in the case of Maharashtra State
Co-operative Bank ltd. .vrs. The Assistant Provident Fund Commissioner
[supra], was in the matter of Sale of Sugar bags pledged by Sugar Factory with
a Cooperative Bank as security for repayment of loan. The Provident Fund
authorities attached those sugar bags for payment of Provident Fund dues
payable by the employer of the factory. In paragraph no.18 the Hon’ble Apex
Court has found that, in the shape of Provident Fund Act the legislature made
comprehensive provisions for recovery of dues by way of attachment of
movable and immovable property. In paragraph no.20, question whether
provisions of Section 11[2] of the PF Act applied against other debts like
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26
mortgage, pledge etc., has been considered and it has been held that language
of Section 11 was very clear and priority given to Provident Fund dues in
Section 11 is not hedged with any limitation or condition. In paragraph no.21
and onwards other judgments taking similar view are also considered.
Provisions of Section 11 shows that where employer is adjudged insolvent or
being Company an order for its winding up is made, amount due from him/it
in respect of any contribution payable to Fund, damages recoverable under
section 14B is deemed to be included amongst other debts to be paid in
priority to all other debts as per Section 530 of the Companies Act, 1956. The
judgment therefore was not require to consider the scheme sanctioned by the
BIFR or then effect of Section 32 of the SICA. It is also clear that, the said
priority of debt payment does not militate in any way with precedence given to
the rehabilitation scheme by Section 32 of the SICA and both operate in
distinct fields.
32. The relevant sub-clause [ix] clause [b] of BIFR scheme which deals
with reliefs and concessions is already reproduced above. This clause appears
in part of BIFR scheme dealing with obligation of Government of India and
Ministry of Textiles. It requires the Provident Fund authorities i.e., the Central
Board to consider the waiving penalties and damages. It is important to note
that, it does not expect the Provident Fund authorities to waives Provident
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27
Fund contribution to be made by the employer or deducted from wages of the
employees. It further requires the Central Board to consider payment of
Provident Fund dues in two years after the sanction of rehabilitation scheme
by the Board. However, these Provident Fund dues are after waiver of
damages and penalties i.e. without damages and penalties. It contemplates
that dues towards contribution of un-viable mills are to be paid in first year and
dues of viable mills are to be paid in second year. Properties of un-viable mills
are to be sold or shifted to help viable mills and hence, after such sale, the P.F.
dues (without damages or penalties) of such un-viable mills are to be paid
within 1 year. For clearing these dues of viable mills, time of 2 years is given.
The corresponding obligation on Provident Fund authorities is in second
proviso to section 14B of the PF Act. Section 14B, second proviso enables the
Central Board to reduce or waives such damages in case of present petitioners.
Similarly, paragraph no.32B of the Statutory Provident Fund Scheme, 1952 in
its clause-B also expects Central Board to exercise that power in cases where
BIFR for reasons to be recorded in a scheme in this behalf recommends. It
permits waiver of damages up to 100%. Here BIFR has recommended such
waiver of damages and penalties. However, contention of respondent is that,
the said recommendation is without any reasons. First of all the Central Board
has to consider the representation made by the petitioners for such waiver and
then it has to record such conclusions. Such conclusions cannot be reached
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28
only by reading sub clause [ix] reproduced above, but entire rehabilitation
scheme needs to be looked into for the said purpose. The total number of NTC
Mills declared un-viable, the number of those mills found viable, mode and
manner in which the movable and immovable properties of un-vaible mills are
to be utilized for restoration of viable mills, constitution of Assets sale
Committee for it are some of the relevant factors, which need to weighed for
said purpose. At this juncture it is premature for this Court to record any
finding in that respect. Shri Sundaram, learned counsel has fairly stated that, a
direction to Board to consider the said application for waiver can be issued in
the matter. Hence, I do not find it necessary to delve more into that aspect at
this stage.
33. This bring me to the consideration of challenge in relation to
automatic application of paragraph no.60 of the Statutory Scheme to the
MMPF Scheme. Paragraph No.60 of the Statutory PF Scheme, 1952 requires
Commissioner to credit to the account of each member, interest at the rate
determined by the Central Government in consultation with the Central Board.
It also requires interest to be credited to the members account on monthly
running balance basis. Rule 23 of the Rules under MMPF Scheme enables the
MM Board of Trustees to determine such rate of interest and it also requires the
same to be credited to the account of individual member as on 31st March of
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29
the preceding year. The question is, which provision will apply in the present
matter.
34. The grant of exemption to Provident Fund of Model Mills under
Section 17[1] of the PF Act on 22.08.1974 is not in dispute. The said
exemption is subject to the conditions specified in the schedule annexed
thereto and those conditions are in addition to the conditions mentioned in
Section 17[1]. In schedule annexed along with the said exemption order
dated 22.08.1974, the obligation upon the employer is to invest the Provident
Fund amounts in securities of Central Government. There is no express
provision linking rate of interest in it with rate declared under para 60. Its
clause 13, requires employer to enhance rate of Provident Fund contribution
proportionately, if the Statutory rate or contribution for it under section 6 of
the PF Act is increased. This requirement is followed by a sentence which
states that “but the purpose for such proportionate enhancement is to see that the
benefits under the scheme of establishment may not become less favorable than the
benefits of the Statutory Provident Fund Scheme.” This clause 13 therefore,
expressly stipulates enhancement in rate of Provident Fund contribution i.e.
portion to be deducted from wages of employees. The said clause cannot be
read to mean that, it also requires MM Board of Trustees / Employer to give
interest at rate declared by the Central Government in paragraph no.60 of the
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30
Statutory scheme or to apply interest declared by it in accordance with the
scheme of the said paragraph no.60. The other provisions in the schedule deal
with the submission of the audited balance sheet, facility for inspection of
accounts etc., which do not have any bearing on this issue. The rules framed
by the MM Board of Trustees to regulate the Provident Fund are also approved
by the Department. As per Rule 3 the MM Board of Trustee have exclusive
administration and control of the Provident Fund and income, subject to any
instructions issued by the Regional Provident Fund Commissioner. Rule 6 casts
obligation upon the employer to hand over monthly contribution to the
Fund/BOT on or before 15th day of the next of month and in default there of,
the employer is obliged to pay penal interest at such rate as may be levied by
the Regional Provident Fund Commissioner. Rule 8 deals with investment of
Provident Fund in prescribed Government Securities. Rule 9 states that, all
expenses in relation to management of Fund are to be borne by the employer,
while any loss arising from any change in investment or from depreciation in
market value of investment has to be borne by the Fund. Rule 15 makes the
Trustees responsible for any money that, actually came into their hand. Rule
23 which deals with interest is as under –
“Rule No.23 : Interest :
The interest and income actually realized and
received on investments during a year ending on 31st
March, in each year shall be utilized towards crediting::: Downloaded on – 09/06/2013 15:23:32 :::
31members individual account with interest on the total
amount standing to the credit of each member as on 31stMarch of the preceding year after, deducting non-refunded
amount, the interest and income, while settling the
accounts or transfer of provident Fund Account, should be
paid upto the end of the month preceding that in which theaccount is settled or transferred. For the broken period
interest should be paid at the rate declared for the previous
year. The rate of interest shall be determined by the Boardof Trustees from year to year after taking into account total
actual yield at investment and income.”
35. Rule 47 of this Rules is heavily relied upon by the department. It is
as under –
“Rule No.[47] : Contribution Irrevocable:
The Trust created by these rules and the
contributions to the fund shall be irrevocable, save with theconsent of all the beneficiaries for the time being, and the
Mills shall not be entitled to claim the returns of any portion
of its own contribution whether provisionally or finally.
If the Provident Fund Rules of the
Mills/Establishment which are not beneficial and are in
conflict with the provisions of the Employees’ Provident
Fund and Misc. Provisions Act, 1952 and E.P.F. Scheme,
1952 the letter shall prevail. Whether a particular rule of::: Downloaded on – 09/06/2013 15:23:32 :::
32the Mills / Establishment is beneficial or not; shall be
decided by the Regional Provident Fund Commissioner,whose decision shall be final. In the absence of any provision
the corresponding provisions of the Employees’ Provident
Fund and Misc. Provisions Act, 1952 and E.P.F. Scheme
1952 shall prevail.”
This Rule shows that in case of conflict between the said Rules and P.F Act,
1952 or Statutory Provident Fund Scheme 1953, the PF Act 1952 and Statutory
Scheme prevail. However, it also states that whether PF Rules of employer are
more beneficial or then the Statutory provisions are more beneficial is the
question to be decided by the Regional Provident Fund Commissioner and his
decision is final. Admittedly, in the present matter there is no decision by the
Regional Provident Fund Commissioner that, the provisions of paragraph no.
60 of the Statutory P.F. Scheme 1952 are more beneficial than Rule 23 of the
MM PF Rules. Said Rule 47 also contemplates that, if, there is no provisions in
the employers scheme or employers rule, the corresponding provisions of PF
Act or Statutory Scheme will prevail. It is also important to note that,
employer was not given any show cause notice that provisions of Rule 23 of the
MM PF Rules, are less beneficial in the matter of award of interest to the
members.
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33
36. The exemption granted is under section 17[1]. Under section 17[1]
[a] the exemption can be granted when appropriate Government is satisfied
that the Rules of the establishment to be exempted are not less favorable than
those specified in section 6 in so far as the rates of contribution are concerned
and employees are in enjoyment of “other Provident Fund benefits which on
the whole are not less favorable” to the employees than the benefits provided
under the PF Act or the Statutory scheme. This exemption is already
admittedly granted by the appropriate Government to the petitioners and it
was in force till the closure of Model Mills on 05.06.2005. It is obvious that
the appropriate Government was then satisfied that the employees of Model
Mills were in enjoyment of other benefits which were not less favorable. While
considering the provisions of Rule 47 above, the requirement of recording a
satisfaction by the Regional Provident Fund Commissioner in this respect is
already highlighted by me. It is therefore, obvious that unless the Regional
Provident Fund Commissioner after hearing the petitioners and the employees
and for reasons to be recorded, finds that the provisions of paragraph no.60 are
more beneficial, the respondent cannot insist upon payment of interest in terms
of the said paragraph no.60 of the Statutory P.F Scheme. Till such satisfaction
is reached, the exemption given to the petitioners and opinion reached or
finding reached by the appropriate Government under section 17[1][a] of the
P.F. Act has to prevail, and deserves to be honoured. It is equally important to
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34
note that, the comparison has to be in relation to the MMPF Scheme and
Statutory P.F. Scheme “on the whole”. In other words, one has to also find out
the other benefits flowing from a particular scheme and its impart jointly on
whole scheme and scrutiny cannot be restricted only to one particular
paragraph or rule. It is apparent that, the provisions of section 17[1][a], are
therefore not sufficient to enable the respondents to import paragraph 60 of
the Statutory Scheme of 1952 in MMPF Scheme.
37.
The respondents have tried to urge that, the obligation to pay
interest as per clause 60 is cast upon the petitioners, because of paragraph
27AA added to the PF Statutory Scheme. It is to be noted that, the said
amendment has come into force from 06.01.2001. Its opening part itself shows
that, paragraph 27AA prescribed terms and conditions for exemption applicable
to “all exemptions already granted or to be granted hereinafter” under section
17 of the PF Act. Clause 19, states that the interest to be credited to the
account of each employee shall not be lower than the rate declared by the
Central Government in paragraph no.60 of the Statutory scheme. Clause 20
states that, if such Board of Trustees of exempted establishment are unable to
pay interest at said rate declared by the central Government, the deficiencies is
to be made good by the employer. The discussions above, clearly shows that,
for the first time such arrangement has been made by the legislature in the
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35
field. Clause 19 itself shows that the interest needs to be credited on opening
balance as on the first day of the accounting year and it only requires rate of
interest declared by the Central Government to be adopted. It does not require
mode and manner of crediting interest stipulated in paragraph no.60 i.e. on
monthly running balance basis to be followed. This is sufficient to indicate
that, the scheme framing authority was aware that, there was no such
obligation upon exempted establishment earlier. The limited amendment to
add compliance with only some part of para 60 shows the absence of intention
to apply entire paragraph 60 of statutory scheme. It also derogates from its
alleged clarificatory or declaratory character. It reveals inappropriateness in
stand of Respondents to apply the government declared rate of interest also to
MMPF Scheme.
38. In Allied Motors (P) Ltd. .vrs. Commissioner of Income Tax, (supra),
the Hon’ble Apex Court has considered the interpretation of the provision
inserted to remedy unintended consequences and to make the proviso
workable. It has been held that a proviso which speaks of obvious omission in
the section and is required to be read into section to give it a reasonable
interpretation, is required to be treated as retrospective in operation so that, a
reasonable interpretation can be given to whole section. It is apparent that the
respondents have not come up with a case that paragraph no.27AA has been
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36
added or clause nos. 19 and 20 have been added with a view to fill in some
omission. The judgment therefore, has no relevance. The consideration of
limited effect of paragraph 27AA in statutory scheme and it being non-
declaratory above also shows that this ruling of Hon. Apex Court is not relevant
here.
Judgment in the case of Brij Mohan Das Laxman Das .vrs.
Commissioner of Income Tax, Amritsar (supra), also relied upon by Shri
Sundaram, learned counsel again considers the explanation added to clause
[b] of Section 40 of the Income Tax Act, 1941. The explanation no.2,
expressly provided that where an individual is partner in firm on behalf of or
for the benefit of any other person, any interest paid by the firm to such
individual otherwise than as partners, in representative capacity shall not be
taken into account for the purpose of clause [b]. The explanation were added
from 01.04.1985 and prior to that, there was conflict of opinion amongst
several High Courts. The amending Act did not satisfy whether the
explanation was to have retrospective effect. After considering the provisions
in paragraph no.5 and view reached by majority of High Courts in paragraph
no.6, in paragraph no.8 the Hon’ble Apex Court has observed that, the
explanation- 2 did not preclude an individual who happen to be partner
representing the HUF from depositing his personal funds with the partnership
and receiving interest thereon. The Hon’ble Apex Court concluded that the
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37
amendment was legislative recognition of the theory of different capacities of
individual which he may hold and hence such theory and recognition was
available for party prior to 01.04.1985 also. It was thus found to take note of
already existing feature. The judgment therefore, clearly shows that the
amendment was found to be declaratory in nature and therefore, retrospective.
39. 2009 [8] Scale 685 (M/s. Delta Engineers .vrs. State of Goa and
others), considers the relevant Rules were amended in 1992 and first schedule
relating to open lands was amended to include the words “and/or open
riverine land” after the words “open plots” The Rules were further amended in
1994 by adding Rule 54A which required user of such riverine land to pay
rental charge of Re.1/- per square meter per month in advance. The question
before the Hon’ble Apex Court was whether the said rental charges could have
been claimed by Port Authorities retrospectively for the period from
05.04.1984 to 03.03.1994. The Hon’ble Apex Court has in paragraph no.22
noticed that there was no such provision earlier and hence for earlier period
Port Authorities could not have levied any such fee. In paragraph no.24
question whether 1992 and 1994 amendment to the Rules were retrospective
or not, has been considered and it has been held that, the statute has prima
facie prospective operation, unless it is expressly or by necessary implication
made to have retrospective operation. Where the object of the statutes is to
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38
affect vested rights or to impose new burden, it is deemed to be prospective
unless there are words in statute sufficient to show the intention of legislature
to affect existing rights.
40. In the present matter, paragraph no.27AA clearly states that all
exemptions already granted or to be granted after its coming into force under
section 17 are subject to the terms and conditions as given in Appendix “A”.
Thus, the use of word ‘shall’ and language of this paragraph clearly shows that
from 06.01.2001 all exemptions whether already granted or to be granted
thereafter are regulated by Appendix “A”. The language no where indicates
intention of legislature to cast obligation upon the exempted establishment to
abide by clause 19 and clause 20, even after period prior to 06.01.2001. I
have already found that clause 19 and 20 cast a new obligation not existing till
then, therefore, the contention of respondent that paragraph no.27AA with its
Appendix -A, has got retrospective effect is without any merit.
41. Interest payable to a member under the Scheme is definitely a factor
to be considered to find out whether the scheme of exempted establishment or
Statutory Provident Fund scheme is better for him. The word ‘other Provident
Fund benefits’ in section 17[1][a], therefore, needs to be given widest possible
interpretation. I am therefore, not in a position to accept the contention of
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39
learned Senior Advocate that interest declared by the MM Board of Trustees
under Rule 23 or declared by the Central Government in paragraph no.60 of
the Statutory Provident Fund Scheme is not a “benefit”. In this view of the
matter, I do not find it necessary to refer to judgment in the case of Thazhathe
Purayil Sarabi and others .vrs. Union of India and another (supra) and Sri
Venkateswara Syndicate .vrs. Oriental Insurance Company (supra), cited by
him. Even if interest is presumed to be a compensation, still it also has
character as a benefit flowing from the investment to the contributory of the
Provident Fund. M/s. Rampur Fertilizer Ltd .vrs. M/s. Vigyan Chemical
Industries (supra), also need not to be considered for said purpose. Paragraph
no.12 there further, considers the case of retrospective obligation and holds
that the transactions with which the Hon’ble High Court was dealing, took
place prior to 23.09.1992 and suit itself was filed on 31.10.1991 i.e. before
coming into force of Interest on Delayed Payment to Small Scale and Ancillary
Industrial Undertaking Act, 1993. The said Act came into force on 23.09.1992.
42. The judgment of Hon. Calcutta High Court in the case of Electric
Lamp Manufacturers (India) Ltd. .vrs. Regional Provident Fund Commissioner
and others (supra), considers some what similar facts. Shri Sundaram, learned
counsel has tried to distinguish this division bench judgment by urging that, the
exempted establishment there was admittedly earning interest at less than
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40
statutory rate of interest of 12%. However, that cannot be a distinguishing
feature at all, and in any case, in present matter the Provident Fund
department has never come up with a case that MM Board of Trustees was
receiving interest from Government securities at higher rate and still credited
to the account of the members interest only at 10%. The MMPF Scheme and
Rules framed thereunder, are not alleged to have been violated and
department which has received returns of account and audited statements
regularly from the MM Board of Trustees has not come up with any such
specific case. Show cause notice issued to petitioners is also not containing any
such ground.
43. Perusal of the judgment of Hon’ble Division bench of Calcutta High
Court above, shows that there the exempted establishment was paying interest
at 10% and hence on 02.04.1991, petitioner employer there expressed his
difficulty as regards payment of minimum rate of interest as increased by the
Central Government periodically. Clarification was sought from the
department about the conditions imposed while granting exemption. The
department advised the petitioner to surrender exemption granted under
section 17[1] and to seek exemption under paragraph no.27A of the Statutory
Scheme of 1952. In terms of clause 20 of Appendix of said paragraph no.27A,
employer was to make good the deficiencies on account of difference in rate of
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41
interest. In paragraph no.13 the Calcutta High Court noticed that, the
questions before it was whether, petitioner employer was liable to make good
the deficiencies about payment of interest in terms of notification issued by the
Central Government. In paragraph no.17 provisions of Section 17 are looked
into and it has been noticed that in terms of scheme thereof a pattern of
investment was fixed and investment had been made accordingly. The
investments also received due recognition. In paragraph no.20 the High Court
there observed that, the employer had no other liability once a notification of
exemption under section 17 was issued. It also observed that, the liability if
any, was only in terms of section 6 or Clause [a] of sub-clause [3] of Section
17. In paragraph no.22 it is found that once a Trust is constituted by such
employer, he has no say in the matter. Though the PF Act is beneficial, it
cannot be construed so as to operate in a different field and make a person
liable for that, for which he is not answerable under the said Act or the scheme
framed therein. Paragraph No.60 of the statutory scheme is held to impose
duty upon the Commissioner and not upon the trustees. The question whether
Board of Trustees is required to pay same interest which may be declared by
the Central Government in terms of paragraph no.60 was not considered
because action by department was not against the Board of Trustees. Position
before me is not different, and here provident fund department has not taken
any action against the MM Board of Trustee. However, it is to be noticed that
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42
the Division Bench of Calcutta High Court also noticed that, its attention was
not drawn to any provisions of the Scheme which require Board of Trustee to
declare interest at the same rate. In paragraph no.24 the Hon’ble Division
Bench has noticed that in terms of clause 16 of the scheme framed under
Section 17 of the P.F. Act, Central Government could have issued a notification
imposing additional conditions, but unless it is done, the Board of Trustees or
the employer cannot be saddled with additional liability.
44.
The Division Bench however, did not accept the contentions of the
department that sub-section [1] of Section 17 needed to be construed in a
manner conducive to provide for same facilities as would be conferred by the
Central Government. It further accepted that, rate of interest is one of the
facilities which can be conferred upon, under P.F. Act. In paragraph no. 25
while recording reasons for rejecting contention of provident fund department,
the Division Bench has noticed that, Board of Trustees is not expected to pay
enhanced interest at a rate which they may not earn from their source of
investments. It also found that any other construction of Section 17[1] would
jeopardized the exempted scheme itself. It found that, to impose any other or
further monetary liability, a condition in that respect must be specifically added
in the exemption order. The Hon’ble Division Bench concluded that any
condition de-hors exemption notification cannot be thrust upon the employer.
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43
45. Thus, the judgment clearly shows that matter needs to be examined
in the light of order of exemption and here it is not the case of respondents
that, the securities in which the MM Board of Trustees invested the amount
were not protected by it or then the Model Mills did not shoulder the
expenditure of the administration of the scheme. In short the provident fund
department is not alleging any breach or violation of exemption order or of
MMPF scheme or Rules framed thereunder.
46. In Jiyajeerao Cotton Mills Employees .vrs. Dev Kumar Holani and
others [supra], the Hon’ble Apex Court has considered some what similar
situation. There the Central Government forwarded to appropriate
Government revised conditions for granting exemption under Section 17[1]
and one such condition was that any amendment to statutory P.F. Scheme
more beneficial to the employees than the existing one, shall become
automatically applicable. Because of this condition, the provident fund
department claimed difference between interest which was given at rate
declared by the Board of Trustees and rate of interest declared by the Central
Government. The Regional Provident Fund Commissioner, held that the
revised condition cannot be implemented unless the same were notified in
official gazette by the appropriate Government. The employees challenged the
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44
same in Writ Petition before the High Court and the High Court held that, not
paying interest at higher rate was in contravention of the P.F. Act and
Statutory Scheme. The Hon’ble Apex Court in petition filed before it by the
establishment/department, found that the employer had its own Rules and
because of exemption, the Statutory P.F. Scheme do not apply to it. In
paragraph no.9, the Hon’ble Apex Court found that, the High Court was
therefore, clearly wrong in applying paragraph No.60 of the Statutory P.F.
Scheme to the said establishment. It also found that the proposed revised
terms and conditions do not and could not have become applicable
automatically unless they were incorporated by appropriate government in the
notification granting exemption under Section 17[1][a] of the P.F. Act. The
view of the Regional Provident Fund Commissioner was therefore, upheld by
the Hon’ble Apex Court.
47. The judgment of Hon’ble Apex Court above and of Division Bench of
Calcutta High Court considers provision of Section 17[1][a], and also
paragraph No.60 and it has been held that unless and until obligation to pay
interest at rate declared by the Central Government is specifically incorporated
in the order of exemption, exempted establishment is not expected to pay
interest at that rate. Both these judgments considers the relevant provisions for
reaching said conclusion. Efforts of Shri Sundaram, learned counsel to show
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45
that the judgments have been reached because of absence of notification, must
be held to be without any substance. The relevant provision considered above,
clearly show that petitioners are not statutorily required to pay interest at 12%
and therefore action of paying interest at rate declared by the MM Board of
Trustees cannot be stated to be either illegal or improper, or in contravention
of the provisions of the P.F. Act, 1952 or Statutory P.F. Scheme framed
thereunder.
48.
Learned Senior Counsel, has relied upon the judgment of Hon’ble
Apex Court in the case of M/s. D.N. Roy and others .vrs. The State of Bihar
and others (supra), to urge that a specific show cause notice and opportunity to
MM Board of Trustee in the matter or in the alternative to the petitioner was
necessary. He has urged that the arguments about earning more interest by the
MM Board of Trustee are without any notice to petitioner. In view of the
finding already reached above, though I find that show cause notice under
section 7A does not raise any such ground, it is not necessary to consider the
said judgment. In Union of India .vrs. GTC Industries Ltd. Bombay [supra], the
Hon’ble Apex Court has stated that the quasi judicial order must be evaluated
on the basis of reasoning contained therein, and not on the basis of pleas put
forward by person seeking to sustain order in its counter affidavit or oral
arguments before the court. This is settled legal position and again in view of
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the finding already reached above, I do not find it necessary to go in to more
details here. It may be noted here that recoveries sought here are also for
period prior to 6/1/2001 and necessary period-wise breakup or liabilities are
not ascertained or crystallized as yet.
49. The provisions of Section 32 of the SICA give overriding effect to the
rehabilitation scheme framed for petitioners by BIFR. The Hon’ble Apex Court
has already observed that the scheme is accepted by all concerned and it
should be implemented. The Director, Recovery of respondents has restrained
local authorities from taking any coercive steps against the petitioner
establishment. Record show that a Fax Message dated 04.06.2004 was
forwarded by the said Authority to all concerned, including the authorities at
Nagpur. Inspite of this, the movables of petitioners were attached on
04.06.1994 itself and immovable properties have been attached on
14.03.2005. The stand that Fax Message dated 04.06.2004 was not received is
during oral arguments before this Court. There is no affidavit filed for said
purpose. The receipt of communication -a letter to confirm fax, dated
07.06.2004 is not in dispute. If after receipt of confirmation letter dated
07.06.2004 the Authorities at Nagpur learnt about the error committed by
them one fails to understand how/why amends were not made by releasing
the said property from attachment. It is not understood why more than 9
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months thereafter, immovable properties were attached in its violation. All
this shows that there is some substance in the allegations of malafides on the
part of the local authorities by the petitioners. It is to be noted that properties
for sale wee to be identified by the Assets sale Committee and funds derived
from sale thereof were to be utilized for discharging various liabilities and for
revival of the viable mills. Thus the entire design in sanctioned BIFR scheme
was thus jeopardized because of such high handed action on the part of the
local officers/authorities of the respondent. It appears that the employees and
their recognized trade union were also opposing the sale of assets and then it
had filed proceedings to stall the execution of the scheme sanctioned by the
BIFR on 25.07.2002. The said scheme and appellate order dated 20.11.2007
passed by the Appellate Authority for Industrial and Financial Reconstruction,
along with the permit of closure dated 01.06.2004 were questioned before this
Court by the said Trade Union in Writ Petition No. 5907/2007. The Writ
Petition was dismissed summarily on 15.01.2008 by the Division Bench of this
Court. In view of this development it cannot be said that the BIFR Scheme
could not be implemented only because of the high handed or arbitrary action
on the part of the local provident fund authorities. The request for grant of
exemplary costs against them in the matter however needs to be considered.
It is also to be noted that the petitioners have not joined any individual officer
at Nagpur in his personal capacity and have not made any allegations of
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malafides against him. The intervenor employees are bound by the BIFR
Scheme for rehabilitation and can not attempt to defeat or dilute it in any way.
50. The judgment of Hon’ble Apex Court in the case of Dhampur Sugar
Mills Ltd. .vrs. State of U.P. And others [supra], relied upon by the learned
Senior Counsel to show that when an enabling power is conferred upon a
particular authority for public reasons and public benefit, duty to exercise that
powers can also be inferred. Discussion on various precedents by the Hon’ble
Apex Court in paragraph nos. 37 to 57 of this judgment has been relied upon to
show that because of second proviso to section 14[B] of the P.F. Act,
paragraph no.32[B] of the Statutory P.F. Scheme and Section 32 of the SICA,
the Central Board of P.F. Department is under obligation to consider the
representation of the petitioners for exemption. The power to waive given to
Central P.F. Board is definitely in larger public interest and said Board is
therefore obliged to and can not refuse to exercise that power. It is not
necessary for this court to record any finding in this respect because Shri
Sundaram, learned counsel has expressly stated that the Central Board can be
directed to consider the same in time bound manner. Perusal of
communication dated 13.06.2007 produced before the Court during final
arguments and admitted by both the parties, show that there was some
discussion going on in the matter between the parties. It also show that the
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Central Provident Fund Commissioner has directed Regional Provident Fund
Commissioner not to take any coercive action against the NTC Mills which
includes MM Mills in respect of dues, interest and damages until further
instructions from the Head Office. In these circumstances, it is apparent that
the directions to decide the said representation dated 09.09.2002 need to be
issued in the present matter.
51. In view of this discussion above, it is apparent that the respondents
are not entitled to claim alleged amounts on account of difference in rate of
interest declared by the Commissioner in paragraph no.60 of the Statutory
Scheme and by MM Board of Trustees under Rule 23 of the MM PF Scheme. It
therefore, follows that demand for damages on that account is unsustainable.
The show cause notice dated 15.04.2004 at Annexure-C with Writ Petition No.
5440/2005 or order dated 05.10.2004 based upon it, by the respondent no.1
Assistant Provident Fund Commissioner and further order dated 06.09.2005
passed by the EPF Tribunal at Annexure-H along with the said petition in
Appeal No. 107[a]/2005 are accordingly quashed and set aside. The said Writ
Petition is thus allowed. However, it is made clear that the respondents are
free to issue fresh notices as per law giving period wise breakups and after
giving opportunity to the petitioners, are free to recover it in accordance with
law. This exercise is subject to result of hearing in and consideration of
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application of petitioner dated 9/9/2002 as per directions below in W.P.
1717/2005.
52. Writ Petition No. 1717/2005 is allowed. The order of attachment
dated 14.03.2005 and 04.06.2004 issued by the respondent no.3 Recovery
Officer therein are quashed and set aside. The respondent no.1 Central Board
in that petition is directed to consider the application dated 09.09.2002
submitted by the petitioner for waiver of damages in the light of the BIFR
Scheme and orders dated 25.07.2002. The said decision be taken as early as
possible and in any case by 31.03.2010, after hearing the petitioners. The Bank
guarantee for amount of Rs. 9 Crores furnished by the petitioners in terms of
interim order dated 16.06.2005 shall be kept alive till 31.03.2010
53. Both the Writ Petitions are allowed accordingly with costs, and the
cost are quantified at Rs. 15000/- each. Respondents to recover these costs
from its officers who ignored fax message and communication dated 7/6/2004
and proceeded with attachment of movables or immovables. Rule accordingly
in both the Writ Petition in the aforesaid terms.
JUDGE
Rgd.
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