JUDGMENT
1. By this writ petition filed under Article 226 of the Constitution the petitioner is seeking to challenge legality and correctness of the order passed by the respondent Regional Provident Fund Commissioner on April 28, 1989 ordering damages for delayed payment amounting to Rs. 43,605.15 and further directing the petitioner to pay the said amount within 15 days on receipt of the order. Mr. Dastane, the learned counsel for the petitioner, has raised two-fold contentions in support of the writ petition. Firstly Mr. Dastane contended that initiation of the proceedings by the respondent under Section 14-B of the Employees’ Provident Funds and Miscelleous Provisions Act, 1952 (for short “the Act of 1952”) was grossly belated inasmuch as the damages were sought to be imposed for the defaults for the months of January 1973 to September 1982. In this connection Mr. Dastane placed reliance on the decision in K. T. Rolling Mills Pvt. Ltd. v. R. M. Gandhi and others (1994-I-LLJ-66) (Bom). The second contention of Mr. Dastane, learned counsel for the petitioners is that by the circular issued by the authorities on November 3, 1982 the maximum levy of arrears could have been to the tune of 25% and therefore the levy of damages exceeding 25% was bad in law and in this connection Mr. Dastane, relied on the decision of this Court in Super processors vs. Union of India, 1992 Mh. L.J. 809.
2. Per contra Mr. Sundaram, learned counsel for the respondent, strenuously urged that the notice issued to the petitioner on May 26, 1998 for defaults for the months of January 1973 to September 1982 cannot be said to be grossly delayed or belated, and in any case on that ground alone the damages levied by the Regional Provident Fund Commissioner cannot be quashed. Mr. Sundaram submitted that the decision in the case of K.T. Rolling Mills has been reversed by the Supreme Court in Civil Appeal No. 1639 of 1994, Regional Provident Fund Commissioner v. M/s K. T. Rolling Mills Pvt. Ltd. (since reported in 1995-I-LLJ-882) vide judgment dated November 22, 1994. He placed on record a photostatcopy of the judgment of the Supreme Court in that connection. Mr. Sundaram also contended that the Circular dated November 3, 1982 relied upon by the learned counsel for the petitioner has no application in the present case because subsequently the clarification was made by the Commissioner by the subsequent Circular dated May 13, 1983 and the judgment of this Court in Super Processor’s case has no application in the facts and circumstances of the present case.
3. The respondent Regional Provident Fund Commissioner issued a notice dated May 26, 1988 to the petitioner Saoner Taluka Ginning, Pressing and Dal Mill Prakriya Sahakari Sanstha (for short “the employer”) and called upon the employer to explain why for the defaults committed for the months of January 1973 to September 1982 damages should not be imposed under Section 14B of the Act of 1952. Along with the notice the details of the defaults were mentioned. The employer submitted the reply on June 23, 1988 to the show cause notice and submitted that the delay was occasioned because of late finalisation of the accounts and the decisions of the Govermnent of Maharashtra from time to time and also due to regular power cut off since the employer was the seasonal factory. The employer submitted that there was no deliberate intention to commit default and therefore, the proceedings initiated under Section 14-B were unwarranted.
4. The Regional Provident Fund Commissioner (for Short “the Commissioner”) heard the arguments and after going through the record of the case held that merely because the employer was seasonal factory, it was not open to the employer to commit breach of the provisions of the Act of 1952. The Commissioner held that the employer was required to make compliance under the Labour laws and therefore the contentions that there was financial difficulty and that it was co-operative sector were irrelevant. In the facts and circumstances the Commissioner imposed the damages at the following rates.
1. For the period - @ 25%
1/73 to 7/73 of the dues
2. For the period 10/73 - @ 60%
of the dues
3. For the period - @ 50%
12/73, 5/75, 6/76 of the dues
11/75
4. For the period 3/74 - @ 100%
to 4/75, 6/75 to of the dues
10/75, 12/75 to 5/76,
7/76 to 6/77, 7/77, to
3/78.2/81 to 9/82.
5. For the period 5/78, - @ 2%
7/78, 9/78, 8/79, of the dues
1/79
6. For the period 10/78 - @ 10%
of the dues
7. For the period 2/79 - @ 5%
to 3/79 of the dues
8. For the period 1/80 - @ 20%
to 4/80. of the dues
9. For the period 8/76 - @ 100%
to 2/78. of the dues
in A/c XXI
and XXII
10. For the period 1/74 - @ 75%
to 2/74. of the dues
11. For the period 1/73 - @ 40%
of the dues
12. For the period 12/73 - @ 22.5%
of the dues
Accordingly the Commissioner ordered the damages for delayed payment to the tune of Rs. 33,587.35 towards the Provident Fund Contributions, Rs. 7362.55 towards Family Pension Contributions, Rs. 1598.60 towards the Employees’ Deposit Linked Insurance Contributions, Rs. 1742.50 towards administrative charges and Rs. 314.15 towards administrative charges on Employees’ Deposit Linked Insurance Contributions. Thus for the period from January 1973 to September 1982 an amount of Rs. 43,605.15 was levied as damages.
5. The aforesaid levy of damages would show that the Commissioner has levied the damages looking to the gravity of defaults and the said damages ranged from 2% to 100%. In the case ofsuper Processors (supra) this Court held as under :-
“… In my judgment, whether there has been an undue and unexplained delay in initiating proceedings and whether there has been an infraction of the principles of natural justice would depend upon the facts of each individual case. If it is shown that the employer has been prejudiced on account of delay; that the employer has been prejudiced in setting up a proper denfence to the show cause notice and to lead evidence in support thereof on the ground that he has not maintained the relevant record, it is possible to hold that there has been an infringement of the principles of natural justice and, therefore, the order, levying damages is liable to be quashed. In the present case, however, it will be seen that the petitioner has not filed any reply whatsoever to the show cause notice. Though as many as ten adjournments were granted, the petitioners failed to submit their explanation. They chose to remain absent. This is not a case where the petitioners have filed a reply and have taken up a contention that they have, on account of passage of time not maintained the revevant record for the period in question and, therefore they are not in a position to take up the proper defence. It will therefore not be open for the petitioners to take up the point for the first time in the writ petition i.e. prejudice being suffered by the petitioners on ground of delay. It is to be noted that so far as Section 14-B is concerned, there is no period of limitation prescribed within which action for the recovery of damages can be instituted against the defaulter. It is to be realised that the amount of provident fund dues consist of deductions made from wages of the workers as well. If an employer deducts these contribution from wages and sits tight over them, he as a trustee is liable to account for the same at any time. It is no defence for him to say that he will cease to be accountable after a given fixed period. Legislature has advisedly not prescribed any period of limitation for issuing show cause notice against such defaulting trustees-employers. It is also to be noted that the Act is a beneficial piece of legislation meant for the welfare of weaker section of society namely the employees. Such employees have no control over the acts and omissions of authorities exercising their powers under the Act. If such authority out of negligence or otherwise fails to issue show cause notice against the defaulting employer promptly, there is no rhyme or reason why innocent beneficiary employers who are third parties should suffer thereby. The only question that would really survive is the one whether on facts and circumstances of a given case, the show cause notice issued after laspe of reasonable time can be said to be issued beyond reasonable time. The test whether lapse of time is reasonable or not will depend upon the further fact that whether the employer in the meantime has changed his position to his detriment and is likely to be irretrievably prejudiced by the belated issuance of such a show cause notice. If such, defence is not pleaded and proved, challenge on the ground of late issuance of notice must stand rejected. (See Gandhidham Spinning and Mfg. Co v. Regional Provident Fund Commissioner, 1987 Lab. I.C. 659.)
6. Subsequent to the aforesaid judgment, in K. T. Rolling Mills Pvt. Limited’s case this Court held as under : (at page 74)
“As already indicated, the fact that the legislation in question is a social welfare legislation cannot be stretched too far to give a licence to the authorities thereunder to sit over matters for years and years and to spring in action and initiate proceedings as and when they like. The Law in this regard is well settled by the various decisions of the Supreme Court. The principles that emerge from these decisions are clear and can be summed up thus :
Where no period of limitation is prescribed by the law for the exercise of any power, it must be exercised within a reasonable time. Any unreasonable delay in exercise of the power may affect its validity. What is reasonable time, however, will depend upon the facts of each case.
In the instant case, there is long delay ranging between 8 to 17 years in initiating action under Section 14-B of the Act for alleged delay in depositing contributions. No explanation is available for such unreasonable delay. Under the circumstances, the delay cannot be held to be reasonable. Such unreasonable delay will definitely vitiate the action taken by the respondents. In fact, the initiation of proceedings after such inordinate delay amounts to abuse of power. The initiation of the proceedings and the impugned order passed in pursuance thereof, therefore, are liable to be quashed.”
7. The judgment of this Court delivered in K. T. Rolling Mills Pvt. Limited’s case has been reversed by the Apex Court and it held as under : (at pp 882, 883)
“The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, hereinafter “the Act” was enacted to serve beneficent purpose and it does constitute a welfare measure, as it seeks to create a fund which could be drawn upon by certain categories of employees working in factories and some establishments to meet pressing demands, so also to provide pension after the employees have ceased to be in service. So the Act has to be construed in such a way, in case two views be possible, which advances the object. This has been the outlook of the Court for over three decades by now, as the same was first focused in Regional Provident Fund Commissioner vs. Sri Krishna Metal Manufacturing Company (1962-I-LLJ-427) (SC) and was reiterated in Regional Provident Fund Commissioner v. Shibu Metal Works, (1965-I-LLJ-473) (SC). The purpose of the aforesaid prologue is to find out as to when power under Section 14-B of the Act should be allowed to be used and whether it would be in consonance with the object sought to be achieved by the Act if delay in invoking the power is allowed to stand in the way. As in the present case we are concerned with the order of the Regional Provident Fund Commissioner, Maharashtra, (the Commissioner) levying damages on the respondent for default in the payment of the contribution in exercise ol power under Section 14-B let it be noted what this Court had said in Organo Chemical Industries v. Union of India, (1979-II-LLJ-416). In that case this Court was called upon to decide the constitutionality of Section 14-B, which was challenged as violative of Article 14 having conferred unguided power. It rejected the contention. It also spelt out the purpose of imposition of damages, stating that the same was meant to penalise defaulting employer, as also to provide reparation for the amount of loss suffered by the employees. It was pointed out that it is not only a warning to employers in general not to commit a breach of the statutory requirements, 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 no dispute in the present case that the respondent had defaulted in depositing the contributions both its own and as well as of the employees in time. The Commissioner after applying his mind to the period of delay as well as to the quantum, imposed a sum of Rs. 52,034.80 as damages. The order of the Commissioner came to be challenged before the Bombay High Court by the respondent who has set aside the order solely on the ground that the proceeding was bad because of unreasonable delay in initiating the same. The Court pointed out that though Section 14-B has not laid down any period of limitation, the power has to be exercised within reasonable time. As the default related to the period from July 1968 to October 1977, relating to which proceedings came to be initiated in 1985, the High Court regarded the delay as unreasonable, and so fatal. The Regional Provident Fund Commissioner has preferred this appeal with the aid of Article 136 of the Constitution.
There can be no dispute in law that when a power is conferred by statute without mentioning the period within it could be invoked, the same has to be done within reasonable period, as all powers must be exercised reasonably, and exercise of the same within reasonable period would be a facet of reasonableness. When this appeal was heard by us on September 7, 1994 and when this aspect of the matter came to our notice, we desired an affidavit from the Commissioner to put on record regarding the point of time when he knew about the default and to explain the cause of delay. Pursuant to that order the Commissioner filed his affidavit on November 10, 1994, according to which the power of levying damages came to be delegated to the Commissioner by an order dated October 17, 1973. As however large number of establishments were in existence in the State of Maharashtra the number of which in 1985 was 22, 189 – and there was only one Regional Provident Fund Commissioner having power to levy damages, delay was caused in detection of the cases of belated payment. According to the ‘affidavit, the default at hand was located on April 19, 1985 and the damages came to be levied by order dated November 5, 1986.
The aforesaid shows that the delay was of 12 years viewed generally and was of 1 1/2 years qua the case at hand. Though the general period of delay is quite long, unreasonably long, but is borne in mind that in view of large number of establishments in the State of Maharashtra, default at hand came to notice only in April 1985, the killing effect of delay gets eroded. We do not, therefore, think if the order merits to be struck down on the ground of delay, when it is also kept in mind that the delay in default related even to the contribution of the employees, which money the respondent (after deducting the same from the wages of the employees) must have used for its own purpose and that too without paying any interest, at the cost of those for whose benefit it was meant. Any different stand would encourage the employers to thwart the object of the Act, which cannot he permitted.”
8. The judgment of this Court in K.T. Rolling Mills Pvt. Ltd’s case relied upon by the learned counsel for the petitioner thus has been reversed as aforesaid and the Apex Court has emphasised that if the order merits to be struck down on the ground of delay, then it must also be kept in mind that the delay in default even related to contribution of the employees, which money the employer must have used for its own purpose and that too without paying any interest at the cost of those for whose benefit it was meant. Any different stand would encourage the employers to thwart the object of the Act which cannot be permitted. The Act of 1952 being a beneficial legislation meant for the benefit of the employees, for non-compliance and default by the employer the damages imposed in exercise of the powers under Section 14-B therefore cannot be set aside solely on the ground that there was delay in initiation of the proceedings. No hard and fast rule can be laid down as to what period would be unreasonable because each case is required to be examined in the facts and circumstances of its own. Unless the employer sets up a specific case of prejudice because of delay normally in the absence of such specific plea, it could not be assumed that the initiation of proceedings under Section 14-B by the Commissioner after some years would be unreasonable. The power under Section 14-B has to be exercised obviously within a reasonable time, but unreasonable time cannot be confined to any particular period. In the facts and circumstances of the present case for the defaults for the period from January 1973 to September 1982 the notice issued in the month of May 1988 cannot be said to be so unreasonable to render the proceedings under Section 14-B fatal. There is not even a whisper on the part of the employer that during the aforesaid period its positions has been changed to its detriment and that by belated issuance of notice it has been put to prejudice. Thus there is no merit in the contention of the learned counsel for the petitioner that the order passed by the Commissioner deserves to be quashed because of belated initiation of the proceedings under Section 14-B of the Act of 1952.
9. As regards the second contention raised by the learned counsel for the petitioner that by the notification dated November 3, 1982 the Central Board directed the Regional Provident Fund Commissioner to levy the damages at the rate of 25% per annum, the said circular and the subsequent circular dated May 13, 1983, may be adverted to. In the circular dated November 3, 1982 the relevant para reads as under :
“3. This decision of the Board was referred to the Government of India for approval and the Government have while conveying their approval advised this office that pending amendment of Section 14-B of the Act the decision of the Board may be given effect to. You are accordingly advised to regulate the levy of damages at the rate of 25% per annum subject to the condition specified in the preceding paragraph in all cases of defaults with immediate effect. All pending cases and those cases where hearings under Section 14-B have already been held but final orders have not been issued should also be regulated as per this letter. Cases where speaking orders have already been issued may not however be reopened, except as otherwise instructed in this office circular letter No. E-II/Dam (Genl.) 80, dated the December 31, 1980.”
This circular dated November 3, 1982 was clarified by the subsequent Circular dated May 13, 1983 which reads as under :
“Please refer to this office circular letter of even No. dated the November 3, 1982 regarding levy of damages.
Under the said guidelines, the levy of damages has been advised to be regulated, inter alia, at the rate of 25% per annum instead of graded rates of damages as provided in the earlier guidelines, in all cases of default with immediate effect. Central regions have however sought clarification regarding the true scope of the applicability of the said guidelines in view of certain references having been made therein to certain cases pending under Section 14-B on the date of the issue of the said guidelines.
On a careful examination of the difficulties experienced and the doubts expressed in the matter, it is hereby clarified that the defaults committed after the issue of the said guidelines are advised to be regulated in accordance with the revised guidelines issued as aforesaid. Therefore, all defaults for the period upto September 1982 (September 1982 dues payable on or before October 15, 1982) are advised to be processed and decided as per the then existing guidelines. Defaults arising for the month of October, 1982 for provident fund dues which are payable on or before November 15, 1982 and defaults onwards are advised to be regulated under the revised guidelines. Accordingly reference in para 3 of the Revised Guidelines, to “All pending cases and those cases where hearings under Section 14-B have already been held but final orders have not been issued should also be regulated as per this letter. Cases where speaking orders have already been issued may not however be reopened except as otherwise instructed in this office circular letter No.E-II/Dam.(Genl) 80, dated the December 31, 1980” be deleted.
It is further clarified that all guidelines on levy of damages including the revised guidelines, are designed to provide necessary guidance in the matter of levy of damages with a view to bring about an element of uniformity in the working of the Organisation in this regard. However, you are advised to consider Judiciously all the relevant facts and circumstances of each case of default, having regard to the provisions of Section 14-B and then pass a considered order in each case.”
It would be seen that para 3 of the Circular dated November 3, 1982 has been clarified in the subsequent circular dated May 13, 1983 by making it clear that all pending cases and those cases where hearing under Section 14-B have already been held but final orders have not been issued should be regulated as per this letter/circular. This means that by the subsequent circular dated May 13, 1983 it was made clear that all defaults for the period up to September 1982 (September, 1982 dues payable on or before October 15, 1982) were advised to be processed and decided as per the then existing guidelines, and defaults arising for the month of October 1982 for provident fund dues which were payable on or before November 15, 1982 and defaults onwards were advised to be regulated under the revised guidelines. It is further made clear that these guidelines were intended to provide necessary guidance in the matter of levy of damages with a view to bring about an element of uniformity in the working of the organisation and the cases were to be decided judiciously on consideration of all the revevant facts and circumstances of each case of default.
10. In the case of Super Processors, while considering the circular dated November 3, 1982 and the circular dated May 13, 1983 this Court held as under :
“The last contention advanced by Shri Cama relates to the challenge of the circular dated November 3, 1982 at Exhibit-D and the clarification dated November 3, 1982 at Exhibit-E. The respondents prior to the issuance of the said circulars were governed by the old guide lines recommending damages for different number of defaults and the period of delay in making payment of contribution to the fund. The damages varied from 2% to 100% of the amount in arrears. By the instant circulars the respondents have sought to amend the guidelines. By the amendment a higher Emit of damages has been prescribed at 25%. The said circular is made applicable to defaults which take place after the month of October, 1982. The pending cases in respect of the period upto September 1982 are directed to be heard and disposed of under the old guidelines. By the circulars the respondents have sought to lay down a uniform pattern of damages to be levied for default or delay in making the contributions to the fund. It is sought to reduce the quantum of damages which are liable to be levied. The circulars have thus created two classes of defaults, one committed prior to September 1982 and the other for the month of October, 1982 and thereafter. The employers who have committed defaults for the prior period, are required to be treated differently from the subsequent period. The circulars have thus created two classes of employers, who are similarly placed. Whereas one class is liable to be visited with damages which can extend upto 100%, the latter class is liable to be treated lightly and is liable to pay damages not over 25% of the amount in arrears. The classification is not based on any intelligible differentia which distinguishes persons or things which are grouped in one class and others who are grouped in the other. The action on the part of the respondent to treat the petitioners differently from the employers who committed similar defaults for the subsequent period will attract the vice of Article 14 of Constitution of India. Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It is attracted where equals are treated differently without any reasonable basis. The principles underlying the guarantee is that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabifities imposed. Equal laws would have to be applied to all in the same situation and there should be ne discrimination between one person and another if as regards the subject matter ol the legislation of their position is substantially the same. Article 14 forbid,, class legislation but permits reasonable classification for the purpose of legislation. The classification must be founded on the intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the group an@ that differentia must have a rational nexu@ to the objects sought to be achieved by the statute in question. In other words, there ought to be causal connection between the basis of classification and the object of the statute. The classification has to be based, as is well settled on some rational principle and the rational principle must have nexus with the object sought to be achieved. A discriminatory action is liable to be strucl down unless it can be shown by tht Government that the departure was not arbitrary but was based on some valic principle which in itself was not irrational,, unreasonable and discriminatory. (See D. S. Nakara and others v. Union of India, (1983-I-LLJ-104) (SC). In the present cast what has been done by the aforesaid circulars is that the employers who are found guilty of defaults for the period prior to 1982 will be liable to pay damages whict can extend upto 100% whereas the employers who commit defaults for the period October 1982 and thereafter will be liable to pay damages only upto 25% of the amount in arrears. Why the two sets of employers are to be differently treated is no explained. In my view there is no justification to treat the defaults committed prior to September 1982 and thereafter differently. If the defaults which are committed for the period October, 1982 and thereafter are liable to be visited with damages only upto the extent of 25% of the amount in arrears. I do not see any valid reason why the same benefit should not be extended to the employers who are found guilty of default for the period prior to September 1982. If the employers guilty of default for the period prior to September 1982 are treated differently from the employers who are guilty of default for the period of October 1982 and thereafter the same would attract the mischief of Article 14 of the Constitution. The employers like the petitioners who are guilty of default for the period prior to 1982 will therefore be entitled to get equal treatment along with the employers who are guilty of default for the period October, 1982 and onwards. Hence the maximum penalty, which can be imposed upon the petitioners, will be to the extent of 25% of the amount in arrears.
11. From the aforesaid eirculars one thing is clear that for the period upto September 1982 dues payable on or before October 15, 1982 were advised to be processed and decided as per the then existing guidelines and according to the said guidelines the levy of damages could be at the rate of 25% per annum and for the defaults arising from the month of October 1982 for provident fund dues payable on or before November 15, 1982 were to be regulated as per the revised guidelines. Perusal of the order passed by the Commissioner shows that from January 1973 to September 1982 for some period damages have been levied at the rate of 60%, 50% and 100% while under the circular it should have been only upto 25%. Since the employer was guilty of defaults for the period upto September 1982, the employer was liable to pay the damage at the rate of 25% under the circular aforesaid, to have the uniform rate of damages for similarly situated employers and since for some of the said period the damages have been imposed at higher rate than 25% the order passed by the Commissioner on September 28, 1989 deserves to be quashed and set aside and matter remanded back to the Regional Provident Fund Commissioner to compute the levy of damages under Section 14-B in accordance with law and in accordance with the observations made bereinabove. The employer is directed to appear before the respondent Regional Provident Fund Commissioner on March 15, 1995 and the said Commissioner would decide levy of damages within one month from appearance of the
passed by the Regional Provident Fund commissioner, Bombay on April 28, 1989 is quashed and set aside and the matter is remanded and sent back to him for decision in accordance with law as observed above. Rule is made absolute in above terms. No order as to costs.
