Sen - (1.) THIS is a petition under Article 32 of the Constitution by M/s. Organo Chemical Industries, Sonepat directed against an order of the Regional Provident Fund Commissioner, Chandigarh, dated 12/10/1977 by which he imposed a penalty of Rs. 94,996.80 on the petitioners as damages under S. 14-B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, for delayed remittances of the Employees' Provident Fund, Family Pension Scheme contributions of their employees, including their own contributions, and the administrative charges thereon.
(2.) ORGANO Chemical Industries, an 'establishment' within the meaning of S. 1(3) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act') to which the Act applies, committed defaults in payments of Provident Fund and Family Pension Scheme dues for the period from March to October 1975 and again for the period from December 197 5/11/1976 to the extent of Rs. 92,687.00 and of administrative charges amounting to Rs 2,309.80 i. e. Rs. 91,996.80 in all. The Regional Provident Fund Commissioner, Chandi- garh, accordingly, issued a show cause notice dated 7/06/1977 requiring the petitioners to show cause why damages should not be levied under S. 14-B of the Act. The notice was accompanied by a statement showing a break-up of the various amounts in arrears and the extent of delay in respect of each payment and the details of damages proposed to be imposed on the belated payments. The period of delay in payment of the amounts remitted varied from a few months to a year. It was proposed to levy damages at a uniform rate of hundred per cent on each of the amounts in arrears. In response to the notice, the petitioners tried to explain away the delay by alleging that it was due to difficulties beyond their control and, therefore, the payments could not be made in time viz., the facts that there were disputes between the partners of the firm as a result of which, there was a loss of Rs. 1,40,165.15, there was a power-cut of 60% by the Haryana Electricity Board w.e.f. 6/05/1974, which compelled the 578 petitioners to purchase a generating set to tide over the difficulties and that the establishment had borrowed huge sums from the Haryana Financial Corporation and in payment of which it had defaulted for want of financial resources etc. It was, accordingly, contended that the default, if any, was not wilful as they had no intention to commit a default. The Regional Provident Fund Commissioner after giving to the petitioners the opportunity of a hearing by his reasoned order dated 16/08/1977 considered in detail each of the grounds taken in mitigation of the defaults and came to the conclusion that none of the grounds alleged furnished a legal justification for the delay in making contributions in time. As regards the alleged dispute among the partners leading to a loss of Rs. 1,40,165.15, he observed : Even if it is assumed that there was a loss as claimed it does not justify the delay in deposit of Provident Fund money which is an unqualified statutory obligation and cannot be allowed to be linked with the financial position of the establishment) over different points of time. Besides 50% of the contributions deposited late represented the employees' share which had been deducted from the employees wages and was a trust money with employer for deposit in the statutory fund. The delay in the deposit of this part of the contribution amounted to breach of trust and does not entitle the employer to any consideration for relief. With respect to the plea that the petitioners had been subject to a power-cut of 6% w.e.f. 6/05/1974 by the Haryana Electricity Board, he negatived the plea by observing that this restriction was not exclusive to them and further that no cause had been shown as to how this prevented them from depositing the provident fund dues in time. Even if the power-cut had resulted in any substantial loss, it would have reduced the liability on the amount of provident fund dues also. He went on to observe that where an employer can pay wages, it is not conceivable why it cannot pay the provident fund dues. As regards the stand taken that the establishment had borrowed huge sums from the Haryana Financial Corporation and in repayment of which it had defaulted, he held that even if it were so) the fact did not absolve the establishment of its statutory obligation for deposit of provident fund dues in time. Similarly, the other reasons furnished like the purchase of anew generating plant or internal dispute among the partners and the dissolution of the partnership firm etc. did not constitute sufficient cause beyond the control of the petitioners to justify the late deposit of Provident Fund dues. He accordingly, concluded that the petitioners had failed to carry out their obligation to contribute to the Employees' Provident Fund and Family Pension Scheme within the time-limit -provided therefor, and that no convincing case had been made out to justify the delay in making; the deposits. He also on the material on record found, as a fact, that the petitioners, having regard to their past record, were 'habitual defaulters' and had, therefore, to bo severely dealt with, and should be visited with the maximum penalty. The petitioners are guilty of suppressio veri and this, by itself, was sufficient to dismiss the writ petition, but, since it involves a point of importance which was argued at length, we will have to deal with the same. There can be no doubt that the petitioners have been habitual defaulteres in the matter of making contributions to the Employees' Provident Fund, Family Pension Scheme and payment of administrative charges from the very inception. They have deliberately concealed the facts pertaining to the earlier defaults and the attendant levy of damages under S. 14-B of 579 the Act. For the period between November 1970 and January 1971, again for the periods between October 197 1/02/1972, March and April 1973, August to October 1973, January and February 1974, then again for the period March 1974. May to August 1974, October and December 1974, and January 1975, they made delayed payments of the Employees' Provident Fund and Family Pension Scheme Contributions and consequently the Regional Provident Fund Commissioner after notice to them under Section 14-B and after considering the objections raised and hearing the petitioners, imposed damages amounting to Rs. 223.35, Rs. 2,452.40 and Rs. 15,214.05 for the periods in question respectively, which they deposited on 17/02/197 2/09/1975 and 13/12/1976.
(3.) IT would thus be manifest that the petitioners instead of making their contributions, deliberately made wilful defaults on one pretext or another and have been utilising the amounts deducted from the wages of their employees, including their own contributions as well as administrative charges, in running their business. The Regional Provident Fund Commissioner, therefore, rightly observed that the petitioners having regard to their past record must be visited with the maximum penalty. Taking an overall view, the Regional Provident Fund Commissioner, by his reasoned order dated 12/10/1977, adverted to the fact that the petitioners were habitual defaulters and, therefore, deserve to be dealt with sternly so as to bring home the deterrent effect of damage under Seclion 14-B of the Act and, accordingly, directed recovery of Rs. 94,996.80 at the rate of hundred per cent i.e. equivalent to the amount in arrears, for the delayed payment of contributions to the Empoyees' Provident Fund, the Family Pension Fund and administrative charges, as detailed below : JUDGEMENT_573_4_1979Html1.htm This was preminently a fit case for imposition of punitive damages to ensure due compliance of the provisions of the Act.;