S.S. Sandhawalia, C.J. - (1.) WHETHER the damages for delayed payments of contributions to I the Fund under Section 14 -B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, are penal in nature and not merely co -related with the loss of interest entailed by such delay is the common link in this chain of eight writ petitions. Learned Counsel for the parties are agreed that the issues of law and fact being clearly identical, this judgment will govern all of them.
(2.) IN view of the above it suffices to advert to the facts in Messrs. T.C.M. Woollen Mills Ltd. The Petitioner, being a private limited company, is engaged in the business of spinning in its premises located in the industrial area, Ludhiana and is admittedly covered by the provisions of the Employees Provident Funds and Family Pension Fund Act, 1952 (hereinafter called the Act) and the scheme framed thereunder. The Regional Provident Fund Commissioner issued a notice, dated the 28th of October, 1975, under Section 14 -B of the Act to the Petitioner -company on the ground that they had not paid the amount of contributions within the period stipulated and therefore, it had rendered itself liable to pay damages as per the details given in the said notice. A calculation -sheet of, the damages worked out by Respondent No. 1 for the delayed payment was attached as annexure P. 1 to the petition. It is averred that in response to the notice, an official of the Petitioner company called on Respondent No. 1, to seek a review of the damages assessed and to render some explanation for the admitted delay in the payment of the contributions beyond stipulated dates. However, it is alleged that the Respondent by its detailed order, dated the 1st January, 1976, annexure P. 2 has imposed damages to the tune of Rs. 24,396.95 P. under Section 14 -B of the Act and directed the Petitioner to deposit the same within 30 days of the receipt 'thereof. In compliance therewith recovery notice, annexure P. 3 was issued and the Petitioner -company then corresponded with Respondent No. 1 but it is alleged that active steps to recover the amount have been now initiated through the Naib -Tahsildar, Ludhiana. Aggrieved thereby the Petitioner -company has preferred this writ petition. In paragraph 7 of the return filed on behalf of Respondent No. 1 it has been highlighted that despite the service of the notice, annexure P. 1, no objections were filed by the Petitioner -company within one month of, the time afforded to it to do so. Consequently, the answering Respondent was left with no option but to determine the damages on the materials before it and he did so by a detailed speaking order. Even thereafter the Petitioner -company sought a personal bearing to highlight its financial difficulty and this request was acceded to and the 21st of February, 1976, was intimated as the date of hearing. Shri Chadha, a Director of the Company appeared on that date and again pleaded financial stringency and requested for the waiver of the damages or a substantial reduction therein. He was then directed to produce documentary evidence in support of the Petitioner -company's stand but no such proof at all was submitted. Consequently, Respondent No. 1 was left with not option but to request for the recovery of the amount of damages assessed through the Collector, Ludhiana. It is denied that the answering Respondent had ever agreed or extended any assurance of reviewing the amount of damages assessed. However, a further opportunity for representing their case on 14th of March, 1977, was afforded to the Petitioner but again no appearance was put in on that date on their behalf. However, much later on, the 26th of April, 1977, the Petitioner -company again sent a letter attempting to explain the reason for non -appearance and seeking another opportunity which charitably was acceded to for the 23rd of August, 1977. On this date again none appeared on behalf of the Petitioner -company. Later on, the 26th December, 1977, the Petitioner -company intimated the answering Respondent that they had preferred the writ petition in Court. The firm stand on behalf of the Respondent is that in fact the Petitioner -company had no financial difficulty and instead the company had been deducting the Provident Fund Contribution amount from the wages of the employees and had been withholding the deposit for a long time.
(3.) AS has been indicated at the very outset, the issue that lay at the core of all these writ petitions is whether the damages imposed by the Commissioner were merely co -related with the loss of interest entailed by the delayed payments and therefore, in quantum could not exceed a fair rate of interest on the amounts due. Undoubtedly, on this point there earlier existed a controversy and a wide ranging conflict of judicial opinion. Fortunately, the matter has now been completely set at rest by the unequivocal observations of the final Court in Organo Chemical Industries and Anr. v. Union of India and Ors. AIR 1979 S.C. 1803. Krishna Iyer, J., in his concurrent judgment noticed the aforesaid contention in the following terms: The further submission is that damages being compensatory in character could not exceed the interest the amount defaulted would have carried during the period of delay. The Respondent has gone beyond the mere quantum of interest and has rounded it off to a sum equal to the defaulted contribution. Is this excess an illegal extravagance or a legal levy? This turns on what is 'damages' in the setting of the Act. and provided a categoric answer as: I am clearly of the view that, as imposed by Section 14 -B, includes a punitive sum quantified according to the circumstances of the case. In exemplary damages this aggravating element is prominent. Constitutionally speaking, such a penal levy included in damages is perfectly within the area of implied powers and the legislature may, while enforcing collections, legitimately and reasonably provide for recovery of additional sums in the shape of penalty so as to see that avoidance is obviated. Such a penal levy, can take the form of damages because the reparation for the injury suffered by the default is more than the narrow computation of interest on the contribution. Sen, J., after adverting to the conflict of opinion between the High Courts observed that those taking the view that damages were o be limited to the loss of interest had obviously fallen into an error and laid, down the law as under: The expression 'damages' occurring in Section 14 -B is, in substance, a penalty imposed on the employer for the breach of the statutory obligation. The object of imposition of penalty under Section 14 -B is not merely to provide compensation for the employees. We are clearly of the opinion that the imposition of damages under Section 14 -B serves both the purposes. It is meant to penalise defaulting employer as also to provide reparation for the amount of loss suffered by the employees. It is not only a warning to employers in, general not to commit a breach of the statutory requirements of Section 6, but at the same time it is meant to provide compensation or redress to the beneficiaries i.e. to recompense the employees for the loss sustained by them. There is nothing in the section to show that the damages must bear relationship to the loss which is caused to the beneficiaries under the Scheme. Now it is plain from the afore -quoted observations that the damages under Section 14 -B of the Act are penal in nature and not merely co -related with the loss of interest entailed by the delayed payments of contributions to the Fund. Indeed in this view of the situation, all the learned Counsel for the Petitioners very fairly conceded their inability to raise this issue which admittedly stood concluded against them.;