REGIONAL PROVIDENT FUND COMMR Vs. BHARATH PLYWOOD AND TIMBER PRODUCTS P LTD

JUDGEMENT

(1.) THE writ appeal and the original petition raise a common question and hence are disposed of together. To understand the question, the facts in the original petition, O. P. 2976 of 1974, from which the writ appeal is filed, may be stated. THE petitioner is a company and an establishment coming within the ambit of the Employees' Provident Funds Act, 1952, (hereinafter called the Act) and a scheme framed thereunder. THE employer made default in the payment of contribution to the fund for the periods from february 1967 to April 1971. Four notices covering the entire period were issued by the Government to the employer calling upon him to pay damages at the rate of 25% of the amount of arrears alleged to be due from the petitioner. THE petitioner did not comply with the notices of demand. So revenue recovery steps were taken against the petitioner. At that time the petitioner came forward with the writ petition challenging the levy of damages and the steps taken to recover the same under the Revenue Recovery Act. THE petitioner's grievance is that at the time when the provisions of S. 14-B of the Act were invoked there were no arrears. No doubt contributions and administrative charges were not paid in time and for the delay the petitioner had been proceeded against under s. 14 (2a) of the Act and therefore there is no jurisdiction to the Government to proceed again under S. 14-B of the Act long after the amounts in respect of which damages are sought to be recovered have been paid. Further it was contended that what is provided for under S. 14-B is levy of damages. That requires an ascertainment of the loss incurred on account of the delay in the payment of contributions and administrative charges. This has not been done. What has been done is a mechanical application of the section which gives power to the concerned authority to levy damages not exceeding 25% of the amount in arrears. THE mechanical imposition of 25% of the amount due is contrary to the provisions of S. 14-B and as such invalid. THE later plea was accepted by Kochu thommen, J. and the original petition was allowed. THE Writ Appeal is filed by the Government challenging the correctness of the decision.

(2.) IN the other original petition also the facts are similar. Remittances towards Employees Provident Funds and Family Pension Fund dues for two months in 1967, four months in 1969, four months in 1970 and the amount due by way of arrears in 1971 and up to September, 1972 were delayed. So a show cause notice was issued to the Manager of the petitioner-company to show cause why Government may not order levy of damages under S. 14-B of the Act. Though a reply was sent showing cause against the proposed step, the Government passed an order on 16 61973 levying damages at the rate of 25% of each amount in default. The amount was quantified by the Regional Provident Fund commissioner and he issued a notice of demand calling upon the petitioner to pay the amount specified in the notice. Though the petitioner made a representation against it nothing was done by the authorities. At the same time steps were taken under the Revenue Recovery Act to realise the amount from the petitioner. So the petitioner has moved the writ petition challenging the levy of damages against him. According to the petitioner S. 14-B gives a discretion to the authority to impose damages at the rate not exceeding 25%. That is no reason to impose damages at that rate in every case. Further damages, being in the nature of compensation for the loss sustained by the default or delay in the payment, without quantifying or ascertaining the loss an arbitrary imposition of damages at the rate of 25% of the amount is contrary to S. 14-B and invalid.

(3.) IN what sense the law provides for imposition of damages can be understood only on an appreciation of the provisions of the concerned statute and the social background forming the basis of the statute. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952, is enacted by the Parliament for the benefit of workers and it is a social security measure enacted for the protection of the workers. The Act provides for contributions to be paid by the employer to a fund constituted under the act from which fund the workers are paid some amount at the time of termination of their services by retirement or resignation or retrenchment etc. The employer and the employee are required to contribute to this fund. The employee has to pay from out of his wages a certain amount compulsorily towards this fund. This has to be realised by the employer from out of the wages before the wage is paid to the employee. The sum so realised has to be paid by the employer to the fund and over and above this, the employer has to make his own contribution as prescribed by the Act or the scheme. So the success of this scheme, in other words, the benefit intended to be conferred on a worker, depends largely on the active co-operation of the employer and if he defaults in that the enforcement of the provisions of the Act will become impossible. So the Act has provided for the imposition of penalties. The breach of the provisions may in some cases entail criminal action against the employer. If the employer contravenes or fails to comply with the provisions of the Act, he can be prosecuted and punished with imprisonment and/or fine. This will not very much help for the realisation of the contributions and other payments which an employer has to make. So the statute provides a power on the authorities who are entrusted with the administration of the Act to impose and recover damages for the default of the employer in complying with the provisions of the Act. IN this connection it will be useful to read S. 14-B before its amendment by Act 40 of 1973: "14-B. Power to recover damages. Where an employer makes default in the payment of any contribution to the Fund, the Family Fund or the INsurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of S. 15 or sub-section (5) of. S. 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or INsurance Scheme or under any of the conditions specified under S. 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the official gazette in this behalf may recover from the employer such damages not exceeding twenty-five per cent of the amount of arrear, as it may think fit to impose: provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard. " It will be seen that the competent authority is given a power to impose or levy damages. IN the case of a breach of contract or a tort the court determines the loss and the compensation payable and award damages to the aggrieved party. The court does not'impose' any damage. The situation or the circumstance of the default is not generally taken into account. But as seen from the section a power is given on the authority to 'impose' damages. The imposition is something in the nature of a penalty for the breach or violation of any provision of law. The authority concerned may take into account the facts and circumstances of the case, the position of the employer and impose damages not exceeding 25% of the arrears. To impose damages it is not necessary to find out the loss suffered by the department or the employee. That this is so will be clear from the various provisions of the Provident Fund scheme which will be useful to state.