Ismart Business Solutions Pvt. Ltd., rep. By its Chief Financial Officer And Company Secretary Mr. D.K. Sundaram vs Employees'' Provident Fund Appellate Tribunal & Ors.

K. Harilal, J. - The petitioner is a transferee establishment under Section 17-B of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 (for short ''the Act''). The petitioner, with effect from 01/04/2004, took over the establishment of the 3rd respondent, by way of a business purchase agreement. At the time of the said agreement, around Rs. 35 lakhs was pending due to the 1st respondent, as arrear of contribution and subsequently, the petitioner has paid the entire arrear with interest of Rs. 4,74,452/- and, at present, no amount is due from the petitioner to the 1st respondent. Now, the challenge, in this writ petition, is confined to the arbitrariness and unreasonableness in quantifying the damages in Ext.P15 order passed by the 1st respondent, under Section 14B of the Act. It is the case of the petitioner that Exts.P4 to P8 reveal that the predecessor and the petitioner continue to suffer a heavy loss before and after takeover and accumulated loss as on today is Rs. 343.36 lakhs. After takeover, the 2nd respondent issued a notice under Section 7A of the Act and the petitioner accordingly paid an amount of Rs. 35,19.267/- towards contribution and Rs. 4,74,452/- towards interest. Again, the 2nd respondent issued a notice claiming damages alleging delay in payment of contribution during the period 2002-2004. Though the petitioner explained that it took over the Unit only in 2004 and both the predecessor and the petitioner have been suffering heavy loss, the 2nd respondent passed an order levying damages at the maximum rate i.e., Rs. 13,05,230/- vide Ext.P9. Though the petitioner challenged the order by filing an appeal before the 1st respondent, the 1st respondent dismissed the appeal without going into the merits and the circumstances whereby the predecessor defaulted in payment of contribution. Thus, the imposition of maximum penalty is arbitrary, unreasonable and thereby, liable to be quashed invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India.

Heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondents.

The learned counsel for the petitioner fairly confined his arguments challenging the quantum of penalty imposed on the petitioner only. The sum and substance of the arguments is that the imposition of maximum penalty can no way be justified in view of the circumstances in which the predecessor defaulted payment of contribution in time. In support of the arguments, the learned counsel pressed Exts.P4 to P8 into service. Though the imposition of penalty would come under the discretionary jurisdiction under Section 14B of the Act, the 2nd respondent has not exercised the jurisdiction and power vested in him and without adverting to the facts and circumstances whereby the predecessor defaulted payment of contribution, the petitioner is mulcted with maximum penalty. In support of the above arguments, the learned counsel cited the decision reported in Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd., [2013 (3) KLT 790] and according to the learned counsel, in the light of the above decision, it can be held that the 2nd respondent could have exercised his discretionary jurisdiction. But, instead of that, the 2nd respondent passed Ext.P9, in a perfunctory manner, without application of mind to the facts and circumstances narrated by the petitioner and thereafter, the 1st respondent also affirmed the same, by Ext.P15.

Per contra, the learned standing counsel for the respondents advanced arguments to justify the imposition of the maximum penalty against the petitioner. According to the respondents, under Section 14B of the Act, there is no room for exercising discretion and where there is a default, it is incumbent upon the authority under the Act to impose the maximum penalty. As against the decision cited by the learned counsel for the petitioner, the learned Standing Counsel submits that a Special Leave Petition is also filed against the said judgment and the same is pending before the Supreme Court.

It stands admitted that no amount is due from the petitioner either under Section 7A or under Section 7Q of the Act. It is the case of the petitioner that the predecessor and the petitioner continued to suffer heavy loss before and after takeover and the loss accumulated as on today is at Rs. 343.36 lakhs. Going by the statutory mandate under Section 14B of the Act, this Court noticed that the legislature consciously employed the modal auxiliary verb ''may'' before the word ''recover'' and the maximum limit alone is fixed. Needless to say, minimum is not consciously left out. In my view, the legislature itself in its wisdom provided a room for exercising discretion by fixing the limit of maximum alone, while imposing penalty under Section 14B of the Act. This view is supported by the decision of this Court in Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd., [2013 (3) KLT 790] .

Coming to the instant case, the petitioner had produced Exts.P4 to P8 before the 2nd respondent to substantiate the claim that the petitioner and the predecessor continued to suffer heavy loss before and after the takeover and accumulated a loss at Rs. 343.36 lakhs and there was no wilful default or contumacious circumstances in not remitting the contribution in time. But, the 2nd respondent has not adverted to those documents or reasons and circumstances, projected by the petitioner; whereby the petitioner and the predecessor could not pay the contribution in time. In my view, in the matter of imposing penalty or damages, fairness, the principles of equity and proportionality are to be observed by the authorities. But, in the instant case, the 2nd respondent has not considered any of the relevant aspects, which were required to be considered, while considering imposition of damages. In the above view of the matter, Exts. P8 to P9 will stand quashed and the matter is remitted back to the 2nd respondent for fresh consideration in the light of the decision of this Court in Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd., [2013 (3) KLT 790].

This writ petition is disposed of accordingly.