Oil & Natural Gas Corporation Ltd vs Regional Provident Fund Commissioner

Sudhanshu Dhulia, J

The petitioner is a Government Company which is engaged in the field of oil exploration. The petitioner comes under the purview of Employees' Provident Funds and Misc. Provisions Act, 1952 (from hereinafter referred to as the Act), which is a labour welfare legislation. The Act was brought about with the purposes that there should be a compulsory provident fund, pension fund and deposit-linked insurance fund for employees in factories and other establishments, to be used for their welfare.

Under Section 5 of this Act, the Central Government had to frame a "schemes" by way of notification to be known as "Employees' Provident Fund Schemes" for the establishment of provident funds under this Act for employees or for any class of employees. The Fund so constituted shall vest in, and be administered by the Central Board, which is constituted under Section 5-A of this Act. After coming of the Act into force, the Central Government has already framed scheme which is known as "Employees Provident Fund Schemes, 1952" (from hereinafter referred to as the Scheme). There are various contributions required under the Act, which go into the fund under this Act.

There are certain establishments which are exempted from the contribution under the Scheme, as the appropriate Government has got powers to exempt an establishment from the operation of the schemes of this Act provided the government has a reason to believe, and it is of the opinion, that there is already a provident fund and scheme for the benefit of the employees in such an establishment, " which are not less favourable than those specified in Section 6 and the employees are also in enjoyment of other provident fund benefits which on the whole are not less favourable to the employees than the benefits provided under this Act or any Scheme in relation to the employees in any other establishment of a similar character". Where exemption is granted to an establishment, it is duty bound to establish a Board of Trustees for the administration of provident fund, consisting of such members as specified in the scheme.

It is an admitted fact that ONGC is an exempted establishment under Section 17 of the Act and the provident fund and the schemes are presently being run by the Board of Trustees of the company. Nevertheless it is not totally out of purview and control of the Act, inasmuch as the Provident Fund Commissioner or the Regional Provident Fund Commissioner, as the case might be, have to periodically inspect the accounts of the petitioner to ensure that the scheme is being managed properly in accordance with law. For this inspection, the petitioner is bound to pay EPF charge which is known as "Inspection Charges", under Section 17 (3) (a) of the Act, which reads as under:-

"17.Power to exempt. - (1).....

(2)......

(3) Where in respect of any person or class of persons employed in an establishment an exemption is granted under this section from the operation of all or any of the provisions of any scheme (whether such exemption has been granted to the establishment wherein such person or class of persons is employed or to the person or class of persons as such), the employer in relation to such establishment -

(a) shall, in relation to the provident fund, pension and gratuity to which any such person or class of persons is entitled, maintain such accounts, inspection and pay such inspection charges as the Central Government may direct."

The petitioner has been paying inspection charges to the Provident Fund Commissioner regularly. Till 1998 the inspection charges were to be given at the rate of 0.09 % of the basic wages of its employees. This was increased in the year 1998 by way of notification dated 9.7.1998 and it was increased from 0.09 % to 0.18 %. It is an admitted case that the petitioner was never informed that the rate of inspection charges have increased from 0.09 % to 0.18 %. The petitioner continued to pay the inspection charges at the old rate till 2007. It is again an admitted case that till 2007 there was no demand by the respondent about the inspection charges to be paid on the increased rate. The first notice was given by the Provident Fund Commissioner to the petitioner on 10.05.2007 saying that there has been shortfall in the record of inspection charges and the record may be produced before the office of Provident Fund Commissioner. In pursuance to the said notice dated 10.05.2007, the petitioner sought time to produce the record, but it is again an admitted case that on 06.07.2007 the entire amount at the increased rate for the period from 1998 was deposited by the petitioner i.e. Rupees Nine Crore Ninety Three Lakh Twenty Thousands and Five Hundred Eighty One. The Regional Provident Fund Commissioner, however, raised the demand for the interest amount of Rs. 4,32,92,880/- (Rupees Four Crore Thirty Two Lakh Ninety Thousand Eight Hundred Eighty only) under Section 7-Q and an amount of Rs. 7,83,11,900/-(Rupees Seven Crore Eighty Three Lakh Eleven Thousand Nine Hundred only) towards "damages" under Section 14-B of the Act.

Section 14-B of the Act reads as under:-

"14.B. Power to recover damages. - Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of Section 15 or sub-section (5) of Section 17 or in the payment of any charges under any other provisions of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under Section 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 by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme:

Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:

Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme."

As the aforesaid provision would show that the Regional Provident Fund Commissioner can take damages and the amount can be the same as is the arrear admittedly at the maximum rate. The petitioner challenged this demand by way of writ petition before this Court.

This writ petition was initially dismissed vide order dated 03.01.2011. During the period this writ petition remained dismissed, of which the petitioner was not aware, the Regional Provident Fund Commissioner raised a demand from the bank of the petitioner, and withdrew the entire amount i.e. the damages as well as the interest. Meanwhile at the time of filing the writ petition, the petitioner was also asked to deposit an amount of Rupees Four Crore. This amount (Rupees Four Crore), has been returned to the petitioner since the entire amount has already been received by the Provident Fund Commissioner.

Now the only question is whether the respondent can raise damages under the facts and circumstances of the case. The petitioner has admitted that as far as interest is concerned, they are bound to pay. So there is no dispute as to the interest part. The only question is regarding damages.

The plea against the damages as raised by the present petitioner before this Court is that the petitioner is one of the largest profit making public sector undertakings of the country. It has been not been at default at any point of time, in its entire history right from the moment of its establishment, nor has it ever committed a deliberate breach in payment of its contributions. In the present case in fact the petitioner is also an exempted establishment and therefore as far as the benefits of employees of ONGC are concerned, the same are being taken care of by the Board of Trustees established under the Act by the company itself and the benefits which the employees of the petitioner are getting under its own scheme in any case are not less than whatever an employee would get generally under the Act.

Under the facts and circumstances of the case, therefore it was absolutely unnecessary that before imposing damages on the petitioner, it could have been established that there was a deliberate act on the part of the petitioner or mens rea or even actus reus for giving delayed payment.

The admitted position is that once the charges were increased from 0.09 % to 0.18 % in the year 1998, the petitioner was not informed about it. It continued to give charges under the old rate, which continued to be accepted by the Provident Fund Authorities and at no point of time till 2007, the petitioner was ever asked by the Provident Fund authorities that the charges are being paid at a lesser rate. The moment they were informed about it, they promptly paid the charges. Therefore damages ought not to have been raised against the petitioner. As far as interest part is concerned, they are again liable to pay the same as per Section 7-Q of the Act. There can be no exemption there.

Learned counsel for the petitioner would admit that whereas the word used in Section 7-Q is "shall" and therefore the employer is liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate per annum, for the damages under Section 14-B the word is "may". In other words, there is a discretion vested with the Provident Fund Authorities who have to examine the case in the light of its peculiar facts and therefore come to a determination whether the damages at all were liable to be paid or not and if yes, at what rate. This has clearly not been done in the present case. The order dated 17.07.2008 does not give any reason as to why the damages that too at the highest rate are being taken from the petitioner.

On the other hand, the learned Senior Counsel for the Provident Fund submits that this is a labour beneficial legislation and the amount belongs to the employees and "damages" have been inserted in the Act so that it acts as a deterrence to an employer who should not delay the payment of its contribution. Moreover, as far as not having the knowledge of enhanced rate is concerned, learned Senior Counsel would argue that ignorance of law would not be applicable in this case. The notification regarding increase in inspection charges was published in gazette notification and the petitioner ought to have been knowing the same.

This argument of the learned Senior Counsel for the Provident Fund is totally misconceived. Even if it is assumed for the sake of argument that the petitioner was expected to know about the enhanced rate, once the petitioner continued to pay the charges at the old rate, the Provident Fund Authorities should not have accepted the amount at all at old rate and should have raised the demand as per the new rate. This was never done.

The fact remains that until 2007, the demand was never raised by the Provident Fund Authorities. It is again true that the principle of ignorance have a limited application in this matter which will not give the benefit to the petitioner for not giving the charges at enhanced rate at all. The petitioner is bound to pay the inspection charges at the enhanced rate. It is bound to pay the interest accumulated therein as well. The question here is only whether the petitioner is bound to pay the damages.

The learned counsel for the petitioner would also argue that though the word used under Section 14-B is "damages" and therefore a finding should have been given in the order itself as to how much of damages, if at all, have to be given to the Provident Fund Authorities, but it has not been done.

This argument is entirely correct. Although the initial wording of Section 14-B was "damages" only but thereafter by way of amendment in the year 1988 (w.e.f. 1.9.1991) it has been said that Provident Fund Authorities may recover "from the employer by way of penalty such damages". So even if it is "damages" which has a different connotation in law as compared to "penalty", yet in the present case the legislature has deliberately also inserted the word "penalty" and in this case the damages can be recovered as penalty. So what has to be given by the petitioner under Section 14-B is both by way of damages as well as penalty.

Therefore the final distinction as made by the petitioner regarding damages and penalty would not be applicable in the present case after the 1988 amendment.

Learned counsel for the petitioner would reply upon the decision of Hon'ble Apex Court in the case of Employees" State Insurance Corporation v. HMT Ltd. and another reported in (2008) 3 SCC 35 would argue that before a damages can be imposed a finding as to mens rea or even actus reus has to be given. There is no such finding in this case. Moreover, even assuming for the sake of argument that Section 14-B is also by way of deterrence even then reasons must be assigned as to why damages are being imposed and as to how much quantity of damages has to be imposed. There is no such finding on this score as well.

The argument of the learned Senior Counsel for the Provident Fund is that the power of Provident Fund Commissioner or the Central Board under the first and second proviso to Section 14-B for waiver or reduction of damages is very limited and specific. This argument is totally misconceived inasmuch as we are not dealing with general cases which fall under Section 14-B, but we are dealing with an establishment which comes under the exempted category under Section 17 of the Act and therefore at least a finding ought to have been given by the Provident Fund commissioner as to why the damages are being charged and as to how much.

As far as preliminary objection regarding statutory appeal under Section 7-I against the order demanding damages is concerned, the fact is that the petition remained pending before this Court since last more than ten years and at this stage it would not be appropriate to send back the petitioner on alternative ground.

In view of the above, writ petition is partly allowed. No damages can be recovered from the petitioner under Section 14-B of the Act. However, since the entire amount including the damages has already been recovered that shall not be immediately given back to the petitioner but shall be adjusted from the liability of the petitioner towards its future inspection charges.