Oswal Vanaspati and Allied Industries and Another vs Tahasildar and Another

D.V. Sehgal, J.—The Regional Provident Fund Commissioner, respondent No. 2, vide order, dated 14th October, 1977, annexure P-5, has levied on the petitioner damages amounting to Rs. 10,422.65 u/s 14B of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 (for short "the Act"), on account of default committed by it in delaying payment of contributions under the Act and the Scheme made thereunder in respect of the period specified therein. Recovery certificate dated 25th July, 1978, annexure P-16, issued by respondent No. 2 and the notice of demand, annexure P-17, issued by respondent No. 1, requiring the petitioner to deposit an amount of Rs. 7,209 which is alleged to be recoverable in pursuance of the impugned order, annexure P-5, and notifying further that if the amount is not so deposited, warrants of arrest and attachment of the property for the recovery of the amount as arrears of land revenue under Sections 69 and 70 of the Punjab Land Revenue Act shall be taken, have also been impugned. Prayer is for the issuance of a writ of certiorari quashing the aforesaid orders and notices.

The petition has been opposed by respondent No. 2 and a written statement has been filed by him.

The first contention of learned counsel for the petitioner is that no opportunity of hearing was afforded to the petitioner before its reply to the show-cause notice issued by the respondent, had been finally rejected and the impugned order, annexure P-5, was passed. The defence of respondent No. 2 is that no opportunity of personal hearing was required to be given as adequate opportunity had already been afforded by issuance of show-cause notice to the petitioner. This defence is, however, not sustainable in view of the following observations of I.S. Tiwana, J., in Civil Writ Petition No. 3589 of 1978, Subbash Talkies v. Regional Provident Fund Commissioner, decided on 7th November, 1983:

"The proviso to Section 14-B of the Act lays down in categorical terms that before the levying or recovering any damages, the employer shall be given a reasonable opportunity of being heard. Mr. Dewan then seeks to contend that serving of a show-cause notice on the petitioner and considering its reply to the same is good enough a compliance of this requirement of law and the same tantamounts to a hearing. I see;rno merit in this submission of learned counsel. The opportunity of being heard cannot possibly be equated with an opportunity to show-cause".

The second submission of learned counsel for the petitioner is that it was incumbent on respondent No. 2 to have applied its mind and decided specifically as to what amount of damages is commensurate with the loss suffered by the employees and to what extent the damages are punitive to serve as a deterrent against future defaults by the petitioner. In Civil Writ Petition No. 3476, of 1978 Taylor Instrument Company (India) Ltd. v. Regional Provident Fund Commissioner, decided on 22nd August, 1984, M.M. Punchhi, J. relying upon Organo Chemical Industries and Another Vs. Union of India (UOI) and Others, has observed thus:

While fixing the amount of damages, the Regional Provident Fund Commissioner usually takes into consideration as he has done here, various factors, viz., the number of defaults, the period of delay, the frequency of defaults and the amounts involved. The word ''damages'' in Section 14-B lays down sufficient guidelines for him to levy damages.

x x x x x The imposition of damages u/s 14-B serves a two-fold purpose. It results in indemnification and also serves as a deterrent. The predominant object is to penalise, so that an employer may be thwarted or deterred from making any further defaults.

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 u/s 14-B is not merely ''to provide compensation for the employees''. We are clearly of the opinion that the imposition of damages u/s 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.

X X X X X The employees would, of course, get damages commensurate with their loss, i.e. the amount of interest on delayed payment; but the remaining amount should go to augment the ''Fund'' constituted u/s 5, implementing the Scheme under the Act".

A reading of the impugned order, anncxurc P-5 makes it clear that respondent No. 2 did not apply his mind to the above aspect and, as such, the order passed by him cannot be considered to be a speaking order which might satisfy the tests of Section 14-B of the Act.

Consequently, I allow this petition, quash the order, annexure P-5, the recovery certificate, annexure P-16, and notice of demand, annexure P-17. Respondent No. 2 shall now proceed to decide the matter afresh according to law after affording opportunity of personal hearing to the petitioner. There shall, however, be no order, as to costs.