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Judgment
Mr. Justice Vinod K. Sharma
The petitioner, Sri Naga Nanthana Mills Ltd., has challenged the order passed by the Assessing Officer, u/s 14B of the Employees'' Provident Funds and Miscellaneous Provisions Act 1952 (hereinafter referred to as ''Act''), and that of the learned Employees'' Provident Fund Appellate Tribunal, New Delhi. The ground of challenge to the imposition of damages, is that the notice claiming damages was issued after eight years. In response to the show cause notice, the petitioner raised defence, that due to lapse of time, prejudice has been caused to the petitioner to effectively contest the imposition of damages, in exercise of power u/s 14B of the Act.
The plea raised by the petitioner was recorded by the Assessing Officer, while imposing damages, u/s 14B of the Act. which reads as under:
Sr. B.V. Kothandaraman appeared on January 30, 2004, he has submitted a written representation from the Director. In the statement the employer has represented that the Mill is a Spinning Mill having 40,000 spindles in a backward area of Virudhunagar District, situated in a remote village of Aruppukottai Taluk only to provide employment opportunities to the villagers in and around Vakkanankundu village. The year 1994 onwards the textile industries are facing severe crises to run the Mill for want of raw materials, the Heavy Price of cotton and such other things. Now the textiles mills are facing the severe crises and holding the pathetic conditions. The responsible persons who were in charge of the remittance of P.F. contributions for the demand period were left and not able to contact and the non availability of records, due to the long delay in initiation of proceedings by the department prevented the appellant to give proper reasons for the delay in remittance of contributions. By imposing such huge damages resulting the appellant industry will be collapsed and it may throw out from employment as well as proper training from our mill. The huge amount as damages and interest will result closure of P.F. account of nearly 250 employees. Finally the employer has prayed that the Hon''ble authority may be pleased to consider their case sympathetically and waive the proposed levy of damages and interest and thus render justice. On the above facts. The statutory dues are to be paid within the stipulated period.
While passing the impugned order, no reasons have been given, as to why the Assessing Officer did not agree with the contention raised against the imposition of damages u/s 14B of the Act, on the ground of delay.
The learned appellate Tribunal also has not considered the question of prejudice to the petitioner, on account of delay of eight years, in issuing of show cause notice.
The learned appellate Tribunal proceeded on the presumption, that as no limitation is prescribed for initiating the proceedings u/s 14B, therefore, it is not open to the petitioner to challenge the order on the ground of delay, in issuing show cause notice.
The learned counsel for the petitioner challenged the impugned order, by contending that though there is no limitation prescribed for initiating proceedings u/s 14B of the Act, still the learned Assessing Officer, and the learned appellate Tribunal were bound to consider the prejudice to the petitioner, in contesting the proposed action because of the long delay in issuing of notice.
In support of this contention, learned counsel for the petitioner placed reliance on the judgment of the Honourable Supreme Court, in the case of M/s. Hindustan Times Limited Vs. Union of India and Others, wherein the Hon''ble Supreme Court has been pleased to lay down as under:
From the aforesaid decisions, the following principles can be summarised:
The authority u/s 14B has to apply his mind to the facts of the case and the reply to the show-cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard; the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on plea of power-cut, financial problems relating to other indebtedness or the delay in realisation of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no, period of limitation prescribed by the legislature for initiating action for recovery of damages u/s 14B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings u/s 14B would be taken; mere delay in initiating action u/s 14B cannot amount to prejudice inasmuch as the delay on the part of the Department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action u/s 14B, he has changed his position to his detriment to such an extent that if the recovery is made after a large number of years, the prejudice to him is of an "irretrievable" nature; he might also claim prejudice upon proof of loss of all the relevant records and/or non-availability of the personnel who were, several years back in charge of these payments and provided he further establishes that there is no other way he can reconstruct the record or produce evidence; or there are other similar grounds which could lead to "irretrievable" prejudice; further, in such cases of "irretrievable" prejudice, the defaulter must take the necessary pleas in defence in the reply to the show-cause notice and must satisfy the authority concerned with acceptable material; if those pleas are rejected, he cannot raise them in the High Court unless there is a clear pleading in the writ petition to that effect.
There is force in the contention of the learned counsel for the petitioner. Inspite of noticing the contentions raised by the petitioner, the learned Assessing Officer did not consider the question of prejudice, and imposed damages, by recording as under:
I therefore levy damages at the rates specified under para 32 A of Employees'' Provident Fund Scheme, 1952. Para 5 of Employees'' Pension Scheme, 1955 (Para 10 A of Employees'' Family. Pension Scheme, 1971) and Para 8 A of Employees'' Deposit Linked Insurance Scheme, 1976 and order that a total sum of ` 11,80,625/- (Rupees Eleven Lakhs Eighty Thousand Six Hundred and Twenty five only) shall be recovered from the employer of Sri Nagananthana Mills Limited, Vakkanangundu post, Kariapatti Taluk, Virudhunagar District towards damages for the period 3/1995 to 11/2000.
The details of damages levied Account Number Wise are furnished below:
i)
The Provident Fund contributions
` 7,22,314/-in EPF A/c. 1
ii)
The Administrative/inspection charges (EPF)
` 45,574/- in EPF A/c. 2
iii)
Family Pension Fund Contributions/Employees'' Family Pension Fund/contribution
` 3,87,746/-in EPF A/c. 10
iv)
Deposit Linked Insurance Contributions
` 23,965/- in EPF A/c. 21
v)
Administrative Charges/Inspection Charges (EDLI)
` 1,026/-in EPF A/c. 22
Total
` 11,80,625/-
I further order that the amount of damages should be paid by the aforesaid employer into the respective Employees'' Provident Fund Accounts maintained at State Bank of India within 15 days of receipt of the order, failing which action will be taken u/s 8 of the Act, to recover the amount without further notice.
Failure to deposit the penal damages within the stipulated period will attract the provisions of Section 7Q of the Act thereby the employer will become liable to pay simple interest @ 12 percent per annum on the amount in arrears from the due date specified in this order to the date of remittance.
The learned appellate Tribunal, has also committed the same error, in proceedings on the presumption that there was no limitation: prescribed without considering the points raised by the petitioner, to challenge the imposition of damages.
The impugned orders, therefore, can be safely said to be non-speaking orders, which are not sustainable in law, as quasi-judicial authorities are under legal obligation to answer the contention raised by a party, otherwise very purpose of hearing a party is lost.
The learned counsel for the respondents, on the other hand, supported the order, by contending that though the petitioner had raised the plea of prejudice on account of delay, but at the same time, it cannot be ground to challenge the imposition of damages, u/s 14-8 of the Act. In view of the fact that damages cannot be waived completely, as it is mandatory for the authority under the Act, to impose damages, for the delay, in deposit of contribution. The competent authority can only consider the quantum of the damages to be imposed, in view of the facts and circumstances of each case.
In support of this contention, the learned counsel for the respondents placed reliance on the judgment of the Hon''ble Supreme Court in the case of Regional Provident Fund Commissioner Vs. S.D. College, Hoshiarpur and others, wherein the Honourable Supreme Court has been pleased to lay down as under:
Thereby the employer is under a statutory obligation to deposit the amount to the credit of the fund every month. In the event of any default committed in that behalf, Section 14B steps in and calls upon the employer to pay damages by way of penalty, the maximum of which is the accumulated arrears. The Regional Provident Fund Commissioner is given discretion only to reduce a percentage of damages and he has no power to waive penalty altogether. In this case, admittedly, after the judgment, there was no reason for the respondent to deposit the amount with the University. We can understand that since there was a scheme framed by the University and the respondent was under an obligation to comply with the scheme, they can have a feeling of doubt as to whether they should abide by the scheme framed by the University or under the Act. Since they had filed the writ petition in this Court, this Court gave direction on January 29, 1988 directing the respondents to deposit the contribution with the appellant. Thereby the respondents have a statutory obligation to deposit the amount from February 1988 onwards. Therefore, there is no justification whatsoever to deposit and, keep depositing the amount in the University account after the judgment of this Court. The mere fact that the University has given permission to redeposit the amount with the appellant does not enable the respondents to take shelter thereunder for non-deposit of the amount in the fund.
As observed above, the impugned orders cannot be sustained. Even if, for the sake of argument, it is taken, that there cannot be total waiver, still it was for the authorities under the Act, to take into consideration, the prejudice caused to the petitioner, because of the delay of eight years in issuing notice to show cause, and also to record whether the delay was not intentional, but bona fide, so as to exercise the jurisdiction u/s 14B reasonably, and by taking into consideration the facts and circumstances of the case.
As noticed above, the impugned orders, on the face of it, are non-speaking order, and thus, arbitrary, which cannot be sustained in law.
Consequently, the writ petition is allowed, the impugned orders are set aside, and the matter is remitted back to the learned Assistant Provident Fund Commissioner, to re-determine the damages, after taking into consideration the defence raised by the petitioner, and recording a finding thereon by a speaking order. Connected Miscellaneous Petitions is closed. No costs.