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Judgment
Suvra Ghosh, J
The petitioner pleads violation of principles of natural justice.
The contention of the petitioner, in a nutshell, is that by Notification No. 558-Power/IV dated 28th June 2001 issued by the Secretary to the
Government of West Bengal, Department of Power (the petitioner herein) took over M/s. Bandel Thermal Power Station (hereinafter referred to as
BTPS) with all its assets and liabilities as on 1st April, 2001 with effect from the said date. On 30th July, 2015/31st July 2015 respondent no. 3 issued
summons under section 14B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 against BTPS for the period April 1996 to
December 2003. A demand of Rs. 9,60,683/- was made against respondent no. 4 for the period 1st April, 1996 to 31st December, 2013 under section
14B/7Q of the Act of 1952 by way of penalty and interest upon observation that during the said period certain payments were made beyond time. The
claim was subsequently revised to a period from 1st March, 1995 to 14th November, 2000. The petitioner submitted a representation before
respondent no. 3 stating that it has no knowledge as to when and in respect of which persons contribution was deposited and also, no record was
available to the petitioner with regard to strength and identification of the employees for the relevant period. The petitioner requested respondent no. 3
to direct respondent no. 4 to provide necessary records and particulars to enable the petitioner to place its case before the authority. By an order dated
16th November, 2016 revised claim to the tune of Rs. 9, 52,863/- was slapped upon the petitioner who was directed to deposit the said amount within
10 days from the date of receipt of the order.
Being aggrieved by the said order, the petitioner has filed the present writ petition.
The prayer of the writ petitioner is set out hereunder:-
(a) Issue of a Writ of Mandamus and/or Writ in the nature thereof commanding the Respondent No.2 and 3 or each one of them forthwith cancel, set
aside, withdraw and/or rescind the impugned orderdated16.11.2016(being Annexure- P/8) passed by the Respondent No. 3.
(b) Issue of a Writ of Certiorari and/or Writ in the nature thereof commanding the Respondent No.2 and 3 or each one of them to produce records
relating to the impugned order dated 16.11.2016 being Annexure-P/8 passed by the Respondent No. 3 for their examination and for quashing the same
if found illegal, void and contrary to law and for doing conscionable justice to the parties;
(c) Issue of a Writ of Prohibition and/or Writ in the nature thereof commanding the Respondents not to take any steps or any further step pursuant to
the impugned order dated 16.11.2016 being Annexure-P/8 till the disposal of the instant Application.
It is submitted on behalf of the petitioner that the liability of the petitioner begins only from 1st April, 2001 when the petitioner took over M/s. BTPS.
The notice under section 14B of the 1952 Act issued against BTPS was handed over to the petitioner following which the petitioner submitted the
representation before the Assistant Provident Fund Commissioner (damage) on 18th May, 2016 requesting the authority for providing the relevant
records along with particulars of the employees including proper identification from 1st March, 1995 to 14th November, 2000 for taking appropriate
steps in the matter. The finding arrived at by the authority that the petitioner who is the principal employer, used to deduct 18% from the work
contract bills towards provident fund which was never deposited, has no basis. The order impugned is also silent as to why highest penalty was
imposed upon the petitioner despite such penalty being the discretion of the authority, moreso, as there was no observation of malice of any manner
against the petitioner. The amount of damages and interest payable by the petitioner was decided by the authority arbitrarily and the innocuous claim
of the petitioner for production and inspection of documents was not acceded to.
The writ petition was filed on 24th January, 2017 and notice of the same was served upon the provident fund authority on 25th January, 2017. On
27th January, 2017 notice under section 8F (3) (X) of the 1952 Act was issued upon the State Bank and the State Bank had to remit the entire amount
of Rs. 9,52,,863/- on the same date. Upon intimating this court of the said development, the court directed the provident fund authorities to keep the
recovered amount in a short term fixed deposit with any nationalised bank within a period of 7 days from the date of order and to continue to renew
the same from time to time until further orders of the court.
Learned counsel for the petitioner has further submitted that though there is a provision for appeal under section 7(I) of the Act, the petitioner is
entitled to claim relief in the writ petition on the ground of violation of principles of natural justice.
In support of his contention, learned counsel for the petitioner has placed reliance on several authorities. The authority in Arambagh Hatcheries Ltd
v/s. Employees Provident Fund Organisation reported in LAWS(CAL) 2011 9 166 observes that damages under section 14B of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 may be recovered from the employer for delayed payment of contribution under the scheme.
But the term “may†used in the provision cannot be construed as “shallâ€. Learned counsel has next placed reliance on Paramount Leathers
v/s. Regional Provident Fund Commissioner reported in LAWS(CAL) 2010 12 72. In the said judgment, the Hon’ble Division Bench of this Court
held that an order in which the authority fails to exercise its jurisdiction or decide the dispute by a speaking order is amenable to writ jurisdiction.
Reliance is also placed in the authority in Mangal Keshav Securities Limited v/s. Assistant Provident Fund Commissioner reported in 2021 LLR 974
which observes that though the Provident Fund Authority has the power to make coercive recovery of unpaid provident fund dues, powers of
garnishee recovery must be exercised with due care and caution and after affording reasonable opportunity to the company to prefer an appeal unless
it is pointed out that the company/employer would divert its fund lying in the bank account to frustrate recovery.
On the issue of delay in initiation of the proceedings under section 14B of the Act, learned counsel has relied upon the authority in Regional
Provident Fund Commissioner, Jalpaiguri v/s. Darjeeling Dooars Plantation (Tea) Limited reported in LAWS(CAL) 2015 6 40. In the said judgment, a
coordinate bench of this court has observed that though section 14B of the Act does not provide for any limitation for initiation of proceedings, the
power should be exercised within a reasonable period. The next authority referred to by learned counsel is Assistant Provident Fund Commissioner,
Epfo And Anr. v/s. The Management Of Rsl Textiles India Pvt. Ltd. reported in LAWS(SC) 2017 1 27 wherein it is held by the Hon’ble Supreme
Court that the presence or absence of mens rea and/or actus reus would be a determining factor in imposing damages under section 14B.
In opposing the contention of the petitioner, learned counsel for the provident fund authority, respondent nos. 2 and 3 herein, has submitted that
alternative remedy under section 7(I) of the Act is available to the petitioner and the present writ petition is not maintainable. Notice under section 14B
was issued on 31st July, 2015 stating that the petitioner being the principal employer failed to deposit the proportionate provident fund of the employees
to the tune of 18% from their bill. It was recorded and is also not in dispute that BTPS was the exclusive contractor at the relevant time. As the
present management is a logical continuity of the erstwhile management, it cannot be said that the documents relating to the period under consideration
were not in custody or within the knowledge of the petitioner. The production of Form-6A indicates that the beneficiaries were identified and the
provident fund dues quantified. According to the learned counsel, the principal employer, i.e. the petitioner used to deduct provident fund to the tune of
18% from the salary of employees till respondent no. 4 got its separate provident fund code number. The matter was extensively heard by the
provident fund authority upon giving opportunity of hearing to the petitioner and respondent no. 4 and upon consideration of the documents produced
before it, the authority came to the conclusion that the petitioner was liable to pay the damages and interest from 1st March, 1995 to November 2000.
Ample opportunity was given to the parties for taking any objection to the revised calculation but no such objection was raised. Damage was
calculated in terms of para-32A of the Employees’ Provident Fund Schemes, 1952. Dues under section 7A which was assessed by the authority
were paid belatedly for which damages and interest have accrued. The identification of employees does not apply in such a case. The writ petition is,
therefore, devoid of merits and is liable to be rejected.
Learned counsel has placed reliance on the judgment in Tirrihannah Company Ltd. v/s. Regional Provident Fund Commissioner-I & Ors. In
M.A.T. 42 of 2021 wherein an Hon’ble Division Bench of this Court has held that the writ proceedings is concerned with the decision making
process and not the decision itself. In Employees’ State Insurance Corporation v/s. M/s. Harrison Malayalam Pvt. Ltd., reported in AIR 1993
Supreme Court 2655 it is held that the obligation to make contribution does not depend on whether the particular employee ceases to be employee
after the contribution period and after the benefit period expire.
The legal proposition in Organo Chemical Industries And Another v/s. Union of India And Others reported in (1979) 4 Supreme Court Cases 573
is that imposition of damages under section 14B is meant to penalise the defaulting employer and also to provide reparation for the amount of loss
suffered by the employees.
I have considered the submissions made on behalf of the parties.
It is on record that the petitioner, being the principal employer was directed to pay an amount of Rs. 9, 52,863/- in the proceedings under section
14B/7Q of the 1952 Act and during pendency of the writ petition a notice under section 8F(3)(X) of the Act was issued upon the State Bank which
was constrained to remit the said amount on the same date. An Hon’ble Division Bench of this Court directed the provident fund authorities to
keep the said amount in a short term fixed deposit with any nationalised bank within a period of 7 days from the date of order and to continue to renew
the same from time to time until further orders of the court.
At the outset, learned counsel for respondents no. 2 and 3 has challenged the maintainability of the writ petition on the ground that there is a
provision for appeal against the order impugned under section 7-I of the Act of 1952 and as such, an alternative efficacious remedy is available to the
petitioner. In this connection, the observation of the Hon’ble Supreme Court in Whirlpool Corporation v/s. Registrar of Trade Marks, Mumbai and
others reported in (1998) 8 Supreme Court Cases 1 may be relevant. In the said report, the Hon’ble Supreme Court has held that existence of
alternative statutory remedy is not an absolute bar to High Court’s jurisdiction under Article 226 of the Constitution of India. Alternative remedy
would not operate as a bar in at least three contingencies:- (i) where the writ petition seeks enforcement of any fundamental right; (ii) where there is
violation of principles of natural justice; or (iii) where the order or the proceedings are wholly without jurisdiction or; (iv) the vires of an Act is
challenged. In referring to the said report the Hon’ble Division Bench of this Court has also made similar observations in Paramount Leathers
(supra).
In the case in hand, learned counsel for the petitioner is aggrieved with the decision making process of the authority on the ground that relevant
documents relating to the claim were not supplied to him and the decision was arrived at arbitrarily. A case of violation of principles of natural justice
prima facie being made out by the petitioner, the writ petition cannot be dismissed on the ground of alternative remedy. Also, affidavits have been used
in the writ petition and when such affidavit is used by the respondents, dismissal of a writ petition on the ground of availability of alternative remedy is
not wholly just and proper. [Paramount Leathers (supra)]. Therefore the writ petition is maintainable and shall be dealt with on merits.
In dealing with the merits of the case, section 14B of the Act of 1952 is set out:-
“[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 payable under any other provision 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:]â€
Therefore the provident fund authority has discretionary power to recover damages by way of penalty from the petitioner and such discretion has
to be exercised by way of application of mind by the authority. In exercise of such discretion, the authority is at liberty to impose or waive the penalty
upon hearing the employer and upon application of mind [Arambagh Hatcheries Limited (supra)].
A plethora of decisions of the Hon’ble Supreme Court demonstrate that in view of the punitive nature of the power exercised under section
14B, an order under section 14B must be a speaking order containing the reasons in support of it. In determining the damages to be imposed under
section 14B, the mens rea or actus reus prevailing at the relevant time should be given due consideration. [Assistant Provident Fund Commissioner,
Epfo and Another (supra)].
In the present case, the petitioner claims that a maximum of 12% of the salary of the employee can be deducted as proportionate provident fund
contribution but the order impugned demonstrates that 18% was deducted by the petitioner from the work contract bills towards provident fund till the
employer received its own provident fund code. It also appears from the order that the authority had no knowledge whether copy of Form-6A was
supplied to the petitioner in course of the hearing. The petitioner has denied receipt of the said form. During the hearing, the petitioner submitted a
representation before the authority on 15th November, 2016, wherein he requested the authority to provide detailed calculation regarding the revised
claim. The order impugned is silent as to whether such representation was dealt with and in fact, the order impugned was passed on the same date,
i.e., on 15th November, 2016. The submission of the petitioner of not having the documents relating to the period under consideration was brushed
aside as an alibi taken by the petitioner for absolving him of his responsibility. Payment of damages and interest from March, 1995 to November 2000
was thrust upon the petitioner on the anvil of submission made on behalf of the establishment, i.e., respondent no. 4 who agreed to pay the dues after
the period November 2000. No explanation is offered as to the reason for reduction of the claim amount by only Rs. 7,820/- thought the period of
claim was revised to 04/1996-11/2000 from 04/96-12/2013. The authority’s observation that the petitioner deducted provident fund @ 18% is not
supported by any document. No malice in the conduct of the petitioner in not depositing the provident fund dues within the statutory period of time has
been inferred by the authority. In the order impugned itself the authority has stated that several issues remained to be ascertained. But the order is
silent as to whether such issues were actually ascertained by the authority.
It is trite law that the authority is under obligation to apply its mind before imposing damages under section 14B. The power of imposing damages
being discretionary, the respondent authority ought to have given cogent reasons for imposing the highest penalty. Consideration of extent of penalty
has not found place within the four corners of the order.
The petitioner submitted a representation before the authority on 18th May, 2016 requesting the authority to provide the relevant records and
documents and also the deposits along with particulars of the employees including proper identification from 1st March, 1995 to 14th November, 2000.
The authority has shed its responsibility by holding that the petitioner ought to possess the relevant documents as he is a logical continuity of the
erstwhile management. Admittedly the petitioner took over the management of the fourth respondent with effect from 28/06/2001 and was not
concerned with the administration thereof earlier. Only because the petitioner is a logical continuity of the erstwhile management, it cannot be ipso
facto inferred that the petitioner was in possession of all relevant documents pertaining to the company.
The order impugned was passed on 15th November, 2016. Even before expiry of the statutory period of appeal, the provident fund authority issued
notice under section 8F (3) (X) of the Act of 1952 upon the State Bank and caused the bank to remit the amount of Rs. 9,52,863/- on the same date.
Notice of the writ petition was also served upon the authority prior to issuance of the notice under section 8F (3) (X) of the Act of 1952 despite which
the amount was attached.
Upon consideration of the submissions made on behalf of the parties and material on record, this court is of the view that the order impugned
should be set aside/quashed and the provident fund authority should reconsider the issue upon due consideration of the representations submitted by
the petitioner and upon taking necessary steps for providing all the relevant documents and records as required/requested by the petitioner. The
amount recovered from the State Bank of India should continue to remain in the short-term fixed deposit account as directed earlier till the matter is
reconsidered by the provident fund authority as directed hereinabove. The authority should also afford reasonable opportunity of hearing to both the
parties, in accordance with law.
With the above directions and observations, W.P.A. 2045 of 2017 is allowed.
The order impugned dated 15th November, 2016 is hereby quashed/set aside.
There shall, however, be no order as to costs.
Urgent certified website copies of this judgment, if applied for, be supplied to the parties expeditiously on compliance with the usual formalities.