The main legal point established in the judgment is the interpretation of the calculation of damages payable under Section 14-B of the Employees Provident Fund Act, 1952, and the clarification that interest under Section 7-Q should not be charged twice.

Dr. Mukundakam Sharma, C.J.

The present appeals are directed against the judgment dated January 10, 2006 by which the learned single Judge has dismissed the Writ Petition (Civil) No. 20999-21000/2005. The said writ petitions were filed by the appellant impugning the order dated February 23, 2001 passed by the Regional Provident Fund Commissioner, Kanpur levying the penalty under Section 14-B of Employees Provident Fund Miscellaneous Provisions Act, 1952 (hereinafter referred to as an "Act").

The appeal against the said order was also dismissed by the appellate authority by its order dated September 7, 2005.

2. Short issue raised by the appellant is regarding quantum of penalty imposed under Section 14-B of the Act. The appellant admits defaults in payment of employees Provident Fund during the period December 1989 to February 2000. The period of default in each case varies and we are not required to go into this aspect. The only issue that arises for consideration is the quantum of damages payable under Section 14B of the Act in terms of Office Memorandum dated May 29, 1990, the relevant portion of which reads as under:

"Moreover, now that in the recent amendment to the act, we have already provided for the payment of simple interest at 12% per annum (Section 7Q) payable

3. Counsel for the parties agree that, for the period upto July 1, 1997 the appellants will be liable to pay penalty/damages under Section 14B of the Act on the total amount mentioned in column 3 under the heading Total. The reason for the same is that though Section 7-Q was introduced in the Act in 1988, it was made effective only from July 1, 1997.

4. The dispute relates to the period after July 1, 1997 and whether the percentage mentioned in column 1 "damages" is payable or the percentage mentioned under column 3 under the head "Total" is payable under Section 14-B of the Act.

5. The aforesaid circular was issued with a view to rationalise penalty/damages which was being levied under Section 14-B of the Act. In from the date the amount has become due till the date it is actually paid. It had become necessary to revise the rates of damages and to specify the same in the scheme. Thus, a proposal to revise the rates of damages was accordingly placed before the Central Board of Trustees and the Board in its 119th meeting held on April 4, 1989 approved the following revised rates of damages with the condition that the position with regard to the incidence of default following the revision of the rates of damages would be analysed after six months from the

.date the new rates come into force: para 1 of the circular it is specifically mentioned that imposition of damages at a flat rate of 25% per annum even in cases of default of less than 4 months was considered to be exhorbitant. It was also noticed that the existing rate of damages as a flat rate of 25% per annum did not make any distinction between occasional or defaults for short period and defaults by chronic or habitual defaulter and for longer periods.

6. The circular dated May 29, 1990 provides that all defaulters thereafter shall be liable to pay interest at the rate specified in column 1, that is, from 5 to 25 per cent depending upon the period of default as damages under Section 14-B of the Act. The defaulters in addition are liable to pay interest chargeable under Section 7-Q of the Act at the rate of 12 per cent per annum as mentioned in TABLE the 2nd column. The rates mentioned in column 3 of the circular is the sum total of column nos. 1 and 2. The total amount varies between 17 to 37 per cent per annum depending upon the period of default. Thus, for default of less than two months, the defaulter becomes liable to pay damages at the rate of 5 per cent per annum under Section 14-B and also interest under Section 7-Q of the Act at the rate of 12 per cent per annum. Therefore, the defaulter becomes liable to pay damages under Section 14-B and interest under Section 7-Q at the rate of 17 per