Damages under Section 14B cannot be imposed without arrears; compliance with the Act negates default, and mens rea is not essential for penalties.

JUDGMENT :

1. This petition is filed under Articles 226 and 227 of the Constitution of India challenging the order of the Employees’ Provident Funds Appellate Tribunal, New Delhi passed in ATA No.590(5)/2001, dated 8th May, 2007.

2. Facts arising for this petition are as under.

2.1 The petitioner is a Co-operative Bank duly registered under the provisions of Gujarat Co-operative Societies Act, 1961 having registration dated 1.12.1966 and engaged in Banking business from 1.1.1967 in the Rajkot city. As per the provisions of the Gujarat Co-operative Societies Act, 1961, if the Bank is employing less than 50 persons, it was not amenable to Employee Provident Fund and Misc.Provisions Act, 1952 as per the provisions of Section 16(1) (a) of the said Act. In the larger interest of the employees and as per provisions of Section 72 of the Gujarat Co-operative Societies Act, 1961, the petitioner had implemented the provisions of Provident Fund (for short, ‘PF’) Rules and deducted the PF contribution @ 8.33%/10% from the wages, salaries and paid equal amount of its share, deposited the amount of both shares of contributions in the earmarked Fixed Deposit with the Rajkot District Co-operative Bank Ltd - Apex Bank as laid down under Section 71 of the Gujarat Co-operative Societies Act, 1961.

From the very beginning the amount of PF was being invested and lying in the safe custody of the Apex Bank till 31st March, 1999. There was no any allegation about the funds which was utilized for the private purpose at any point of time.

2.2 The Respondent by its letter dated 18th March, 1999 applied the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 with effect from 1.1.1992. By virtue of this letter, petitioner was informed to open PF account as per the provisions of Employees’ Provident Funds Act. The said letter was received by the petitioner on 26th March, 1999. On receipt of the same, petitioner had immediately started depositing PF dues from April, 1999 onwards with the respondent office regularly on or before due dates and had never committed any default. Payment from January, 1973 to March, 1999 is concerned, same is paid in three installments i.e. on 13th October, 1999, 16th May, 2000 and 24th May, 2000. Despite the above mentioned payments, a show cause notice came to be issued on 18th October, 2000 under Section 14B of the Act purporting to levy damages for the alleged defaults for the period from February, 1992 to May, 1999. Thereafter, order was passed on 3rd January, 2001 levying damages of Rs.61,86,074/- that petitioner deposited Rs.21,79,778/- out of Rs.61,86,074/- on 22.2.2009 and challenged the order dated 3.1.2001 by way of Review Application before Employees’ Provident Funds, Sub Regional Office, Rajkot wherein the respondent had imposed penal damages @ 12% for the period from January, 1992 to March, 1999 which amounts to Rs.23,09,937/- and, further damages were imposed as default was committed by the establishment beyond 6 months from due date. Thus, the total penal damages were imposed at Rs.51,28,586 (Rs.23,09,937 + Rs.28,18,749/-). They deducted the amount paid i.e Rs.21,79,778/- and thereafter, total damages of Rs.29,48,808/- came to be levied with outstanding interest as per the past accumulation statement of Rs.7,71,608/- which comes to the amount of Rs.37,20,416/-, under Section 14B of the Act. The total amount of Rs.37,20,416/- came to be recovered by the respondent on 20th October, 2001 and therefore, the entire amount towards the penal damages is paid to the respondent under protest. Being aggrieved and dissatisfied with the aforesaid order dated 17th August, 2001, petitioner herein had preferred the appeal before the learned Provident Fund Appellate Tribunal, New Delhi being ATA No.590(5)/2001, which came to be dismissed vide order dated 8.5.2007, same is impugned in the present peti