The main legal point established in the judgment is that damages under S.14-B of the Employees' Provident Funds Act are penal in nature, providing the government with the authority to impose penalties on employers for non-compliance, and the authority has discretion in imposing damages not exceeding 25% of the arrears.

1. The writ appeal and the original petition raise a common question and hence are disposed of together. To understand the question, the facts in the original petition, O. P. 2976 of 1974, from which the writ appeal is filed, may be stated. The petitioner is a company and an establishment coming within the ambit of the Employees' Provident Funds Act, 1952, (hereinafter called the Act) and a scheme framed thereunder. The employer made default in the payment of contribution to the fund for the periods from February 1967 to April 1971. Four notices covering the entire period were issued by the Government to the employer calling upon him to pay damages at the rate of 25% of the amount of arrears alleged to be due from the petitioner. The petitioner did not comply with the notices of demand. So revenue recovery steps were taken against the petitioner. At that time the petitioner came forward with the writ petition challenging the levy of damages and the steps taken to recover the same under the Revenue Recovery Act. The petitioner's grievance is that at the time when the provisions of S.14-B of the Act were invoked there were no arrears. No doubt contributions and administrative charges were not paid in time and for the delay the petitioner had been proceeded against under S.14(2A) of the Act and therefore there is no jurisdiction to the Government to proceed again under S.14-B of the Act long after the amounts in respect of which damages are sought to be recovered have been paid. Further it was contended that what is provided for under S.14-B is levy of damages. That requires an ascertainment of the loss incurred on account of the delay in the payment of contributions and administrative charges. This has not been done. What has been done is a mechanical application of the section which gives power to the concerned authority to levy damages not exceeding 25% of the amount in arrears. The mechanical imposition of 25% of the amount due is contrary to the provisions of S.14-B and as such invalid. The later plea was accepted by Kochu Thommen, J. and the original petition was allowed. The Writ Appeal is filed by the Government challenging the correctness of the decision.

2. In the other original petition also the facts are similar. Remittances towards Employees Provident Funds and Family Pension Fund dues for two months in 1967, four months in 1969, four months in 1970 and the amount due by way of arrears in 1971 and up to September, 1972 were delayed. So a show cause notice was issued to the Manager of the petitioner-company to show cause why Government may not order levy of damages under S.14-B of the Act. Though a reply was sent showing cause against the proposed step, the Government passed an order on 16 61973 levying damages at the rate of 25% of each amount in default. The amount was quantified by the Regional Provident Fund Commissioner and he issued a notice of demand calling upon the petitioner to pay the amount specified in the notice. Though the petitioner made a representation against it nothing was done by the authorities. At the same time steps were taken under the Revenue Recovery Act to realise the amount from the petitioner. So the petitioner has moved the writ petition challenging the levy of damages against him. According to the petitioner S.14-B gives a discretion to the authority to impose damages at the rate not exceeding 25%. That is no reason to impose damages at that rate in every case. Further damages, being in the nature of compensation for the loss sustained by the default or delay in the payment, without quantifying or ascertaining the loss an arbitrary imposition of damages at the rate of 25% of the amount is contrary to S.14-B and invalid.

3. The answer of the Employees Provident Fund Commissioner in both the cases is two-fold. Firstly it is contended that the order imposing damages was passed in 1973 and only in 1975 when the writ petition was filed this has been challenged and hence on the grou