The main legal principle established is that damages under Section 14-B of the Employees Provident Fund Act are essentially penal in character and do not attract interest under Section 7-Q.

K.K. Sasidharan, J.

This writ appeal is directed against the order passed by the learned Single Judge dated 2. 2007 in W.P.No.9637 of 2004 whereby the proceedings issued by the first appellant dated 4. 2002 directing payment of damages under Section 14 -B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 was set aside with a direction to refix the amount after granting reduction, but without interest under Section 7-Q of the Act.

Factual Background:-

2. The respondent is an educational institution and their institution is covered under the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "E.P.F Act.") The respondent appears to have collected the employees share but failed to pay the contribution to the fund as well as the scheme within the time permitted, which made the first appellant (hereafter referred as "the Authorised Officer") to pass an order under Section 14-B of the E.P.F. Act calling upon the respondent to pay damages as well as to pay interest on such damages. The said order dated 4. 2002 was the subject matter of challenge in the writ petition. It was the contention of the respondent before the learned Single Judge that there was no basis for levy of damages to the maximum extent as indicated in the statute and recovery at the appropriate rates as indicated in Para 32 of the Scheme would meet the ends of justice and as such the Authorised Officer was not justified in assessing penal damages at the rate at which it was assessed. The respondent also disputed the levy of interest on the amount assessed under Section 14-B, as according to them the amount referred to under Section 7-Q refers only to the amount payable by way of contribution and does not refer to damages and as such there was no justification in claiming interest on damages. Accordingly they have prayed for quashing the order dated 4. 2002 as well as the consequential recovery notice dated 6. 2003.

3. In the counter affidavit filed on behalf of the Authorised Officer it was contended that sufficient opportunity was given to the respondent to represent their case before assessing damages and their plea to exempt them from payment was negatived as there was no provision in the E.P.F. Act to reduce/waive the damages assessed. They have also justified the claim for interest, as according to them the damages were also a component of the amount due under Section 7Q of the Act and as such the same also attracts payment of interest.

.4. The learned Single Judge considered the payment of damages under Section14-B as well as the claim of interest under Section 7-Q of E.P.F. Act separately. According to the learned Judge, when a discretion was given to the Authorised Officer to reduce the damages by 50%, it should have considered the case of the employer as per the mandate of the statute. The learned Single Judge was of the considered view that Section 32 (b) of the E.P.F. Act permits the Board to reduce or waive the damages under Section 14-B of the Act in relation to an establishment specified in the Second Proviso under Section 14-B and in other cases depending on merits, reduction on damages up to 50% could be allowed. Since the Authorised Officer has not exercised the discretion in the manner expected of them as provided under the Act, the learned Judge set aside the order under Section 14-B and directed the Authorised Officer to grant reduction at 50% and to re-determine the amount of damages and to deduct the same from the amount already deposited and to refund the balance to the employer. The learned Judge also considered the scope and ambit of Section 7-Q of the E.P.F. Act and on a comparison of the provisions determining the contribution as well as payment of damages was of the opinion that the term "amount due" as found in Section 7Q does not cover payment of damages quantified under Section 14-B of the Act. Accordingly the direction to pay interest on the amou