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2014 Supreme(Mad) 3371
High Court of Judicature at Madras
V. DHANAPALAN & G. CHOCKALINGAM, JJ.
The Assistant Provident Fund Commissioner
Versus
The Presiding Officer & Another
W.A.No.1976 of 2011
Decided on: 19-09-2014
Advocate Appeared:
For the Petitioner:K. Gunasekar, Advocate.
For the Respondent:R1, Court, R2, A.L. Somayaji, Advocate General, assisted by Narmadha Sampath, Advocate.
The main legal point established in the judgment is that the imposition of penalty and interest under the Employees Provident Funds and Miscellaneous Provision Act, 1952 is lawful, and the charitable activities of an organization cannot be a basis for waiver of penalty and interest for delayed payment.
Headnote:
Penal Damages - Employees Provident Funds and Miscellaneous Provision Act, 1952 - Section 14B, Section 7Q - Summary of Acts and Sections: The court discussed the application of Section 14B and Section 7Q of the Employees Provident Funds and Miscellaneous Provision Act, 1952. The court analyzed the power of the Tribunal to entertain appeals against the order levying damages under Section 14B and the liability of the employer to pay interest under Section 7Q. The court highlighted the power of the Tribunal to modify the orders passed by the authorities in levying damages and the need for the Tribunal to address the issue of damages and interest. The court also referred to the Supreme Court's decision in Employees' State Insurance Corporation v. HMT Ltd., emphasizing the necessity of mens rea or actus reus to contravene a statutory provision for the levy of damages and/or the quantum thereof.
Fact of the Case:
The Trust was earlier exempted under Section 17(2-A) of the Employees Provident Funds and Miscellaneous Provision Act, 1952. Subsequently, the Trust decided to cover the staff under the PF Scheme and remitted arrears for the period from April 1994 to December 2003. The Assistant Provident Fund Commissioner levied damages and interest for delayed payment, leading to the Trust filing an appeal before the Tribunal.
Finding of the Court:
The court found that the Trust was covered by the Act under Section 1(4) and that the persons engaged by a contractor in connection with the work of an establishment are considered employees under the Act. The court also held that the imposition of penalty and interest on the Trust was legal, as the Trust was given a reasonable opportunity of being heard before the penalty was levied. The court emphasized that the noble objectives of the Trust cannot be a reason for waiver of penalty and interest when they are in arrears for default.
Issues: The issues involved the coverage of the Trust under the PF Scheme, the imposition of penalty and interest for delayed payment, and the Trust's claim for exemption based on its charitable activities.
Ratio Decidendi: The court's decision was based on the interpretation of the relevant provisions of the Employees Provident Funds and Miscellaneous Provision Act, 1952, and the determination that the Trust was liable to pay penalty and interest for delayed payment. The court also emphasized that the Trust's charitable activities cannot be a basis for waiver of penalty and interest.
Final Decision: The Writ Appeal was allowed, setting aside the order of the learned single Judge, and the connected M.P.No.1 of 2011 was closed. The Trust was not precluded from approaching the appropriate Government or the Central Board to exempt it from the operation of the provisions of the Scheme.
V. Dhanapalan, J.
1. Heard Mr. K. Gunasekar, learned counsel appearing for the appellant and Mr. A.L. Somayaji, learned Advocate General assisted by Mrs. Narmadha Sampath, learned counsel appearing for the 2nd respondent.
2. This appeal is filed against the order dated 25.07.2011 passed by the learned Single Judge in W.P.No.16150 of 2011, wherein, the order of the Tribunal, dated 28.01.2011 dismissing the appeal filed against the order passed by the 2nd respondent/Assistant P.F. Commissioner, levying damages and interest against the petitioner Trust was set aside with a direction to the 2nd respondent/Assistant P.F. Commissioner to refund the amount of Rs.24,27,204/- to the petitioner Trust within a period of four weeks and with a further observation that the order of attachment made in respect of the petitioner Trust under Section 8-F of the PF Act dated 04.03.2011 will also stand raised.
3. Before proceeding to analyse the issue in question, a perusal of the facts leading to the filing of the Writ Petition is necessary.
3.1. It is the case of the Trust that it was earlier exempted under Section 17(2-A) of the Employees Provident Funds and Miscellaneous Provision Act, 1952 (in short 'the Act') for the period from 01.04.1990 to 31.03.1993. Subsequently, during the year 1994, the Trust had decided to appoint the staff on contract system and dispensed with PF recovery w.e.f. 01.01.1994. The Trust had also sent a letter dated 02.06.1994 to the Department expressing their intention to close the account and settle the amount in respect of seven employees in whose case the PF amounts were deducted until then. It was also informed that the staff had opted to join the contract system to which the PF Act will not apply and they are voluntarily withdrawing the contribution towards PF. Subsequent to this, all the staffs employed directly by the Trust had got back their PF holdings. Though there were no employees having PF contribution, the Department was sending notices from time to time demanding PF contribution. The last such notice sent by the authorities was dated 09.09.1998, to which, the petitioner Trust sent a reply dated 11.11.1998.
3.2. It was stated that the petitioner Trust convened a meeting on 27.10.2001, wherein it had decided to cover the staff working in Chennai and Ranchi offices under the PF Scheme and to recover 12% on Basic plus DA towards PF. When this decision was informed to the PF authorities, it was informed by them that the action of the Trust that there was a change in the policy since April 1994 was not in order and fresh coverage ignoring the earlier one was not possible. Thereafter, the petitioner Trust under the understanding that their proposal was accepted, remitted a sum of Rs.23,66,593/-to the PF Department towards arrears for the period from April 1994 to December 2003 and accordingly filed the returns. Even thereafter, the Trust is continuing to file returns on time. They were also receiving the annual account slips up to the year 2007-2008 from the respondent and they are yet to receive the slips for the years 2008-2009 and 2009-2010. It was informed that due to computerisation, there was a delay.
3.3. In the meanwhile, the Trust received a Show Cause Notice dated 09.07.2008 from the Assistant Provident Fund Commissioner asking the Trust to remit a sum of Rs.17,55,569/-towards penal damages and Rs.6,71,635/-towards interest for the delayed payment of dues for the year 1994-1995 to 2004-2005. The Trust officials met the Assistant Provident Fund Commissioner on 23.07.2008 and explained their position. During the meeting, the Assistant Provident Fund Commissioner informed that he had no power to cancel the order and also informed that the Trust will have to approach either the Appellate Tribunal at Delhi or the Central Board of Trustees, Delhi. The Assistant Provident Fund Commissioner had also issued proceedings dated 28.07.2008 demanding damages in terms of Section 14-B and interest under Section
