The court emphasized that damages under Section 14B of the Act must consider natural justice and mitigating circumstances, and remanded the matter for fresh consideration.

ORDER :

This writ petition has been filed by the Employees Provident Fund Organisation questioning the order dated 04.03.2013, passed in A.T.A.No. 442(13)2012, on the file of the Employees' Provident Fund Appellate Tribunal, New Delhi, whereby the appeal filed by the second respondent herein was allowed by placing reliance upon a decision of the Honourable Apex Court in the case of Employees' State Insurance Corporation vs. HMT Ltd., and another, reported in (2008) 3 SCC 35, on the ground that there was no willful default on the part of the second respondent in remitting the provident fund contributions belatedly and there is no finding recorded by the petitioner holding that the second respondent has willfully and deliberately withheld the provident fund contributions.

2. As a matter of fact, the above referred decision was overruled by the subsequent decision of the Honourable Supreme Court in the case of Horticulture Experiment Station vs. Provident Fund Organisation, reported in (2022) 4 SCC 516 and thereafter, a Full Bench of this Court, having taken note of the said decision i.e., the decision in the case of Horticulture (cited supra), by a common Judgment dated 03.06.2024, passed in W.P.(MD) Nos.7339, 9688 of 2013, 2765 & 2782 of 2014, has laid down certain guidelines in Paragraph No.39 in the matter of deciding the liability under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (in short, “the Act, 1952”). Paragraph No.39 of the said decision reads as under:

39.Therefore, following the principles reiterated by the Hon'ble Supreme Court and different High Courts including our High Court in similar circumstances, this Court hold that Section 14B of the Act is an enabling provision and it does not envisage any compulsion to levy damages in all cases, and is inclined to frame the following guidelines:-

(i) Before levying damages in terms of Section 14B of the Act, every authority is required to follow principles of natural justice. The particulars of the default, period, etc., and every adverse information that may be relied upon for levying damages should be indicated or furnished to the employer and a fair opportunity should be given to the employer to put forth his case in defence to the proposed action.

(ii) The authority, while exercising power under Section 14B, shall keep in mind that the liability as per the table given in Para 32A of the Scheme, should be treated as upper limit within which damages can be levied for the delay in making contributions by the employer.

(iii) In appropriate cases where the employer is able to provide sufficient reasons or cause justifying the delay with verifiable materials, the authority is competent to waive or fix the quantum of damages less than what is shown in the table under Para 32A of the Scheme.

(iv) When an employer is not in a position to make payment in order to save the industry from closure or on account of protecting the industry or establishment from being put to face proceedings under the SARFAESI Act or other inevitable circumstances which compels the employer to divert the funds only to save the industry and the employees, there cannot be a levy of damages.

(v) The authority under the Act has to consider all the mitigating circumstances including financial difficulties projected by the employer and pass a reasoned order.

(vi) When the employer is able to produce all the documents or verifiable material within his reach to substantiate any mitigating circumstance, the authority exercising power under Section 14B has to pass orders giving reasons, if he is unable to find truth or bona fides in the claim of the employer.

(vii) There shall be proper application of mind objectively on the merits of each case and in any case, the authority cannot resort to the arithmetical calculation or for levying damages as per Para 32A of the Scheme without considering the mitigating circumstances.

(viii) While assessing the quantum of damages, the past and pr