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2022 Supreme(Online)(KER) 41251
HIGH COURT OF KERALA
AMIT RAWAL, J
M/S. TRICHUR URBAN CO-OPERATIVE BANK LTD., – Appellant
Versus
THE ASSISTANT P.F COMMISSIONER, – Respondent
WP(C)/26187/2022
Penal damages for non-remittance of employee contributions are contextually dependent on employment status and legal obligations as clarified by the court.
Headnote:
Damages - Employees' Provident Funds and Miscellaneous Provisions Act - Section 14B, Section 7Q - The Court evaluated the liability to impose penal damages for non-remittance of contributions citing the lack of mens rea for the terminated employee's period but upheld penalties for non-enrolled employees and delayed dues.
Fact of the Case:
A co-operative bank challenged an order imposing penal damages under the Employees’ Provident Funds Act for non-payment of employee contributions, particularly for a terminated employee and non-enrollment of others.
Issues: Whether penal damages can be imposed for non-payment of contributions for a terminated employee and for non-enrolled staff.
Ratio Decidendi: The court ruled that penalties under Sections 14B and 7Q were not applicable for the terminated employee's duration due to ambiguity in employment status, but were appropriate for other defaults.
Final Decision: The writ petition is allowed in part; the demand for the terminated employee's contributions is quashed while liabilities for non-enrolled employees are upheld.
J U D G M E N T
Ext.P6 order dated 18.2.2020 of the assessing authority computing penal damages under Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and Ext.P11 appellate order dated 1.4.2022 accepting the appeal presented on behalf of the petitioner/establishment in part by reducing the damages to
70%, are under challenge.
2. The petitioner is a Co-operative Bank registered under the Kerala Co-operative Societies Act, 1963.
3. One Mr.Jayendran, an employee of the petitioner was dismissed from service with effect from 29.9.2006. The aforementioned dismissal order was challenged before the Co-operative Arbitration Court, Thiruvananthapuram in ARC No.58/2007. Vide Ext.P3 award dated 20.5.2009, the aforementioned ARC was allowed, whereby a direction was issued to the petitioner for reinstating the said Mr.Jayendran with backwages and other service benefits.
4. The petitioner challenged the aforementioned award by preferring an appeal before the Co-operative Tribunal. Though an interim stay of the operation of the award was granted in the appeal, on 31.8.2011, the appeal was dismissed. The aforementioned orders were challenged before this Court by filing WP(C) No.34581/2011 and there was an interim order of stay of operation of the judgment of the Tribunal. However, on 10/11/2014, the writ petition was dismissed by this Court upholding the award and the judgment of the Tribunal. Writ Appeal No.39/2015 was preferred by the petitioner and an interim order of stay was granted. But, the writ appeal also stood dismissed on
16.7.2018, vide Ext.P4 judgment.
5. Thereafter, the petitioner was served with Ext.P1 notice from the office of the Employees Provident Fund Organisation intimating proposed levy of damages and interest for the period from September, 2006 to December, 2016, for the reasons of delayed payments and non- enrollment of 35 employees and also for non-remittance of contribution of regular dues. The aforementioned notice was duly replied by the petitioner. Thereafter, the first respondent passed Ext.P6 order dated 18.2.2020 levying damages amounting to Rs.18,82,460/-, which was challenged by the petitioner by filing Ext.P8 appeal before the Tribunal. In the reply (Ext.P9) filed by the respondent/Organisation to the appeal, it surfaced that damages are proposed to be levied on three counts. The first is non-payment of the contribution of Mr.Jeyendran for the period from September, 2006 to December, 2016; the second is non-enrollment of 35 daily waged employees with effect from March, 2012 to July, 2016 and the third is non- remittance of the regular dues with effect from February, 2012 to August, 2019. The appeal was partly allowed by the Tribunal vide Ext.P11 order dated 1.4.2022 by reducing the damages to 70%.
6. Ext.P6 also contains assessment of interest under Section 7Q . Though the order under was not appealable, the petitioner preferred an appeal. The appellate Tribunal vide Ext.P11 impugned order dated 1.4.2022, reduced the amount of damages under Section
14B to the extent of 70%.
7. Learned counsel appearing on behalf of the petitioner submitted that the petitioner cannot be found faulted with in not depositing contribution in respect of a terminated employee for the period from September, 2006 to December, 2016, and therefore, there was no intentional breach of the obligation and penal provisions for the aforementioned period could not have been imposed. As regards non-enrolled employees, the petitioner had deposited the amount under Section 7A though belatedly. There was no willful default or mens rea with regard to the delay caused in remittance of regular monthly dues for a period from February, 2012 to August, 2019. The order of dismissal was though upheld by the arbitration award, there was interdiction by the Tribunal, writ court and a Division Bench of this Court.
8. On the other hand, Sri.Sajeevkumar K.Gopal, learned Standing Counsel for the first respondent/Organisation,
