Delay in initiating penalty proceedings under a statute must be within a reasonable time; mere delay does not constitute prejudice without substantiation.

J U D G M E N T

The petitioner is a company covered under the provisions of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 'Act') and admittedly satisfying the contributions as prescribed under the statute. The dispute in this writ petition is essentially with reference to the demand of interest under the provisions of Section 7Q of the Act for the various periods starting from March 1998 till March 2020.

2. I have heard Sri.Benny Thomas, the learned Senior Counsel for the petitioner, Sri. John Mani, the learned Standing Counsel for respondent Nos.1 and 2, and Sri.Jithesh Menon, the learned Standing Counsel for the 3rdrespondent – Bank.

3. The learned Senior Counsel for the petitioner would contend that the proceedings initiated, as evidenced by Ext.P1 – show cause notice culminating in the final order at Ext.P3 is hopelessly barred by limitation. He would fairly point out that though the statute does not prescribe any time limit within which the proceedings have to be taken, such proceedings ought to be taken within a reasonable period of time. He further states that the delay in the case at hand is in excess of seven years, as is evidenced by the issue of the show cause notice at Ext.P1.

4. Per contra, Sri John Mani, the learned Standing Counsel for the respondents, would contend that there was no delay even in the initiation of the proceedings, and that mere delay, even if admitted, cannot be a ground for upsetting proceedings taken under the provisions of the statute, relying on the judgment of the Apex Court in K. Streetlite Electric Corporation v. Regional Provident Fund Commissioner, Haryana [2001 (4) SCC 449] . He would also invite the attention of this Court to the averments contained in paragraph 4 of the writ petition to contend that even the petitioner herein has admitted delay in payment, admitting that, on certain occasions, the bank used to return the cheques for one reason or another.

5. I have considered the rival submissions as well as the connected records.

6. There is no dispute to the fact that the proceedings seeking to demand interest with reference to the period from March 1998 have been initiated only by issue of show of cause notice on 17.12.2020. The petitioner, as stated earlier, has been contending that it used to make remittances within the period prescribed under the statute. The respondents, in such circumstances, ought to have initiated proceedings to demand interest, on account of the alleged delay, within a reasonable period of time. True, the provisions of Section 7Q of the Act did not provide for any period within which proceedings for imposition of penalty ought to have been initiated. But even with respect to a scenario where the statute does not visualise or prescribe a time limit for initiation of proceedings, the said proceedings ought to be taken within a “reasonable period of time”.

7. This Court takes note of the provisions of the Code on Social Security, 2020 , as per which, a period of five years has been prescribed for initiation of proceedings under the proviso to Section 125 , which provides for assessment as well as determination of dues from the employer. True, the afore is with reference to the Code of the year 2020.

8. This Court further takes note of the contention raised by the learned Standing Counsel relying on the Judgment of the Apex Court in K. Streetlite Electric Corporation v. Regional Provident Fund Commissioner, Hayana [2001 (4) SCC 449] . In the aforementioned case, the Apex Court considered the question of demand of damages under the provisions of Section 14B. There also, it was contended that the proceedings initiated were beyond the reasonable peri