THE REGIONAL PROVIDENT FUND COMMISSIONER-I vs. M/S BOMBAY RAYON FASHIONS LTD

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF FEBRUARY 2022 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE M.G.S.KAMAL W.P. No.4563 OF 2021 (L-PF) BETWEEN: THE REGIONAL PROVIDENT FUND COMMISSIONER-I EMPLOYEES' PROVIDENT FUND ORGANIZATION REGIONAL OFFICE, NO.570 RAJARAJESHWARI REGENCY NO.26TH CROSS, IDEAL HOME CO-OP. SOCIETY RAJARAJESHWARI NAGAR BENGALURU - 560098.

... PETITIONER (BY MRS. NANDITA D. HALDIPUR, ADV.,) AND: M/S. BOMBAY RAYON FASHIONS LTD., UNIT NO-18, 320/5 MYSORE ROAD OPP BHEL, BENGALURU - 560026 KARNATAKA MANAGING DIRECTOR.

... RESPONDENT - - - THIS W.P. IS FILED UNDER ARTICLE 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO CALL FOR RECORDS IN EPF/ITB/154/2017 FROM THE CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT. QUASHING THE ORDER DATED 27.02.2020 PASSED IN EPF/ITB/154/2017 FROM

2 THE CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT AT ANNEXURE-F. THIS W.P. COMING ON FOR PRELIMINARY HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: ORDER In this petition under Article 227 of the Constitution of India, the petitioner has assailed the validity of the order dated 27.02.2020 passed by the Central Government Industrial Tribunal cum Labour Court (hereinafter referred to as 'the tribunal' for short) in an appeal preferred by the respondent under Rule 7I of the Employees Provident Fund and Miscellaneous Provision Act, 1952 (hereinafter referred to as 'the Act' for short) by which the order passed by the Regional Provident Fund Commissioner dated 17.06.2015 has been modified and the damages imposed for delay in remitting the provident fund from contribution have been reduced by 20% i.e from Rs.5,25,218/- to Rs.4,20,100/-. 2. Facts giving rise to filing of this petition stated in nutshell are that the respondent is an establishment to which the provision of the Act applies. The respondent remitted the provident fund contribution for a period from May 2000 to

3 September 2013 belatedly. Thereupon, proceedings under Section 14B of the Act were initiated against the respondent. The respondent appeared before the Regional Provident Fund Commissioner and accepted the delay in remittance of the amount of provident fund. It is relevant to mention here that the respondent was required to remit the a sum of Rs.3,13,486/- as provident fund contribution for a period from May 2000 to September 2013. However, the Regional Provident Fund Commissioner by an order dated 17.06.2015 imposed damages to the extent of Rs.5,25,218/-. Being aggrieved, the respondent preferred an appeal. The tribunal by an order dated 27.02.2020 inter alia held that the regional provident fund commissioner has imposed damages under Section 14B of the Act without taking into account the expenses incurred by the Respondent and has not adverted to the reasons for the delay in remitting the amount of provident fund contribution. It was further held that the order passed by the regional commissioner is not a speaking order and has been passed in violation of principles of natural justice. However, the tribunal instead of remitting the matter has reduced the quantum of damages by 20% to

4 Rs.4,20,100/-. In the aforesaid factual background, the regional provident fund commissioner has filed this appeal. 3. Learned counsel for the petitioner submits that the damages have been levied in accordance with Paragraph 32A of the Employees Provident Fund Scheme. It is also submitted that the tribunal should have remitted the matter for consideration to the Regional Provident Fund Commissioner. 4. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant statutory provision viz., Section 14B of the Act, which reads as under: 14B. Power to recover damages.— Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund] or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any

5 Scheme or Insurance Scheme or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme: Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard: Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985, subject to such terms and conditions as may be specified in the Scheme. 5. Thus, from perusal of Section 14B of the Act, it is evident that levy of damages under Section 14B of the Act is

6 discretionary and is not imperative in all situations. A division bench of this court in 'COMMISSIONER OF INCOME TAX VS. ALBUQUERQUE AND SONS', MANU/KA/0278/1991 while considering the nature of levy under Section 14B of the Act has held that levy of damages under Section 14B of the Act is predominantly a penal levy which has to be imposed by the adjudicating authority in the facts and circumstances of each case. It has further been held that there is no compulsion that in each and every case of default there should be a levy under Section 14B of the Act and a judicial discretion has been conferred on the statutory authority. The Supreme Court in M/s Hindustan Times Limited supra while considering the scope and ambit of power under Section 14B of the Act, has held that Authority under Section 14B of the Act has to apply its mind to the facts of the case as well as to the facts stated in reply to show cause notice and pass a reasoned order after giving a reasonable opportunity of being heard to the employer. It has further been held that Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of the default and the amount

7 involved. The adjudicating authority is also required to ascertain whether there was any mens rea for the delay in remitting the amount of provident fund contribution. [See: 'EMPLOYEES STATE INSURANCE CORPORATION VS. HMT LTD.,', (2008) 3 SCC 35]. It has further been held that no period of limitation is prescribed for exercise of powers under Section 14B of the Act. 6. In the backdrop of aforesaid well settled legal principles, we may advert to the order passed by the regional provident fund commissioner. The commissioner has not assigned any reasons for imposing damages of Rs.5,25,800/-. The order is cryptic and suffers from the vice of non application of mind. Therefore, the tribunal has rightly modified the aforesaid order instead of remanding the matter and by giving the litigant a protracted lease of life has reduced the damages by 20% from Rs.5,25,218/- to Rs.4,20,100/-. 7. In the peculiar facts of the case, we do not find any ground to interfere with the order dated 27.02.2020 passed by the tribunal. The order neither suffers from any

8 jurisdictional infirmity nor any error apparent on the face of the record warranting interference of this court in exercise of its supervisory jurisdiction. In the result, we do not find any merit in this petition, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE SS