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Judgment
Prasanna B. Varale, J.(Oral)—Rule. Rule Made Returnable Forthwith.
This Court by order dated 11.12.2015 issued notice to the respondent no.1, returnable on 03.02.2016. The notice was duly served on the respondent no.1. Thereafter, on 26.09.2016, 03.10.2016, 17.10.2016 and 25.11.2016, the matter was adjourned at the request of the learned counsel for the petitioners. On 05.12.2016, this Court by referring that though, notice is issued to the respondent no.1 and it is duly served and none appeared for the respondent no.1, to grant one opportunity to the respondent no.1, posted the petition on 13.12.2016. The matter was then adjourned at the request of the petitioners on 23 occasions. Though, the matter was adjourned from time to time at the request of the petitioners, the respondent no.1 was absent on all the earlier dates and in spite of specific order dated 05.12.2016 observing that if none appears for the respondent no.1 on the next date i.e. on 13.12.2016 the petition would be heard and decided on its merits, today also none appears for the respondent. As the controversy involved in the present petition is already dealt with in the judgment of this Court, the petition is taken up for final disposal at the stage of admission itself.
By the present writ petition, the petitioners challenge the order passed by the respondent no.2 � Employees Provident Fund Appellate Tribunal, New Delhi, dated 26.11.2014, thereby partly allowing the appeal filed by the respondent no.1 and quashing and setting aside the order passed by the petitioner no.1 to the extent of damages.
The respondent no.1 is a Company duly registered under the Companies Act, 1956, engaged in the business of manufacturing various types of medicines and drugs. The respondent company is covered under the provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 with effect from 01.01.2007 and has been allotted Code No. MH/65645. The respondent company was reported to be in default in remitting the Provident Fund Contribution, Family Pension Fund Contribution, Deposit Linked Insurance Contribution, Administrative Charges and Administrative Charges on EDLI Scheme for the period 01.01.2007 to 30.09.2013. A notice under Section 14B of the Act was issued to the respondent company on 19.11.2013, informing about the details of payment due and payable. The respondent company was called upon to show cause as to why the damages envisaged under Section 14B of the Act of 1952 should not be levied and recovered from it. The respondent company was also called upon to appear before the petitioner no.1 authority on 04.12.2013. The respondent no.1 company appeared before the petitioner no.1 authority through its representative and sought adjournment. Accordingly, the proceeding was adjourned. Thereafter, in spite of giving opportunities, the respondent company neither submitted any document nor put forth any claim in reply to the proceedings initiated against it. Considering all these aspects, the competent authority passed the order dated 01.08.2014 holding that a sum of Rs.7,57,467/was due towards damages under Section 14B of the Act for belated payments and as per Section 7Q of the Act, the respondent company was liable to pay interest @ 12% per annum for the belated payment. The interest was quantified at Rs.4,14,323/- and separate order to that effect was also passed on 01.08.2014.
Being aggrieved by the said orders dated 01.08.2014, the respondent-company filed an appeal before the respondent no.2 Tribunal, raising the ground that the delay caused in remittance of PF contribution was not an intentional one, but it was because of the financial difficulties and the mitigating circumstances. The appeal was opposed by the petitioners. The petitioners submitted a detailed reply raising preliminary objections. The respondent no.2 Tribunal partly allowed the appeal on the ground that neither any enquiry nor any finding was recorded to the effect that the appellant had deliberately and wilfully withhold the PF contributions. The respondent no.2 � Tribunal then by observing that the respondent company accepted the liability of interest and prayed for instalments to remit the interest amount in 36 instalments on the ground of weak financial conditions, the Tribunal granted 24 instalments to deposit the entire amount of interest.
Mr. Verma, the learned counsel for the petitioners, in challenge to the order passed by the respondent no.2 Appellate Tribunal submitted that the respondent no.1 Company was covered under the EPF and MP Act, 1952. The respondent company was duly informed by issuing a notice for levy of damages and interest for the period from 01.01.2007 to 31.07.2013 for belated payment towards PF contributions and other outstanding dues. Considering the response of respondent company and the belated payments, the competent authority levied the damages and respondent company was also subjected to the payment of interest. The learned counsel for the petitioners submitted that the only ground raised by the respondent company was of financial constraints. It was submitted that the respondent no.2 � Tribunal on an erroneous reading of the provisions of the Act as well on misreading of the judgments relied on by the respondent company, allowed the appeal and also permitted the respondent company to deposit the entire amount of interest in 24 equal instalments. The learned counsel submitted that the course adopted by the Appellate Tribunal is clearly contrary to the judgments of the Hon''ble Apex Court as well as of this Court. The learned counsel placed reliance on the judgments of the Hon''ble Apex Court reported in AIR 2008 Supreme Court 3122 in the case of M/s Goetze (India) Ltd. v. Employees State Insurance Corpn. ; and AIR 1998 Supreme Court 688 in the case of M/s Hindustan Times Ltd. v. Union of India and others. The learned counsel also relied on the unreported judgments of learned Single Judge this Court in Writ Petition No.5754 of 2015, dated 11.07.2016 and in Writ Petition No. 5565 of 2010, dated 15.04.2015. In the judgment of this Court in W.P. No. 5754/2015, the reported judgment of the Hon''ble Apex Court in M/s Goetze (India) Ltd.''s case has been referred to.
As the material factors namely the respondent no.1 company being covered under the EPF & MP Act, notice was duly issued to the respondent company, the order was passed after giving sufficient opportunities to the respondent company are not in dispute. Thus, the only question is whether the order passed by the respondent no.2 Appellate Tribunal is sustainable or not.
Insofar as the part of interference of the respondent no.2 � Appellate Tribunal in the interest amount is concerned, it will be useful to refer to the judgment of the Hon''ble Apex Court in M/s Goetze India Ltd. (supra). While concluding the controversy, Hon''ble Apex Court observed at paragraphs 5 and 6 thus "
In order to appreciate rival submissions it would be necessary to take note of few provisions, Sections 39 and Regulations 31 and 31A reads as follows:
"Section 39 Contributions
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5(a) If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due he shall be liable to pay simple interest at the rate of 12% per annum or at such higher rate as may be specified in the regulations till the date of its actual payment."
"Regulation 31 Time for payment of contribution
An employer who is liable to pay contributions in respect of any employee shall pay those contributions within 21 days of the last day of the calendar month in which the contributions fall due;
Provided that where a factory/establishment is permanently closed, the employer shall pay contribution on the last day of its closure."
"Regulation 31A Interest on contribution due, but not paid in time
An employer who fails to pay contribution within the periods specified in regulation 31, shall be liable to pay interest at the rate of 12% per annum in respect of each day of default or delay in payment of contribution."
As there was delay in making the payment of the contribution the Corporation had issued notice on 29.6.1990 at the first instance and thereafter the order was passed under Section 45(A) of the Act on 23.7.1992. The same was challenged before the ESI Court in which an interim stay was granted on 9.10.1992. During the pendency of the matter there was reverification and the quantum payable by the payment was worked out. The liability to pay interest is statutory. There is no power of waiver. The question of any compromise or settlement does not really arise. Even otherwise the order of the ESI Court referred to and relied upon by the appellant is of no assistance to the appellant. It only noted statement of the appellant that he had deposited contribution payable. The reference to "no further due" is obviously relatable to the contribution payable and nothing beyond that.
Insofar as the provisions of Section 14B of the Act relating to recovery of damages from defaulter is concerned, the Hon''ble Apex Court in M/s Hindustan Times Ltd''s case (supra) considered the aspect of opportunity of hearing to be granted to the defaulter. The Hon''ble Apex Court also observed that the authority Regional PF Commissioner for initiating proceedings under Section 14B usually takes into consideration the number of defaults and the amounts involved. The Hon''ble Apex Court then by considering the various judgments observed at paragraph 28 thus "
"28. From the aforesaid decisions, the following principles can be summarised. The authority under Section 14B has to apply his mind to the facts of the case and the reply to the show cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard; the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on pleas of power cut, financial problems relating to other indebtedness or the delay in realisations of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no period of limitation prescribed by the legislature for initiating action for recovery of damages under section 14B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under section 14B would be taken; mere delay in initiating action under section 14B cannot amount to prejudice inasmuch as the delay on the part of the department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action under section 14B, he had changed his position to his detriment to such an extent that if the recovery is made after a large number of years, the prejudice to him is of an "irretrievable" nature: he might also claim prejudice upon proof of loss of all the relevant records and/or nonavailability of the personnel who were, several years back in charge of these payments and provided he further establishes that there is no other way he can reconstruct the record or produce evidence; or there are other similar grounds which could lead to "irretrievable" prejudice; further, in such cases of "irretrievable" prejudice, the defaulter must take the necessary pleas in defence in the reply to the show cause notice and must satisfy the concerned authority with acceptable material; if those pleas are rejected, he cannot raise them in the High Court unless there is a clear pleading in the writ petition to that effect."
(emphasis supplied)
In the present matter, the only ground raised by the respondent company is the financial and economic difficulties being faced in the business. This Court in the judgment and order in W.P. No. 5754/2015, considering these aspects of the matter as well as the judgment of the Hon''ble Apex Court and the judgment in W.P. No. 5565/10, observed thus at paragraph 8 "
Insofar as the reduction in the amount of damages is concerned, the power to reduce the same has to be exercised in terms of Clause 32B of the Scheme of 1952. Said Clause permits waiver of reduction of damages in certain contingencies. Insofar as the reduction of damages is concerned, the same is restricted to 50% of the damages adjudicated under Section 14B of the said Act. In the present case, the damages have been reduced to 7% by the Tribunal. The impugned order does not reflect the basis on which the Tribunal found it necessary to reduce the amount of damages. It has merely observed that the case for such reduction has been made out. The judgment of learned Single Judge in Writ Petition No. 5565 of 2010 (the Central Board of Trustees Employees Provident Fund and another v. M/s Veekay Contsyn Ltd.) supports the submissions made on behalf of the petitioners and such decision to reduce damages has to be supported by reasons. On this count, the impugned order is liable to be set aside."
Resultantly, the order passed by the respondent no.2 � Appellate Tribunal was set aside and the proceedings were remanded to the Appellate Tribunal with a direction to decide the appeal in the light of the observations of this Court, keeping the contentions of the parties on the aspect of reduction of damages open. It will not be out of place to mention that this Court in the judgment in W.P. No.5565/2010 found that the Tribunal though do not vest with the power to reduce the quantum of damages, without assigning any reason, reduced the quantum of damages upto 80% of the amount as assessed by the Assistant Provident Fund Commissioner. The writ petition was allowed accordingly and the matter was remitted to the Tribunal for deciding the appeal afresh.
Considering all these aspects, I see no reason to take any different view than the view already adopted by this Court. In the result, the writ petition is allowed. The impugned order dated 26.11.2014 passed by the respondent no.2 Appellate Tribunal is set aside. The matter is remitted to the Tribunal for deciding the same afresh. The Tribunal to decide the appeal afresh as expeditiously as possible and preferably within twelve weeks from the date of order of this Court. Rule is made absolute in the aforesaid terms. No order as to costs.