Sajeev T.K. vs Provident Fund Commissioner and Another

M. Ramachandran, J.—Exhibit P4 proceedings had been addressed by the respondents-Employees Provident Fund Organisation towards the petitioner. Thereby, the petitioner was directed to make a payment of Rs. 2, 68,739/- being outstanding dues of contribution with respect of Malabar Chemical Company, Palluruthy. He has subjected this to challenge. According to the petitioner, there was an improper adjudication and he has been asked to shoulder the liability which is not sustainable legally.

Averments in the Writ Petition indicate that the Malabar Chemical Company was proprietary establishment owned by one Mr. K.H. Patel. He had other business also. Petitioner submits that effective from January 1, 2002, he had been given a power of attorney by Mr. Patel and he was as a friend, helping Mr. Patel in the matter of his affairs. A copy of the power of attorney which is dated January 1, 2002 is produced as Exhibit P1. Mr. Patel had passed away on March 17, 2002. It appears that provident fund contributions were due from the establishment from 1998 onwards. The establishment had been closed down some time in October, 2002. Petitioner submits that by the time, at the instance of legal representatives of Mr. Patel, steps had been taken for the running of the business. As could be seen from Exhibit P3, a partner had settled the matter with the workmen and had also expressed his intention to shoulder the Provident Fund liabilities to the full extent. The conciliation agreement is dated October 17, 2002.

Thus, according to the petitioner, he had no role in the running of the business concerned and Exhibit P4 whereby large amounts were demanded had no legal basis.

A statement has been filed by the respondents justifying their stand. It is stated that as could be seen from Exhibit P1, petitioner had been given authority to carry on, manage, transact, perform and conduct all business activities and affairs of Mr. Patel. It is further submitted that this was the arrangement that was going on. Referring to the definition of the term ''employer'' u/s 2(e)(ii), it is stated that the person who or the authority which has ultimate control over the affairs of the establishment, and where the affairs are entrusted to a Manager, Managing Director or Managing Agent, such Manager, Managing Director or Managing Agent is to be considered as an employer. In view of Exhibit P1 Power of Attorney, and as coming out of the enquiries that had been held by the Provident Fund authorities and after notice to the petitioner, they had come to a definite conclusion that he was managing the establishment and therefore had legal liability. Although perhaps the owner of the establishment also might have been equally liable, the petitioner could not have withdrawn himself in respect of the liability. Therefore, it is submitted that the demand as per Exhibit P4 cannot be faulted.

Sri. Devan appearing for the petitioner submits that the Power of Attorney Holder cannot be treated as a Managing Agent. According to him, he is only a person who acts on behalf of the Principal and can have no personal liability in the matter of discharging of his obligations. Normally, this might be the legal position, but the Standing Counsel for the Provident Fund points out that in order to safeguard the interest of the workmen, an artificial definition is there under the Employees'' Provident Funds Act and the petitioner also is to be held responsible since he has been authorised to manage and transact the business and enquiries reveal that he was exercising such rights. He has not explained, he points out why the dues were not remitted, while he was so managing the factory.

I have to accept the above said contention. But, as rightly contended by the petitioner, this by itself will not bind the petitioner beyond certain limits. The demand is stated to be for the period from 1998 onwards up to June, 2002. Exhibit P1 was executed only on January 1, 2002 and automatically, from the date of death of Mr. Patel, it has become of no consequence. Even if the petitioner was continuing the business thereafter, no legal liability could be fastened on him in respect of the contributions that were payable for such periods. In other words, the petitioner will be liable to pay the provident fund contribution for the period from January 1, 2002 to March 17, 2002. Exhibit P4 therefore cannot be sustained, since large liability has been imposed on the petitioner. It is held accordingly.

It will be proper for the Provident Fund authority to confine the liability of the petitioner to the abovesaid period alone. This should be done by necessary adjudication. I make it clear that apart from the petitioner, liability for the abovesaid period as also for the larger period rests with the owners of the establishment, as well as the legal representatives of Mr. Patel who had inherited the properties. Appropriate follow up orders are to be passed by the authority with notice to the affected parties, for effecting recoveries.

While on this, I may observe that the Powers of Attorney Act of 1882 indeed requires a thorough examination, so as to plug the loopholes, and, cover areas, where essentially more legislative attention is necessary. Situations have come before Courts, when it had been felt that a better statement of rights and liabilities of parties, and areas where the facility could and should not be resorted to are to be concisely defined.

Forward a copy of this judgment to the Central Government, for them to take appropriate steps if such action is deemed worthwhile or necessary.

The Writ Petition is disposed of with the above observation.