Truck Operators Union, Badhni Kalan vs Food Corporation Of India And Others

Kuldeep Tiwari, J

The Truck Operators Union (petitioner), which is the contractor of Food Corporation of India (respondent no.1 and 2) has filed the instant petition under Article 226 of the Constitution of India, for issuance of a mandamus upon the latter concerned, to release of an amount of Rs.57,72,649/- alongwith interest @ 09% p.a, which was deposited by the petitioner as security for executing the Handling Transport Contract (HTC) for the different periods, as the petitioner has successfully completed the work of contract.

FACTUAL MATRIX

It is a case of the petitioner-contractor that they were awarded tenders for Handling Transport Contract (HTC), for various seasons spanning the period from 31.01.2002 to 15.01.2009, and the petitioner-contractor executed the same successfully during the relevant time. At the time of allotment of the contract, as per the terms of the contract, the petitioner-contractor was required to deposit the security amount, therefore, as a security amount for different periods in between 1. 08.2002 to 15.01.2009, the petitioner-contractor deposited a total sum of Rs.57,72,649/- in lieu of different tender processes and contracts. Upon successful completion of all contracts, and in the absence of any deficiency or breach being pointed out by the respondents-Food Corporation of India (FCI), the petitioner-contractor submitted several applications requesting the release of the aforementioned security deposit. However, despite repeated requests, the said security amount has not been refunded by the respondents. Aggrieved by the inaction and continued withholding of the security deposit, the petitioner-contractor has approached this Hon’ble Court by way of the present petition.

Learned counsel for the petitioner-contractor submits that the petitioner has completed the tender work without any default within the stipulated time period, and has also deposited the contribution towards Employees Provident Funds (EPF) as the same has been deducted by the respondents-FCI at the time of making payments. Specifically, the petitioner-contractor fulfilled its EPF obligations for the period from August 2002 to December 2006, and deposited its share of the EPF contributions accordingly, and in this regard a specific confirmation has been communicated by respondent no.3 i.e. Assistant Provident Funds Commissioner, Bathinda, on 14.06.2007 (Annexure P-5).

He further submits that after the issuance of above confirmation, the Deputy Regional Manager, FCI, made a recommendations vide communication dated 31.07.2009 (Annexure P-6), to respondent no.1-FCI, to refund the security amount to the tune of Rs.26,17,649/-. Further, it was specifically mentioned therein that no audit recovery is outstanding against the HTC (petitioner-contractor). However, despite the above communications, the total security amount has not been refunded.

He next submits that the petitioner-contractor served a legal notice dated 05.06.2013 (Annexure P-8) through his counsel which was duly replied vide Annexure P-10, by respondents-FCI, wherein, the respondents-FCI, took a stand to the effect that there is a delay on the part of the petitioner-contractor in depositing the EPF, for the period subsequent to May, 2007, and therefore, till the time Regional Provident Fund Commissioner (RPFC), issues a 'No Dues Certificate' (NOC) to the petitioner-contractor, the security amount as deposited cannot be released. The second reason assigned therein, was that since the recovery order passed by respondent no.3, is under challenge before this High Court through a CWP No.22946 of 2011, therefore, till the adjudication thereof, the security amount cannot be released. He submits that both the above grounds are not in existence as on today.

He further draws attention of this Court towards the letter dated 10.07.2014 (Annexure P-11), through which the Area Manager concerned, wrote to the Manager (D), FCI, informing him about the fact that nothing is due against the petitioner-contractor as with regard to the EPF contribution/ damages/interest/any recovery, for the period 16. 01.2007 to 15.01.2009. Further, the subsequent letters dated 25. 07.2014 and 11.09.2014 (Annexure P-12 and P-13 respectively), clearly suggests that the recovery of the damages/ interest/recovery towards EPF contribution, is recoverable from the petitioner-contractor for the period July, 2007 to July, 2010.

He further submits that the writ petition bearing No.CWP-22946-2011 filed by the respondents-FCI, has already been dismissed, even the LPA bearing No.1306 of 2016, preferred thereagainst, was also dismissed, therefore, the order dated 20.12.2007 (Annexure P-7), passed by the Assistant Provident Fund Commissioner, Bathinda, has attained finality. Hence, the petitioner-contractor cannot be held liable for the default of the respondents-FCI.

He also submits that, till date, the respondents-FCI have failed to point out the exact period, or amount of any alleged deficiency in depositing the EPF amount with respondent No 3. In the absence of such particulars, the respondents-FCI is not entitled/authorsied to withheld the security amount for indefinite period.

He in additon submits that, with regard to the liability of the petitioner-contractor for depositing their share of the EPF amount, the same was deducted by the respondents-FCI at the time of making payments against the bills submitted by the petitioner-contractor. Specifically, 24% of the bill amount was deducted by the respondents-FCI towards the EPF contributions. However, it was the respondents-FCI who failed to deposit the EPF amount within the stipulated time for the period from July 1993 to May 2007. This delay attracted the provisions of Section 7(Q) and Section 14(B) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the ‘Act of 1952’), which impose a penalty for interest and damages amounting to Rs. 29,47,195/-.

The next submission made before this Hon’ble Court on behalf of the petitioner-contractor is that, as per Clause VII of the Model Tender Agreement, which forms an integral part of the Contract Agreement, the responsibility for making contribution of the Employees’ Provident Fund (EPF) amount under EPF Act, 1952, lies with the contractor, which is the principal employer.

He, over and above, submits that as per the instructions dated 9. 01.1986 and 05.01.1998 (Annexure R-7 and R-8 respectively), the respondents-FCI is the principal employer, and it cannot escape its lability, and it is the instructions which specifically cast a duty upon the respondents-FCI to deduct at least 20% from the subsequent bills of the contractor, so that the EPF amount is deposited.

He, finally, submits that the respondents-FCI has deducted the EPF amount from the bills submitted by the petitioner-contractor, as is evident from the various bills annexed with the instant petition. Therefore, any delay in depositing the EPF amount lies solely with the respondents-FCI, and the petitioner-contractor cannot be held liable for such delay.

SUBMISSIONS MADE BY LEARNED COUNSEL FOR RESPONDENTS NO.1 AND 2-FCI.

Learned counsel for respondents-FCI started his argument by submitting that the issue involves disputed question of facts, therefore, such issues cannot be appropriately adjudicated merely by way of exchange of affidavits between the parties concerned. Hence, the instant petition is a misconceived motion and may not be entertained.

He further submits that the employees of respondents-FCI are not subject to the provisions of the Act of 1952, as they are governed by the CPF Scheme. So far as, lability of depositing provident funds qua the employees engaged by the contractors from time to time for execution of contractual work, is concerned, the FCI has no role to play, and it is entirely the liability of the contractor concerned, to deposit the EPF contribution with the EPF authorities. The respondents-FCI is for the execution of the work only.

He also placed reliance upon Clause VII of the Model Tender Agreement to submit that the principal responsibility for making contribution of the Employees’ Provident Fund (EPF) amount under EPF Act, 1952, lies with the contractor, which is the principal employer.

The next argument made by learned counsel for the respondents-FCI, that though respondent no.3, had informed the FCI that the petitioner-contractor has deposited the required amount of EPF dues , and the same has been verified as correct vide letter dated 14.06.2007 (Annexure P-5), yet by another order dated 20.12.2007 (Annexure P-7), it was informed the FCI that for the period July, 1993 to May, 2007, a total sum of Rs. 29,47,195/- is payable by the FCI, on account of penalty/damages. Despite the fact that it was the EPF authorities, i.e. respondent no.3, who themselves given the clearance to the petitioner-contractor, about depositing of all dues for the said period, subsequently, a demand notice was issued against respondents-FCI, therefore, the respondents-FCI was left with no other option except to withheld the security amount, so as to settle the penalty imposed upon them.

He in addition submits that it was the duty of the petitioner-contractor to deduct the EPF contribution from wages of its employees, and thereafter, to deposit the said contribution with the EPF authorities, and thereupon, to produce a copy of challan in proof of such payments, and only thereupon, the payment for the concerned period is released by the respondents-FCI.

He draws the attention of this Court towards the various challans annexed to demonstrate the procedure adopted by the respondents-FCI. According to the said procedure, it was the petitioner-contractor who deposited the EPF amount through challans, which were duly countersigned by the concerned officer of the FCI. Upon completion of this process, the payments that had been withheld in respect of the contract amount were released.

He over and above submits that only upon receiving a confirmation from EPF authorities (respondent no.3), the respondents-FCI, used to release the balance amount, as is evident from various sanction orders.

Finally, he submits that in view of the penalty imposed by respondent no. 3, the respondents-FCI, being the principal employer, have the lawful right to recover the said amount from the security deposit furnished by the petitioner-contractor.

In order to give strength to his submission, he placed reliance upon “Bharat Heavy Electricals Ltd. vs. ESI Corporation” 2008(3) SCC 247, wherein it was held by Hon'ble Supreme Court that the principal employer would be entitled to recover the contribution from the contractor being the immediate employer, in case of default in depositing the share towards ESI.

SUBMISSIONS MADE BY LEARNED COUNSEL FOR RESPONDENT NO.3-APFC.

Learned counsel for respondent no.3, submits that the FCI is covered under the Act of 1952, and was, specifically, allotted EPF Code No.12654, to deposit of EPF dues. The petitioner-contractor has worked as a contractor on behalf of the respondents-FCI, in the given depot and employed a large numbers of workers to carry out the work for FCI.

He further submits that the term 'employee', is defined under Section 2(f) of the Act of 1952. As per the said definition, employees engaged/employed by the contractor, in or, in connection with the work of the establishment who gets their wages directly or indirectly, are considered the employees of the establishment. Hence, the FCI is covered under the said Act.

He also submits that as per para 30 and 38 of the Employees Provident Funds Scheme, 1952, the lability to pay provident fund, at first instance, is of the principal employer, even in respect of employees engaged, or deployed by, or through a contractor. But it is always open to the principal employer to recover the same from the contractor under Section 8A of the Act of 1952, read with para 36B of the EPF Scheme.

He in addition submits that as per the procedure adopted by the respondents-FCI, they used to deduct 24% from each running bill as part of EPF dues qua the employees, who were engaged through the petitioner-contractor. But they failed to deposit the EPF dues on time, for the period of July, 1993 to May, 2007, therefore, the order against respondents-FCI on dated 20.12.2007, assessing the amount of Rs.29,47,195/- was passed. He over and above submits that the said order has now attained finality, as even the LPA preferred by the respondents-FCI, has been dismissed.

ANALYSIS

This Court has considered the oral, as well as written submissions, as made by learned counsel for the parties concerned, and with their able assistance has examined the entire available record.

The entire issue revolves around the order dated 20.12.2007 (Annexure P-7), as passed by the EPF authorities, i.e. respondent no.3, under the provisions of Act of 1952, wherethrough, the damages/interest were imposed on remittance of Employees' Provident Funds dues (EPF) for the period July, 1993 to May, 2007. The Assessing Officer concerned, has observed that the respondents-FCI has failed to pay the dues within the prescribed time period, and therefore, by invoking Section 14B and 7Q of the Act of the 1952, imposed the penalty of Rs.29,47,195/-.

The issue for consideration before this Court, is to determine the party liable to pay the penalty/damage amount imposed under the Act of 1952.

The case as set up by the petitioner-contractor before this Court is that respondents-FCI is governed by the Act of 1952, and was allotted EPF Code No.12654, for the purpose of depositing EPF dues.

The petitioner-contractor was being paid the running contract bills by the FCI, only after making deduction of 24% on account of their share on account of liability for payment towards EPF contribution for the period August, 2002 to December, 2006. In this regard, the respondents-FCI, was issued 'No Dues Certificate' (NDC) by the respondent no.3, with regard to the period from August, 2002 to December, 2006, vide communication dated 14.06.2007 (Annexure P-5). Furthermore, the intra-departmental communications vide Annexure P-11 to P-13) between respondent no.1 and respondent no.2, reflects that it was duly communicated by respondent no.2 to respondent no.1 that nothing is due towards EPF contribution/damages/interest against the petitioner-contractor for the period from July, 2007 to July, 2010. The above referred correspondences have not been denied by the contesting respondents-FCI.

It is further imperative to note here that the security amount which is withheld by the respondents-FCI pertains to the period from January, 2002 to January 2009. The details of which is extracted hereinafter in a tabulated form:-

Sr. No.

Period

1

01.08.2002 to 31.07.2004

2

14.12.2004 to 13.12.2006

3

16.01.2007 to 15.01.2009

It is not under dispute that FCI has never issued any show cause notice qua deficiency of any service in execution of the contract work allotted. Till date neither any deficiency in execution of work was pointed out by FCI, nor any show cause notice was issued specifying the exact period and amount for which the petitioner committed default in depositing the EPF amount, rather all the running contract bills and final bills have been cleared upon the successfully completion of the contractual period.

For this contractual period, i.e. January, 2002 to January, 2009, the respondents-FCI itself admitted in their intra-departmental communication that there is no liability upon the petitioner-contractor, as nothing is due towards the EPF contribution for the period June, 2007 to July, 2010, and the amount which was deficient, was duly recovered from the petitioner-contractor.

On perusal of Annexure P-11 to P-13, which is the intra departmental communication, which clearly voices that there is no deficient amount with regard to this period, and if there is any, the same has already been recovered from the petitioner. Therefore, the respondents-FCI has no legs to stand, to say that they are entitled to withhold the security amount in question.

As already observed above, that the security amount was deposited for a period of 06.2007 to 07.2010, and for that period, it transpired from the intra-departmental communication from Annexure P- 11 to P-13,nothing is due towards the petitioner with regard to payment of EPF contribution, therefore, in view of this fact, FCI does not have any power to withhold the security amount in question.

It is important to note here that the order dated 20.12.2007 (Annexure P-7), passed by the authority under the Act of 1952, wherethrough, the damages were imposed on remittance of provident funds dues for the period July, 1993 to May, 2007, was challenged by the FCI by filing a CWP No.22946 of 2011, which was dismissed by a co-ordinate bench of this Court vide order dated 22.12.2017. The respondents-FCI made an unsuccessful attempt to challenge the order (supra), by filing an intra-court appeal i.e. LPA No.1306 of 2016 dated

01.2017, however, that also met with the same fate, and was dismissed, and it is not brought on record by the FCI that the decision so taken, has been challenged before the Supreme Court, therefore, it can be safely presumed that the verdict dated 20.12.2007, has attained finality.

A perusal of the order dated 20.01.2017, as passed by the Division Bench in the LPA (supra), reflects that the respondents-FCI, has taken a stand to throw a challenge to the order in question on the ground that the entire amount on account of contribution towards EPF, has been paid, and despite that respondent no.3, has imposed penalty/damages/interest upon them. However, the LPA bench has observed that the respondents-FCI failed to substantiate either before the learned appellate authority concerned or any other competent authority, that the payments were made within the prescribed time.

The second contention raised before the LPA bench, is that, it is incumbent upon respondent no.3, under the Act of 1952, to summon the contractor, and to establish its liability. However, the LPA bench while referring to Section 8A of the Act of 1952, submits that the FCI fails to recover the amount from the contractor at the relevant time, therefore, on account of its failure to discharge its onus the responsibility cast under the Act is upon the FCI. Finally, the LPA was dismissed. The relevant part of the order dated 20.01.2017, is extracted hereinafter:-

“While impugning the judgment of the learned Single Judge learned counsel for the appellant contended that the amounts due, already stood paid but this fact was ignored by the Provident Fund Authorities while concluding against the appellant. It is contended that once the amounts stood deposited, such period necessarily has to be excluded for the purpose of determining the liability.

We notice from the impugned order as also the order of the Appellate Authority that the appellant failed to produce any material before the said authorities to establish the fact of payment in time. It was on account of the delayed payment that appellant has been fastened with the penal liability. Even before us no such document or material has been produced by the appellant to substantiate such a plea. It is thus difficult to accept what has been projected before us considering that the appellant is an establishment where it would account for each and every payment made and thus it is inconceivable that the appellant would not be having the necessary record of payment to satisfy the queries of the authorities under the Act. In the absence of any such material, we are unable to accept the plea of the appellant.

Contention has also been raised that the employees were engaged through the contractor and it was incumbent upon the authorities under the Act to summon him and establish the liability.

A perusal of Section 8A of the Act, which has been extracted herebelow, would indicate that it is the employer's responsibility to recover such amounts from the contractor even if the workers have been engaged through a contractor:-

“8A. Recovery of moneys by employers and contractors.-(1) The amount of contribution (that is to say, the employer’s contribution as well as the employee’s contribution in pursuance of any Scheme and the employer’s contribution in pursuance of the Insurance Scheme) and any charges for meeting the cost of administering the Fund paid or payable by an employer in respect of an employee employed by or through a contractor may be recovered by such employer from the contractor, either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

(2) A contractor from whom the amounts mentioned in subsection (1) may be recovered in respect of any employee employed by or through him, may recover from such employee the employee’s contribution under any Scheme by deduction from the basic wages, dearness allowance and retaining allowance if any payable to such employee.

(3) Notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer’s contribution or the charges referred to in sub-section (1) from the basic wages, dearness allowance, and retaining allowance if any payable to an employee employed by or through him or otherwise to recover such contribution or charges from such employee. Explanation.

– In this section, the expressions “dearness allowance” and “retaining allowance” shall have the same meanings as in section 6.”

Having failed to discharge its onus and the responsibility cast under the Act we would find no reason to interfere with the findings recorded by the learned Single Judge.

Consequently, the appeal is dismissed. ”

Both the parties to the lis have placed reliance upon Clause VII of the Model Tender Agreement to pass the responsibility of payment of the damages/interest etc. imposed by respondent no.3 vide order dated dated 20.12.2007, upon each other. Lets have a glimpse upon Clause VII:-

“(a) All persons employed by the contractors shall be engaged by them as their own employees workers in all respects and the responsibility under the Indian Factories Act. Or the Worker's Compensation Act or Employees Provident Fund Act. Or any other similar enactments in respect of all such personnel shall be that of the contractors. The contractors shall be bound to indemnify the Corporation against all claims whatsoever in respect of the said personnel under the Workmen's Compensation Act, 1923 or any statutory modification thereof or otherwise for in respect of any damage or compensation payable inconsequence of any accident of injury sustained by any workmen or other person whether in employment of the contractor or not.

(a) Liability for Personnel: The contractor shall be liable for making contributions in accordance with the provisions of the Employees Provident Funds Act, 1952, and the scheme framed thereunder in respect of the labour employed by him. The contractor shall recover the amount payable by such employees and pay to the Corporation i.e. the Principal employer under the said Act. The amount of members contribution together with an equal amount of his contribution. If on account of the default of the contractor in making such payments or for any other reason the Corporation makes such contributions on behalf of the contractor the FCI shall be entitled to set off against the amount due to the contractor the contributions made by it on account of his default in making payments or otherwise in respect of the labour employed by the Contractor.

The Contractor shall also maintain such records and also submit such returns as may be prescribed under the Act to the Authority designated in the GPF Act, 1952 and the scheme framed thereunder and to the Sr.Regional Manager, Food Corporation of India. The contractor shall also make available such records and returns an may be prescribed and or demanded for inspection to the Officers of the Regional Provident Commissioner and to the Sr. Regional Manager, Food Corporation of India or an officer authorized by him or acting on his behalf.

(b) In complying with the said enactments or any statutory modifications thereof the contractors shall also comply with or cause to be complied with the labour regulations enactments made by the State Govts. Central Govt. from time to time in regard to payment of wages to the workers. Wage period, deduction from wages, recovery of wages not paid and deductions un-authorizedly made, maintenance of wage book of wage slip. Publication of the Scale of wages and other terms of employment inspection and submission of periodical returns and all other matters. of like nature.”

The liability clause makes it manifest that, primarily, the contractor is liable for making contribution as per the Act of 1952, in respect of labour employed by him, and the contractor after recovering the amount payable by such employees, pays to the FCI, which is the principal employer under the Act. If there is any default on the part of the contractor in making such payments for, or any other reasons, the FCI makes such contribution on behalf of the contractor, and the FCI shall be entitled to set off against the amount due to the contractor, i.e. the contribution made by it on account of its default in making payments or otherwise in respect of the labour employed by the contractor.

There is no such dispute that the FCI has right to recover the amount from its contractor, on account of the default on the part of the contractor in making EPF contribution. As already observed hereinabove, the security amount deposited by the petitioner-contractor is on account of contract agreement, and the intra-departmental correspondences (Annexures P-11 to P-13), clearly reflects that the respondents-FCI itself admitted, that the petitioner-contractor has deposited its part of share towards EPF contribution for the period starting from June, 2007 to July, 2010. In such circumstances, the respondents-FCI has no authority to retain the security amount for this contract period.

This Court has examined the order dated 20.12.2007 (Annexure P-7). The damages imposed upon the respondents-FCI pertain to the period from July 1993 to May 2007, whereas, the security amount relates to the contract period from 01.08.2002 to 15.01.2009. Therefore, it was incumbent upon the FCI to explain how the security amount, which pertains to above contract period, can be withheld, specifically, when there has been no demonstration of any deficiency, or default during the relevant period of the security deposit. In light of the hereinabove observations, this Court finds that withholding of the security amount pertaining to above contract period is not legally sustainable.

A perusal of the challan placed on record by the respondents-FCI, itself clearly reflects that the EPF amount was deposited by the petitioner-contractor in the EPF account bearing Code no.12654. Since the respondents-FCI, has not identified a single instance or period, where the petitioner-contractor failed to make the required EPF payments, they have no valid reason, or any lawful right to withhold the security amount deposited by the petitioner-contractor.

FINAL ORDER

In view of the foregoing discussion, a writ of mandamus is hereby, issued to the respondents-FCI, to refund the security amount, as withheld from the petitioner-contractor. The refund shall be made within a period of four weeks from the date of this order, along with interest at the rate of 6% per annum, to be calculated from the date when the last contract bill was cleared, until the date of actual payment. The petitioner-contractor is accordingly entitled to receive the security amount along with the accrued interest as stated herein.

In view of the above, the instant petition is allowed.

All pending application(s), if any, also stand disposed of accordingly.