1996 JTR(SC) 1756
1997 AIR(SC) 3645 ; 1997 AIR(SCW) 842 ; 1998 1 CLR 274 ; 1997 90 FJR 60 ; 1997 75 FLR 530 ; 1997 10 JT 638 ; 1997 Supp JT 71 ; 1997 LIC 910 ; 1997 2 LLJ 55 ; 1997 1 LLN 520 ; 1997 2 RSJ 686 ; 1996 8 Scale 438 ; 1997 1 SCC 241 ; 1997 SCC(L&S) 449 ; 1996 SCR 27 ; 1997 2 SCT 141 ; 1997 1 SLR 9 ; 1997 1 UJ 304 ; 1997 KHC 649 ; 1997 1 Supreme 54
1997(1) Supreme 54
SUPREME COURT OF INDIA
K. Ramaswamy and G.B. Pattanaik, JJ.
The Regional Provident Fund Commissioner -Appellant
versus
S.D. College, Hoshiarpur & Ors. -Respondents
Civil Appeal Nos. 14576-77 of 1996
(Arising out of SLP (C) Nos. 13819-20 of 1996)
Decided on 28-10-1996
Counsel for the Parties :
For the Appellant : R. Venugopal Reddy, Sr. Advocate, T.C. Sharma, C.V.S. Rao, Advocates.
For the Punjab University : S.K. Mehta, Dhruv Mehta, Fazlin Anam and Ms. Monica Mehta, Advocate.
For the Respondents : Randhir Jain, Advocate.
IMPORTANT POINT
Regional Provident Fund Commissioner is given discretion only to reduce a percentage of damages to be imposed u/s 14B of the Provident Fund Act and he has no power to waive penalty altogether.
Act Referred :EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT : S.14(b)
(A) The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 was applied to the educational institution respondent through a notification dated March 6, 1982, a position previously affirmed by the same court. The provisions of the Act, read alongside the schemes framed thereunder, create a statutory obligation on the employer to deduct and deposit the employee's contribution. Section 14-B of the Act specifically provides the mechanism for the Central Provident Fund Commissioner or an authorized officer to recover damages not exceeding the amount of arrears as a penalty for default in making contributions or other statutory payments. The second proviso to Section 14-B allows for reduction or waiver of damages only in the specific circumstance of a sick industrial company undergoing reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985, subject to terms and conditions. The court's earlier judgment directed that the Act apply to the institutions with effect from February 1, 1988, mandating compliance and payment of any arrears for the period between March 1, 1982, and February 1, 1988, without interest for the subscribers. The mere issuance of a subsequent direction by the institution or permission to redeposit funds with the university does not absolve the employer of their statutory obligation to deposit with the Fund.
(B) Key legal principles include the mandatory nature of EPFO contributions by educational institutions, the non-discretionary power of the Commissioner to levy damages for default as per Section 14-B, and the narrow scope for waiver of such damages limited strictly to the provisions of the Act. The employer is under a continuing statutory obligation to deposit contributions within the prescribed period, and reliance on subsequent internal directions does not justify non-compliance.
Facts of the case:
The appellant, acting as the Employees' Provident Fund authority, applied the Employees Provident Funds and Miscellaneous Provisions Act, 1952 to the respondent educational institution via a notification dated March 6, 1982. Writ petitions were filed by the respondents, and the court, on January 29, 1988, held that the Act applied and directed the respondents to comply, pay arrears for the period March 1, 1982, to February 1, 1988, and mandatorily deposit contributions with the appellant. Despite this order, the respondents continued to deposit amounts with the University. The appellant subsequently levied damages under Section 14-B at 25% of the arrears. The High Court held that the appellant was not liable to levy these damages, leading to the present appeals.
Findings of Court:
The court found that after the January 29, 1988 judgment, the respondents had no justification to delay depositing the amounts with the Fund and that the direction from the University to redeposit did not override the statutory obligation to the Fund. The court also found that the Commissioner was not entitled to waive the penalty, as discretion under Section 14-B is strictly limited to reducing the rate of damages, not waiving them entirely. Consequently, the 25% damages were deemed payable, with the respondent directed to deposit the balance after accounting for interest earned.
Issues:
Whether the respondent institution was liable to pay damages under Section 14-B of the Act for non-deposit of contributions with the Fund following the earlier court order, and whether the High Court had the power to direct non-recovery of these damages.
Ratio Decidendi:
Section 14-B of the Employees' Provident Funds Act mandates the recovery of damages for default, and this power is exercisable by the Commissioner without discretion to waive the same. The obligation to deposit contributions with the Fund is statutory and continues irrespective of subsequent internal administrative directions or permissions. Damages were properly levied at 25% for delayed payment.
Result:
The appeals were allowed, the writ petitions were dismissed, and the respondents were directed to deposit the balance amount of damages within six weeks, affirming the liability to pay 25% penalty.
(A) The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 was applied to the educational institution respondent through a notification dated March 6, 1982, a position previously affirmed by the same court. The provisions of the Act, read alongside the schemes framed thereunder, create a statutory obligation on the employer to deduct and deposit the employee's contribution. Section 14-B of the Act specifically provides the mechanism for the Central Provident Fund Commissioner or an authorized officer to recover damages not exceeding the amount of arrears as a penalty for default in making contributions or other statutory payments. The second proviso to Section 14-B allows for reduction or waiver of damages only in the specific circumstance of a sick industrial company undergoing reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985, subject to terms and conditions. The court's earlier judgment directed that the Act apply to the institutions with effect from February 1, 1988, mandating compliance and payment of any arrears for the period between March 1, 1982, and February 1, 1988, without interest for the subscribers. The mere issuance of a subsequent direction by the institution or permission to redeposit funds with the university does not absolve the employer of their statutory obligation to deposit with the Fund.
(B) Key legal principles include the mandatory nature of EPFO contributions by educational institutions, the non-discretionary power of the Commissioner to levy damages for default as per Section 14-B, and the narrow scope for waiver of such damages limited strictly to the provisions of the Act. The employer is under a continuing statutory obligation to deposit contributions within the prescribed period, and reliance on subsequent internal directions does not justify non-compliance.
Facts of the case:
The appellant, acting as the Employees' Provident Fund authority, applied the Employees Provident Funds and Miscellaneous Provisions Act, 1952 to the respondent educational institution via a notification dated March 6, 1982. Writ petitions were filed by the respondents, and the court, on January 29, 1988, held that the Act applied and directed the respondents to comply, pay arrears for the period March 1, 1982, to February 1, 1988, and mandatorily deposit contributions with the appellant. Despite this order, the respondents continued to deposit amounts with the University. The appellant subsequently levied damages under Section 14-B at 25% of the arrears. The High Court held that the appellant was not liable to levy these damages, leading to the present appeals.
Findings of Court:
The court found that after the January 29, 1988 judgment, the respondents had no justification to delay depositing the amounts with the Fund and that the direction from the University to redeposit did not override the statutory obligation to the Fund. The court also found that the Commissioner was not entitled to waive the penalty, as discretion under Section 14-B is strictly limited to reducing the rate of damages, not waiving them entirely. Consequently, the 25% damages were deemed payable, with the respondent directed to deposit the balance after accounting for interest earned.
Issues:
Whether the respondent institution was liable to pay damages under Section 14-B of the Act for non-deposit of contributions with the Fund following the earlier court order, and whether the High Court had the power to direct non-recovery of these damages.
Ratio Decidendi:
Section 14-B of the Employees' Provident Funds Act mandates the recovery of damages for default, and this power is exercisable by the Commissioner without discretion to waive the same. The obligation to deposit contributions with the Fund is statutory and continues irrespective of subsequent internal administrative directions or permissions. Damages were properly levied at 25% for delayed payment.
Result:
The appeals were allowed, the writ petitions were dismissed, and the respondents were directed to deposit the balance amount of damages within six weeks, affirming the liability to pay 25% penalty.
ORDER
Delay condoned.
Leave granted.
We have heard learned counsel on both sides.
2. These appeals by special leave arise from the judgment of the Division Bench of the Punjab & Haryana High Court made on December 6, 1995 in CWP Nos. 637 and 692 of 1995.
3. The admitted position is that the appellant had applied the provisions of Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short, the Act ) to the respondent Institution by notification dated March 6, 1982. Calling the notification in question, the respondents had filed writ petition in this Court. This court by judgment dated January 29, 1988 had held that the Act would apply to the educational institutions and, therefore, they are required to comply with the notification issued under the Act. This Court had directed thus:
"Shri S.K. Bagga, learned counsel appears for the petitioners. We do not find any substance in the contention of the petitioners in these cases that the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act ) has no application to the educational institutions, who are petitioners in these cases. We, therefore, dismiss all these cases.
We direct that the petitioners shall comply with the Act and the schemes framed thereunder regularly with effect from 1.2.1988. Whatever arrears they have to pay under the Act and the schemes in respect of the period between 1.3.1982 and 1.2.1988 shall be paid by each of the petitioners within such time as may be granted by the Regional Provident Fund Commissioner. If the petitioners pay all the arrears payable from 1st March, 1982 upto 1st February 1988 in accordance with the directions of the Regional Provident Fund Commissioner he shall not levy any damages for the delay in payment of the arrears. Having regard to the special facts of these cases the subscribers (the employees) shall not be entitled to any interest on the arrears. The writ petitions are disposed of accordingly. No costs.
4. In spite of the directions issued by this Court, instead of complying with the orders of this Court, the respondents continued to deposit the amounts with the University. The respondents, thus, have not complied with the law. Consequently, the appellant exercising the power under Section 14-B of the Act levied damages @ 25% of the amount payable by the respondents. The respondents filed writ petitions against the appellant in the High Court. The High Court in the impugned order has held that the appellant is not liable to levy damages on the respondents. Thus, these appeals by special leave.
Section 14-B of the Act reads as under:
"14-B. Power to recover damages.- Where an employer makes default in the payment of any contribution to the Fund (the Family Fund or the Insurance Fund) or in the transfer of accumulations required to be transferred by him under sub-section (2) of Section 17) or in the payment of any charges payable under any other provision of this Act or of any 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. Shri Randhir Jain, learned counsel for the respondent, contends that after the judgment by this Court, the respondents have applied for permission to the University for withdrawal of the amount. After the receipt of the direction issued by the University on June 7, 1990, they had redeposited the amount to the tune of Rs. 6,40,122.70 together with other charges in a sum of Rs. 58,736.70. There was no intentional delay on the part of the respondents in not depositing the amount and, therefore, the High Court was right in directing not to recover the damages under Section 14-B of the Act. This Court on July 10, 1996 issued notice stating as to why the respondents are not liable to pay the interest for the failure to pay the G.P.F. from February 1988 to May 1990 in the light of the admission made by them in paragraph 6 of their reply letter dated October 26, 1994.
6. Now, an affidavit has been filed on behalf of the respondents stating that they have deposited the amount in the University and the amounts was kept in fixed deposit earning interests @ 11%; since a direction was issued to comply with the direction to redeposit the amount, after premature encashment, they returned it with 9% interest and the same was deposited and, therefore, they are not liable to pay the damages that are determined by the Regional Provident Fund Commissioner under the impugned order as assailed in the writ petition. Having regard to the contention, the question that arises for consideration is; whether the appellant is entitled to recover damages?
7. A reading of Section 14-B of the Act would indicate that the employer is under an obligation under the statute to comply with the payment of the amount. In the event of his committing default in the payment of the contribution to the fund or in the payment of any charges payable under any other provisions of the Act or any scheme or insurance scheme or any of the conditions specified in Section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government may, by notification in the official Gazette in this behalf, recover from the employer, by way of penalty, such damages, not exceeding the amount of arrears, as may be specified in the scheme. The second proviso only lifts the embargo in the event of the industry becoming sick and it was reconstructed under the provisions of Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 subject to such terms and conditions as may be specified in the scheme of rehabilitation. In other words, the Act envisages the imposition of damages for delayed payments. The Act is a beneficial welfare legislation to ensure health and other benefits to the employees. The employer under the Act is under a statutory obligation to deduct the specified percentage of the contribution from the employee s salary and matching contribution, the entire amount is required to be deposited in the fund within 15 days after the date of the collection, every month.
8. Thereby the employer is under a statutory obligation to deposit the amount to the credit of the Fund every month. In the event of any default committed in that behalf, Section 14-B steps in and calls upon the employer to pay damages by way of penalty, the maximum of which is the accumulated arrears. The Regional Provident Fund Commissioner is given discretion only to reduce a percentage of damages and he has no power to waive penalty altogether. In this case, admittedly, after the judgment, there was no reason for the respondent to deposit the amount with the University. We can understand that, since there was a scheme framed by the University and the respondent was under an obligation to comply with the scheme, they can have a feeling of doubt as to whether they should abide by the scheme framed by the University or under the Act. Since they had filed the writ petition in this Court, this Court gave direction on January 29, 1988 directing the respondents to deposit the contribution with the appellant. Thereby the respondents have a statutory obligation to deposit the amount from February 1988 onwards. Therefore, there is no justification whatsoever to deposit and keep depositing the amount in the University account after the judgment of this Court. The mere fact that the University has given permission to redeposit the amount with the appellant does not enable the respondents to take shelter thereunder for non-deposit of the amount in the Fund.
9. Under these circumstances, we do no think that there is any justification in the contention for waiver of the penalty imposed by the Regional Provident Fund Commissioner. As held earlier, there is no discretion left to the Commissioner to totally waive the penalty. What was left to his discretion is the rate at which it is to be computed by way of penalty. In this case, admittedly, 25% of the damages was computed as penalty. Since the respondent had deposited the amount in fixed deposit and it earned 9% interest thereon, the balance amount is required to be deposited and the respondent is directed to deposit the balance amount within six weeks from today.
10. The appeals are accordingly allowed. The writ petition stands dismissed. No costs.
Appeal allowed.
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