@JUDGMENTTAG-ORDER
K. Chandru, J.@mdashThe Petitioner has come forward to challenge an order dated 13.07.2004 passed by the Respondent levying damages u/s 14B of the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952 (for short PF Act) together with interest in terms of Section 7Q of the PF Act. The amount of damages levied for the period from 8/1999 to 2/2002 worked out to Rs. 2,29,528/- and the interest worked out to Rs. 75,006/-.
2. The Petitioner instead of challenging the same before the Employees'' Provident Funds Appellate Tribunal u/s 7I of PF Act had moved this Court.
3. The writ petition was admitted on 04.10.2004. Pending the writ petition, an interim stay was granted in respect of penalty and interest alone. On notice from this Court, the Respondents have filed a counter affidavit dated 08.02.2011.
4. The Petitioner also circulated certain documents to show the various Awards won by the Petitioner to show that the institution is a non profitable organization rendering social service for the health of the Tribals in Dharmapuri District. The case of the Petitioner was that they are Charitable Public Trust providing health care to the Tribals and other villagers. They are also giving residential training to women in hospital related work. The institution does not get enough income to sustain itself and depends upon funds and donations for running the institution. During January 2002, they decided to enroll their institution under the PF Act. It is at this stage the Respondents Enforcement Officers tried to find out whether the Petitioner institution should have been covered in August 1999 itself. Though at the relevant time, the strength was around 18 or 19, but this being a Welfare Scheme, the Petitioner institution paid a sum of Rs. 3,75,926/- representing the arrears from August 1999 to December 2001.
5. Thereafter, a show cause notice dated 17.05.2004 was issued asking the Petitioner as to why interest and damages should not be levied on them. The Petitioner contended that the Act itself exempted the Charitable Trust from the purview of the PF Act. The Enforcement Officer of the Respondent organisation, on an erroneous conclusion calculated the damages retrospectively. It was further contended that the hospital is receiving meager income and run with the assistance of volunteers.
6. In the counter affidavit filed by the Respondent, it was stated that on verification of the records by the Enforcement Officer, it was found that the strength of the employees has exceeded 19 in August 1999. The Petitioner also accepted the same and had paid the amount. Therefore, the levy of damages for non-payment is valid. There is no case made out to interfere with the impugned order.
7. With reference to nature of power vested u/s 14B of the Act for levy of damages and the scope for levying such damages came to be considered elaborately in the judgment of the Supreme Court in
15. In Commr. of Coal Mines Provident Fund v. J.P. Lalla and Sons, interpreting Section 10F of the Coal Mines Provident Fund and Bonus Scheme Act, 1948, it was stated by this Court that by the use of the words ''may levy damages'', in case of default in payment of contribution, and the words ''as it may think fit to impose'', it was clear that the determination was not based on the inflexible application of a rigid formula and that by these words, the authorities were to apply their mind to the facts and circumstances of the case. As a duty was judicially imposed on the authority, principles of natural justice were implied. In Organo Chemical Industries v. Union of India where the vires of the Act were upheld, this Court laid down that while passing orders u/s 14B, the authority was acting in a ''quasi-judicial'' capacity and was bound to give reasons for its orders. The levy was not necessarily proportionate to the loss incurred by the employee inasmuch as it was partly compensatory and partly penal.
17. As to the manner in which the authority concerned could arrive at the ''damages'', A.P. Sen, J. stated that the authority usually takes into consideration, ''as was done in that case'' the number of defaults, the period of delay, the frequency of defaults and the amounts involved. The damages were to be compensatory and penal as well and hence principles of estimation of damages under the law of contract or torts, were not applicable.
8. The judgment in Hindustan Times''s case (cited supra) came to be quoted with approval in the subsequent judgment in
4. ...The High Court adverted to the decision of this Court in Hindustan Times Ltd. v. Union of India to reach this conclusion. In that case, this Court examined the scheme of the provisions of the Act in relation to delay in passing of the order. It was stated that the mere fact that the 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 u/s 14B would be taken and mere delay in initiating such action cannot amount to prejudice inasmuch as such delay would result in allowing the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest on such amount. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action u/s 14B he has altered 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, and such prejudice can also be established by stating reason of non-availability of records of the personnel by which evidence it could be established that there was some basis for delay in making the payments. Therefore, this Court was of the opinion that such delay, by itself, would not result in any prejudice. In the present case, the High Court found that no such prejudice was either pleaded or proved. Hence the first contention stands rejected.
9. In the present case, the Respondents have not stated any particular reason for levying damages at the maximum rate. On the other hand, they did not even take into account the nature of activities done by the Petitioner institution, especially the fact that they were working among the Tribal areas and taking care of their health and running the institution with public donations.
10. Therefore, this Court is of the view that the action of the Respondents in levying damages cannot be fully countenanced. At the same time, in the Streetlite Electric Case (cited supra), the Supreme Court interfered with an order passed by the PF Authorities mechanically by levying damages u/s 14B of the Act based upon a Central Government''s circular. While setting aside the order passed by the authorities, the Supreme Court did not remit the matter for fresh consideration. On the other hand, on an overall consideration, the Court itself reduced the damages to 25% of the amounts claimed. In paragraph 5, the Supreme Court held as follows:
5. The second contention need not be examined in the view we propose to take in the matter. Even if we hold that the Central Government instructions issued u/s 20 of the Act are not binding on the Respondent, still in assessing the damages it will be necessary for us to take note of the manner in which the amounts of damages have been levied and appropriately consider as to what would be the correct rate of damages to be imposed u/s 14B of the Act. The statement of calculation prepared by the Respondent regarding delay in payments discloses that the Respondent has imposed damages at different rates, for example, for the month of July 1976 the rate of damages is 50% whereas the period of default is over a month, while in case of December 1976 the damages imposed upon the Appellant are at the rate of 20% though the period of delay is over two months, in the case of delay for April 1988 damages imposed are at the rate of 30% though the period of delay is only one month. In certain cases, even for a delay of below 15 days, like October 1977, damages at the rate of 85% have been imposed, while for another period though the delay is for six months 65% damages have been levied. Therefore, it is not possible to discern the rationale adopted by the Respondent in the matter of imposition of penalty. In the circumstances, therefore, it would have been appropriate for us to set aside the order and remit the matter to the Respondent, but we do not think that such an exercise is necessary after such a long period. In this case, the amount due towards provident fund has already been deposited and this Court, by order dated 18-12-1998, granted an interim relief to the extent of 75% of the amount of damages sought to be recovered, while out of the disputed amount of damages (that is, Rs. 88,731.25) 25% had already been directed to be deposited. In that view of the matter, we think, it is appropriate to confine the damages leviable in this case on an overall consideration to the extent of 25% of the total damages imposed.
11. In the light of the above, the writ petition is allowed partly. The impugned order is modified to the effect that the Petitioner institution shall pay 25% of the total damages payable. The Respondents are hereby directed to revise the claim for damages in accordance with the direction and make a fresh demand to the Petitioner. The Petitioner on receipt of the same shall pay the said amount without any demur. No costs. Consequently, connected miscellaneous petition is closed.
