MCLEOD RUSSEL INDIA LIMITED v. REG. PROVIDENT FUND COMMISSIONER, JALPAIGURI

Judgment

9 S.C.R. 162 A B MCLEOD RUSSEL INDIA LIMITED v. REG. PROVIDENT FUND COMMISSIONER, JALPAIGURI & ORS. (Civil Appeal No. 5927 of 2014) JULY 02, 2014. [T.S. THAKUR AND VIKRAMAJIT SEN, JJ.] EMPLOYEES' PROVIDENT FUND AND C MISCELLANEOUS PROVISIONS ACT, 1952: ss. 14-8, 178 rlw ss. 7 A and 2(e) - Default by employer in payment of contribution - Damages - Liability in case of transfer of establishment - Held: The Act is a beneficent D legislation and any interpretation facilitating the evasion of its provisions should be abjured - Imposition of punitive damages can be resorted to even in civil proceedings to deter wilful wrongdoing by making an admonished example of the wrongdoer - This is the essential purpose of s. 148, and an imposition within its confines does not assume criminal prosecution so as to stand proscribed insofar as transfer of establishment from one management/employer to its successor is concerned. E ss.14-8, 17-8, 7-A(2}, 7-Q - Default by employer in F payment of contribution - Damages - Liability of transferee establishment - Held: Where the Authority is of the opinion that damages u/s 148 need to be imposed, the computations would come within the purview of s. 148 and it would be recoverable jointly and severally from the erstwhile as well as the current management - Further, once damages have been levied, the same could be recovered from the party which has assumed the management of the establishment - s. 7 A(2) would also be available to proceedings uls 148 - The applicability of Civil Procedure Code to proceedings u/s 148 162 G H MCLEOD RUSSEL INDIA LTD. v. REG. P. F. COMMISSIONER, JALPAIGURI 163 has not specifically been barred by the statute - s.148 is A complete in itself so far as the computation of damages is concerned - It is conceivable that money due from an employer would have to be calculated uls 7 A, and in the event the default or neglect of employer is contumacious and contains requisite mens rea and actus reus yet another B exercise of computation has to be undertaken u/s 148 - Order of RPF Commisioner that failure on part of employers to make remittances of accumulations and contributions undermines the objectives and purposes of the statute is also approved - It is to be emphasised that the liability of the Fund · c to pay. interest to subscribers regardless of whether employers have paid their dues, runs relentlessly -Appel/ant-petitioner has, in the circumstances of the case, been also rightly burdened with the payment of interest u/s 70. · Notices were issued to a tea company, namely M/S D 'MTE' to show cause against the imposition of 'damages' u/s 148 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (the EPF Act), as it had defaulted in remitting the contributions and accumulations payable under the EPF Act. Meanwhile the E management of M/S 'MTE' was taken over by the appellant Company which discharged the liability of the entire principal sum of Provident Fund dues to the tune of Rs.75,76,000/- pertaining to the period prior to the takeover. The appellant contended before the RPF F Commissioner that proceedings u/s 148 9f the EPF Act against it were unjustified as it was not the "employer" defined u/s 2(e) of the EPF Act, which defaulted in paying the contributions. The RPF Commissioner held that on a conjoint reading of ss. 148 and 178 of the EPF Act it was G clear that damages u/s 148, which were assessed at Rs.70,37,950/- were recoverable jointly and severally from the transferor as well as the transferee. He further directed that failure to deposit penal damages within the stipulated period would attract the provisions of s. 7Q of H 164 SUPREME COURT REPORTS [2014] 9 S.C.R. A the EPF Act, thereby enhancing the liability to include simple interest at the rate of 12% per annum on the damages. The single Judge of the High Court, -relying upon the decision in the Karnataka Forest Plantations Corporation Ltd1 • set aside the Commissioner's orders B. and directed the said Authority to reconsider the issues. However, the Division Bench of the High Court, relying on Dalgaon Agro Industries Ltd. 2 , reversed the judgment of the single Judge. c Dismissing the appeal, the Court HELD: 1.1. In Sayaji Mills Ltd.*, this Court has observed that the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 is a beneficent legislation and any interpretation facilitating the evasion D of its provisions should be abjured, as employers would "spare no -ingenuity in s.eeking to deprive the employees of all the benefits conferred upon them"; that the-old establishment should virtually have come to an end for the EPF Act to apply afresh; and most significantly, that the said Act is made applicable to the factory in contradistinction to its owner. [para 6] [175-C-E] ) E *Sayaji Mills Ltd. vs. Regional Provident Fund Commissioner, 1985 SCR 516 =1984 (Supp) SCC 610 - relied on. F

1.2. In the instant case, the inter se covenants between the appellant- transferee company and the erstwhile owners, namely, the transferor, would not insulate the former from the rigours of damages imposed G by the EPF Act. Damages must be calculated and be recovered by the Authority in the most efficacious and

#1. Regional Provident Fund Commissioner, Mangalore vs. Kamataka Forest Plantations CorporationUd., Bangalore, 2000 (1) LU 1134. H 2. Dalgon Agro Industries Ltd. vs. Union of India (2006) 1 CALLT 32 (HG); MCLEOD RUSSEL INDIA LTD. v. REG. P. F. COMMISSIONER, JALPAIGURI 165 convenient manner. The decision in Sayaji Mills Ltd. was A not brought to the notice of the Division Bench of the Karnataka High Court in Karnataka Forest Plantations Corporation Limited**. The reasoning of the Karnataka decision is evidently flawed and runs counter to the intendment of the EPF Act, as is crystal clear: from a B perusal of its Preamble; and manifests the ingenuity that employers may devise to circumvent liability. Once these damages have been levied, the same could be recovered J from the party which has assumed the management of the establishment. [para 6 and 8) [175-F-H; 176-A; !178-B] c 1 Dalgaon Agro Industries Ltd. vs Union of India, (2006) 1 CALLT 32 (HC) - approved. **Regional Provident Fund Commissioner, Mangalore vs Kamataka Forest Plantations Corporation Ltd., Bangalore, D 2000 (1) LLJ 1134 -stood reversed. Employees' State Insurance Corporation vs HMT Ltd. held inapplicable. 2008 (1) SCR 646 = (2008) 3 SCC 35 -