The Regional Provident Fund Commissioner Employee's Provident Fund Organization v. M/s. XLO Machine Tools

Learned Advocate Mr. Modgi appearing on behalf of the respondents waives service. By consent, petition is taken up for Salgaonkar 1 /8 hearing. wp 4123-12

4. According to the present petitioners, the respondents committed defaults in depositing the amount of Provident Fund to the tune of Rs.10 lakhs and odd amount. According to the petitioners, such amount was payable in accordance with provisions of Employee's Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “said Act”). The petitioners, therefore, issued a letter/demand notice to the respondents dated 15.2.2009 calling upon the respondents to pay Rs.1,000,987/- by way of damages as set out in the said letter. It was also indicated to the respondents that if the monies demanded are not deposited as per the contents of the said notice, further action in accordance with Section 8 and Section 14B would be initiated. The respondents were aggrieved by this demand. They therefore filed proceeding in the nature of appeal being ATA No.346(9)2010 before the Employees Provident Fund Appellate Tribunal, New Delhi. Salgaonkar 2 /8

5. The said Tribunal by its order dated 24.8.2012 remanded the matter to the Appropriate Authority of the petitioners as set out in para wp 4123-12 10, which is as follows: “ Thus in view of the discussion held above, the order of the authority cannot be sustained. Hence ordered, the matter is remanded back to the PF Authority to assess the dues @ 22% (inclusive of interest). The appellant is also directed to appear before the PF authority within one month of receipt of this order. If the appellant fails to appear the authority may decide the matter as per law. Copy of order be sent to the parties. File be consigned to record room.” The petitioners have challenged this order dated 24.8.2011.

6. Ms. Bharucha, appearing on behalf of the petitioners took me through the proviso of provisions of Section 14B as well as 32A and 32B of the said Act, and submitted that since the respondents had committed default in payment of Provident Fund dues, petitioners had to proceed in accordance with law and had demanded the amount as per the demand notice dated 15.2.2009. She further submitted that the Salgaonkar 3 /8 wp 4123-12 Appellate Authority has erred in remanding the matter to the Provident Fund Authorities with directions to assess the dues at the rate of 22% along with interest. According to her, on proper interpretation of Section 14B the Appropriate Authority has no jurisdiction to reduce the amount payable by a particular company. According to her, the authority to reduce or waive the damages vests with the Central Board as established under the said Act, and no other authority can do so. She, therefore, submitted that the impugned order passed by the Tribunal is incorrect.

7. Learned Advocate Mr. Modgi, appearing on behalf of the respondents submitted that the Tribunal has not reduced quantum of damages, but the Tribunal has directed the Provident Fund Authorities to assess the dues at the rate of 22% (inclusive of interest). He tried to support the impugned order. In addition to the aforesaid support he submitted that the Appropriate Authority of the petitioners, before issuing demand in terms of letter dated 15.2.2009 has not complied with principles of natural justice as set out in proviso to Section 14B of Salgaonkar 4 /8 wp 4123-12 the said Act. He further submitted that the demand notice dated

15.2.2009, nowhere states that the respondents were given an opportunity before levying the amount payable by the respondents. He, therefore, submitted that appropriate orders in the interest of justice be passed.

8. I have perused the relevant record. Having perused the provisions of Section 14B it is clear that if there is a default on the part of the employer to deposit the Provident Fund dues, the concerned authority can initiate action under Section 14B of the said Act to recover the damages by way of penalty. At the same time, first proviso to section 14B clearly indicates that before levying such damages, the employer has to be given a reasonable opportunity of being heard. Reading of the said proviso clearly goes to indicate that it is necessary for the concerned authorities to follow the principles of natural justice and then levy the amount and then recover the same in accordance with provisions of law. Salgaonkar 5 /8 wp 4123-12

9. Learned Advocate Ms.Bharucha could not place before the court, material to show that reasonable opportunity as envisaged in proviso to Section 14B was provided. A perusal of the letter dated 15.2.2009 nowhere mentions that an opportunity was given. The said letter straightway requested the respondents to make the payment. In my view, in view of the proviso to Section 14B the demand notice dated

15.2.2009 itself is required to be treated as one not issued in accordance with provisions of law. In view of this finding, proceedings which have taken place in the nature of appeal before the Tribunal would turn down to be non-est and that the demand notice dated 15.2.2009 will have to be set aside and the petitioners will have to be given an opportunity to complete the process of levying all damages by following the provisions of Section 14B and any particular proviso. Once that procedure is followed, if after giving reasonable opportunity as envisaged in the proviso, if the petitioners levy the amount towards damages, as contemplated under Section 14B of the said Act, it will be open for the Appropriate Authority to take said demand to its logical end. Salgaonkar 6 /8 wp 4123-12

10. In view of the above, following order is passed to dispose of the petition. ORDER i) Demand for a sum of Rs.1,000,987/- , addressed to respondent no.1 in terms of demand notice dated 15.2.2009 is set aside. ii) Order dated 24.8.2011 passed by the Employees Provident Fund Appellate Tribunal, New Delhi, in proceeding bearing No. A.T.A.No.346(9)2010 is set aside. Iii) If the petitioners are interested in demanding damages from the respondents, they shall provide reasonable opportunity to the respondents before levying the actual damages. After giving reasonable opportunity, it will be open for the Appropriate Authority under the Act to pass appropriate order. iv) This court has not expressed any view as to whether respondents Salgaonkar 7 /8 are liable to pay damages. All questions in that behalf are kept open. wp 4123-12 v) In order to comply with the procedure of giving reasonable opportunity, the competent officer of the respondent shall appear before the Regional Provident Fund Commissioner-II, or the Assistant Regional Provident Fund Commissioner, having office at Wagle Estate, Thane on 30.11.2012 at 11.00 a.m. It will be open for the respondents to produce the documents, as may be necessary, in support of their defence. [R.Y.GANOO, J.] Salgaonkar 8 /8