NAGAMUTHUWrit Petition No.22990 of 2003andW.P.M.P.No.28422 of 2003 M/s. Usha Textiles Private Limited v. The Regional Provident Fund commissioner

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 07.10.2009CORAMTHE HONOURABLE MR. JUSTICE S. NAGAMUTHUWrit Petition No.22990 of 2003andW.P.M.P.No.28422 of 2003M/s. Usha Textiles Private Limited,Chandrapuram,K.N.P.Colony, Thirupur- 641 608 ... Petitioner Vs.1.The Regional Provident Fund commissioner, Office of the Regional Provident fund commissioner, Dr. Balasundaram Road, Coimbatore – 641 018.2. Enforcement Officer, Office of the Regional Provident Fund Commissioner, Dr. Balasundaram Road, Coimbatore – 641 018. ... Respondents Writ Petition filed under Article 226 of Constitution of Indiapraying to issue Writ of Certiorari to call for the records from thefile of the 1st respondent herein and to quash the proceedings No.TN/CBE/PDC/21313/CIR.22/FLO/2002-03 dated 12.05.2003 / 10.07.2003,which was received on 29.07.2003.For Petitioner :M/s.S.JayaramanFor Respondents:Mr.K.Gunasekhar Addl. Central Govt. Standing Counsel ORDERChallenge in this Writ Petition is to an order made under Section14-B of the Employees Provident Fund and Miscellaneous Provisions Actof 1952 passed by the first respondent by his proceedings inTN/CBE/PDC/21313/CIR.22/FLO/2002-03 dated 12.05.2003 / 10.07.2003,directing the petitioner to pay damages. https://hcservices.ecourts.gov.in/hcservices/

2.Learned counsel for the petitioner would contend that theimpugned order had been passed without following the principles ofnatural justice and without application of mind. He relies on arecent judgment of the Hon'ble Supreme Court in "Employees StateInsurance Corporation ..vs.. HMT Limited and another" reported in(2008) 1 SCC (L&S) page 558 wherein the Hon'ble Supreme Court had anoccasion to consider the earlier judgments of the Hon'ble SupremeCourt in Hindustan Times Ltd., ..vs.. Union of India, reported in(1998) 2 SCC Page 242 wherein the Hon'ble Supreme Court had dealtwith the scope of Section 14-B of the Employees Provident Fund andMiscellaneous Provisions Act. The learned counsel would submit thatapplying the principles stated in these two judgments, the impugnedorder is liable to be quashed.3.Learned counsel for the respondents would vehemently opposethe Writ Petition. According to him, the principles stated in thesaid judgments have got no application with the facts of the presentcase. He would submit that the imposition of damages is based on theregulation of paragraph 32(a) of Employees Provident Fund Scheme andtherefore the impugned order does not require any interference.4.I have considered the rival submissions.5.In Hindustan Times Ltd., ..vs.. Union of India, reported in(1998) 2 SCC Page 242 while dealing with the scope of Section 14-B ofthe Employees Provident Fund and Miscellaneous Provisions Act, theHon'ble Supreme Court has held as follows:-" The authority under Section 14-B has to applyhis mind to the facts of the case and the reply tothe show cause notice and pass a reasoned order afterfollowing principles of natural justice and giving areasonable opportunity of being heard: the RegionalProvident Fund Commissioner usually takes intoconsideration the number of defaults, the period ofdelay, the frequency of default and the amountsinvolved; default on the part of the employer basedon plea of power cut, financial problems relating toother indebtedness or the delay in realisation ofamounts paid by the cheques or drafts, cannot bejustifiable grounds for the employer to escapeliability; there is no period of limitationprescribed by the legislature for initiating actionfor recovery of damages under Section 14-B."6.When a similar question arose in respect of Employees StateInsurance Corporation under Section 85(B) of the Act, the Hon'bleSupreme Court relying on the HMT Limited case cited supra and alsorelying on another judgment of the Hon'ble Supreme Court inPrestolite (India) Limited ..vs.. Regional Director reported in 1995 https://hcservices.ecourts.gov.in/hcservices/ SCC (L&S) page 202 has held in paragraphs 25 and 26 as follows :" 25.The statute itself does not say that apenalty has to be levied only in the mannerprescribed. It is also not a case where theauthority is left with no discretion. Thelegislation does not provide that adjudication forthe purpose of levy of penalty proceedings would be amere formality of imposition of penalty as alsocomputation of the quantum thereof became a foregoneconclusion. Ordinarily, even such provision wouldnot be held to providing for mandatory imposition ofpenalty, if the proceeding is an adjudicatory one orcompliance with the principles of natural justice isnecessary thereunder.26.Existence of mens rea or actus reus tocontravene a statutory provision must also be held tobe a necessary ingredient for levy of damages and/orthe quantum thereof."7.In Prestolite (India) Limited ..vs.. Regional Director casein paragraph 5, the Hon'ble Supreme Court has held as follows:"5.... Even if the regulations have prescribedgeneral guidelines and the upper limits at which theimposition of damages can be made, it cannot becontended that in no case, the mitigatingcircumstances can be taken into consideration by theadjudicating authority in finally deciding the matterand it is bound to act mechanically in applying theuppermost limit of the table. In the instant case, itappears to us that the order has been passed withoutindicating any reason whatsoever as to why grounds fordelayed payment were not to be accepted. There is noindication as to why the imposition of damages at therate specified in the order was required to be made.Simply because, the appellant did not appear in personand produce materials to support the objections, theemployee's case could not be discarded in limine. Onthe contrary, the objection ought to have beenconsidered on merits." 8.In view of the law laid down by the Hon'ble Supreme Court inPrestolite (India) Limited case, the regulation relied on by thelearned counsel for the respondents can be termed only as a guidelineand it cannot be stated that the authority can pass the ordermechanically applying the regulations. As held by the Hon'bleSupreme Court in "Employees State Insurance Corporation...vs... HMTLimited and another", the existence of mens rea or actus reus to https://hcservices.ecourts.gov.in/hcservices/ contravene a statutory provision must also be held to be a necessaryingredient for levy of damages and/or the the quantum thereof. Inthe instant case, a perusal of the impugned order would go to showthat there is no finding in respect of mens rea or actus reus. Itis also not stated how the quantum was arrived at. The order wouldgo to show that there was no adjudication at all made by the firstrespondent as required under law.9.I have no hesitation to hold that the the impugned order hasbeen passed mechanically without discharging the duties ofadjudication by the first respondent. For all these reasons,applying the law laid down by the Judgments stated supra, I have nohesitation to hold that the impugned order is liable to be quashed.10.In the result, the Writ Petition is allowed and the impugnedorder is quashed and remanded back to the first respondent who shallto issue notice to the petitioner and afford opportunity, then passappropriate orders strictly in accordance with law as indicated abovewithin a period of three months from the date of receipt of a copy ofthis order. Consequently, connected Miscellaneous Petition isclosed. No costs.Sd/Assistant Registrar/True Copy/Sub Assistant RegistrarmraTo1.The Regional Provident Fund commissioner, Office of the Regional Provident fund commissioner, Dr. Balasundaram Road, Coimbatore – 641 018.2. Enforcement Officer, Office of the Regional Provident Fund Commissioner, Dr. Balasundaram Road, Coimbatore – 641 018.3. The Section Officer, Writ Section, High Court,Madras.1 cc To Mr.S.Jayaraman, Advocate, SR.519641 cc To Mr.K.Gunasekar, ACGSC, SR.52274Writ Petition No.22990 of 2003andW.P.M.P.No.28422 of 2003JSV(CO)SRA(22/10/2009)