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Saturday, July 26, 2014

Sec.14 B and Sec.17 B of EPF Act - Damages under sec.14 B are recoverable jointly and severally from Saroda Tea Company Ltd. as well as Everaeady Industries (India ) Ltd Now Mcleod Russel India Ltd - Apex court up held that The Special Bench of the High Court of Calcutta in Dalgaon Agro Industries Ltd. has rendered a detailed judgment on the conundrum before us. Succinctly stated, the Special Bench has opined that (a) the transferor and the transferee managements remain jointly and severally liable under Sections 14B and 17B of the Act for all sums due including damages; and dismissed the appeal = MCLEOD RUSSEL INDIA LIMITED ….. APPELLANT vs REG. PROVIDENT FUND COMMISSIONER, JALPAIGURI & ORS. ….. RESPONDENTS = 2014 – July. Part – http://judis.nic.in/supremecourt/filename=41734

  Sec.14 B and Sec.17 B of EPF Act - Damages under sec.14 B are recoverable jointly and severally from Saroda Tea Company Ltd. as well as Everaeady Industries (India ) Ltd Now Mcleod  Russel India Ltd - Apex court up held that The Special Bench of the  High  Court  of  Calcutta  in  Dalgaon  Agro Industries Ltd. has rendered a detailed judgment  on  the  conundrum  before us.    Succinctly  stated,  the  Special  Bench  has  opined  that  (a)  the transferor and the  transferee  managements  remain  jointly  and  severally liable under Sections 14B and 17B of the Act  for  all  sums  due  including damages; and dismissed the appeal = 

Eveready  Industries  (India)  Ltd.
undauntedly contended before the RPF Commissioner, Jalpaiguri, in the  event
in futility, that proceedings under Section 14B of the EPF  Act  against  it
were unjustified as it was not the “employer” defined under Section 2(e)  of
the  EPF  Act,  which  defaulted  in   paying   contributions. 
It held that on  a  conjoint  reading
of Sections 14B and 17B of the EPF Act  it  was  clear  that  damages  under
Section 14B were recoverable jointly and severally from Saroda  Tea  Company
Ltd. as well as Eveready Industries  (India)  Ltd.

After  tabulating  the
rates of damages, i.e. percentage of arrears  per  annum  depending  on  the
period of default,  damages  were  assessed  at  Rs.70,37,950;  and  it  was
further  directed  that  failure  to  deposit  penal  damages   within   the
stipulated period would attract the provisions of  Section  7Q  of  the  EPF
Act, thereby enhancing the liability to include simple interest at the  rate
of 12 per cent per annum on the damages.

The Special Bench of the  High  Court  of  Calcutta  in  Dalgaon  Agro
Industries Ltd. has rendered a detailed judgment  on  the  conundrum  before
us.    Succinctly  stated,  the  Special  Bench  has  opined  that  (a)  the
transferor and the  transferee  managements  remain  jointly  and  severally
liable under Sections 14B and 17B of the Act  for  all  sums  due  including
damages; (b) the transferor’s indebtedness comes to a halt on  the  date  of
the transfer but includes the sums computed under both these  Sections  till
the date of transfer; (c) the transfer does not bind  either  the  employees
or the Fund; (d) the transferee stands cautioned by virtue of Sections  1(3)
and  17B  that  the  erstwhile  as  well  as  the  current  employer  remain
responsible for liabilities under both the  Sections  as  a  consequence  of
liability being that of the establishment in  question  of  which  employers
are merely fictional representatives to facilitate  recovery  of  dues;  (e)
recovery of any amount due is protected under  Section  11(2)  of  the  Act,
which grants priority to the amount so due over all other  debts  under  any
other statute as being the first charge on the assets of the  establishment;
(f) the Act has  innovated  radical  and  effective  modes  of  recovery  as
evident from Sections 8B and 8F, which  further  reinforces  the  fact  that
liability to pay dues  is  of  the  establishment  recoverable  through  the
employer; (g) liability  under  Section  14B  admits  no  waiver  except  as
provided; (h) damages  could  be  recovered  regardless  of  any  reasonable
period  of  prescription;  (i)  the  covenants  in  the  Transfer  Deed  are
irrelevant for determination and recovery  of  dues  and  damages;  and  (j)
criminal liability would be attracted only in  the  event  the  outstandings
are not completely recovered.=

In  our  opinion,  Section
14B is  complete  in  itself  so  far  as  the  computation  of  damages  is
concerned.   It is conceivable that the money due  from  an  employer  would
have to be calculated under Section 7A, and in  the  event  the  default  or
neglect of the employer is contumacious and contains the requisite mens  rea
and actus reus yet another exercise of  computation  has  to  be  undertaken
under Section 14B.    Where the Authority is of  the  opinion  that  damages
under Section 14B need to be imposed, the  computations  would  come  within
the purview  of  Section  14B  and  it  would  be  recoverable  jointly  and
severally from the  erstwhile  as  well  as  the  current  managements.    A
perusal of the Appeals Section, namely, 7I is illustrative of the fact  that
these exercises are distinct from each other as per the  enumerations  found
in the first sub-Section of Section 7I.   It also appears logical to us,  in
the wake of the numerous and different dates  of  amendments,  that  Section
7A(2) would also be available to proceedings under Section 14B of  the  Act.
 The applicability of  Civil  Procedure  Code,  1908  to  proceedings  under
Section 14B has not specifically been barred by the statute.
13         It is necessary to clarify that Eveready Industries (India)  Ltd.
had in the interregnum of this litigation changed its name to Mcleod  Russel
India Ltd.  In view of our above analysis,  it  is  our  considered  opinion
that the impugned Judgment deserves to be upheld.   It contains  a  detailed
and logical exposition of facts  as  well  as  the  law  pertaining  to  the
present  dispute.  We  also  approve  the  pithy  observations  of  the  RPF
Commissioner, Jalpaiguri in the subject Order that failure on  the  part  of
the employers  to  make  remittances  of  accumulations  and  contributions,
undermines the objectives and purposes of the statute.   We underscore  that
the liability of the Fund to  pay  interest  to  subscribers  regardless  of
whether  employers  have  paid  their   dues,   runs   relentlessly.     The
Commissioner has specifically recorded that he has taken a lenient  view  in
the matter and has eschewed imposition of damages to the extent of  100  per
cent of the arrears even though this is envisaged  by  the  EPF  Act.    The
Appellant-Petitioner has, in  the  circumstances  of  the  case,  been  also
rightly burdened with the payment of interest under Section 7Q  of  the  EPF
Act.   Accordingly, the Appeal is  dismissed  and  the  interim  Orders  are
recalled.   Although, it is our opinion that the Appeal is wholly devoid  of
merit, we refrain from imposing costs.

2014 – July. Part – http://judis.nic.in/supremecourt/filename=41734

                                                                REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL No. 5927 OF 2014
                   [Arising out of SLP(C) No.7704 of 2008]

MCLEOD RUSSEL INDIA LIMITED                  ….. APPELLANT

      vs

REG. PROVIDENT FUND COMMISSIONER,
JALPAIGURI    &     ORS.                                                 …..
RESPONDENTS



                               J U D G M E N T

VIKRAMAJIT SEN,J.
1     Leave granted.
2     This Appeal assails the judgment of the Division  Bench  of  the  High
Court at Calcutta  which  had  allowed  the  Appeal  preferred  against  the
judgment  of  the  learned  Single  Judge,  who  in  turn  had  applied  and
implemented the opinion of the Division Bench  as  expressed  in  Darjeeling
Dooars Plantation Ltd. vs Regional Provident Fund  Commissioner,  1995  ILLJ
939 Cal.   In the  impugned  Order,  the  present  Division  Bench  had  the
advantage of perusing the view taken by a Special  Bench  of  three  learned
Judges of the Calcutta High Court in Dalgaon Agro Industries Ltd.  vs  Union
of India, (2006) 1 CALLT 32 (HC),  which  was  decided  on  24.06.2005.  The
Special Bench was constituted in view of a reference submitted by  a  Single
Judge in Writ Petition No. 16037(W), who had entertained  an  opinion  which
differed with three earlier decisions rendered by  Single  Judges  in  three
separate matters. Along  with  the  aforestated  writ  petition,  an  appeal
pending before a Division Bench against one of those Single Judge  decisions
was also taken up by the Special Bench.  In this Appeal, therefore, we  have
primarily to consider whether the exposition of law by the Special Bench  in
Dalgaon Agro Industries Ltd. is the logical and acceptable view.
3     The factual matrix obtaining in the case at hand,  succinctly  stated,
is that M/s. Mathura Tea Estate, P.O. Mathura  Bagan,  District  Jalpaiguri,
West Bengal, owned by Saroda Tea Company Ltd., indubitably an  establishment
covered by the Employees’ Provident Funds and Miscellaneous Provisions  Act,
1952  (‘the  EPF  Act’  for  brevity),  had  defaulted  in   remitting   the
contributions and accumulations payable under the EPF  Act  and  the  sundry
Schemes formulated under that statute.   It was in those circumstances  that
the Regional Provident Fund Commissioner (‘RPF Commissioner’  for  brevity),
Jalpaiguri, West Bengal, had issued  notices  to  M/s.  Mathura  Tea  Estate
enabling it to show cause against the imposition of ‘damages’  as  envisaged
under Section 14B of the EPF Act.   M/s. Mathura Tea Estate requested for  a
waiver of damages, which request came to  be  rejected  on  the  predication
that the said establishment was neither a sick unit nor the subject  of  any
scheme for  rehabilitation  sanctioned  by  the  Board  for  Industrial  and
Financial  Reconstruction.  In  the  duration  of  those  proceedings,   the
management of M/s. Mathura Tea  Estate  under  the  erstwhile  ownership  of
Saroda Tea Company Ltd. was taken over by Eveready Industries  (India)  Ltd,
which thereafter  discharged  the  liability  of  entire  principal  sum  of
Provident Fund dues to the tune of  Rs.75,76,000/- pertaining to the  period
prior to the takeover in consonance with  the  Memorandum  of  Understanding
entered into  between it and Saroda  Tea  Company  Ltd.  Significantly,  the
said Memorandum of Understanding also included a clause to the  effect  that
any damages payable for the failure  to deposit the dues  and  accumulations
under the EPF Act would be the exclusive liability  of  Saroda  Tea  Company
Ltd making it palpably evident that the appellant was fully  alive  to  this
liability.  It is in these premises that Eveready  Industries  (India)  Ltd.
undauntedly contended before the RPF Commissioner, Jalpaiguri, in the  event
in futility, that proceedings under Section 14B of the EPF  Act  against  it
were unjustified as it was not the “employer” defined under Section 2(e)  of
the  EPF  Act,  which  defaulted  in   paying   contributions.     The   RPF
Commissioner has recorded that M/s. Mathura  Tea  Estate  had  defaulted  in
payment of dues for the period from March, 1989  to  February,  1998,  which
assertion of fact is not in dispute.   It held that on  a  conjoint  reading
of Sections 14B and 17B of the EPF Act  it  was  clear  that  damages  under
Section 14B were recoverable jointly and severally from Saroda  Tea  Company
Ltd. as well as Eveready Industries  (India)  Ltd.    After  tabulating  the
rates of damages, i.e. percentage of arrears  per  annum  depending  on  the
period of default,  damages  were  assessed  at  Rs.70,37,950;  and  it  was
further  directed  that  failure  to  deposit  penal  damages   within   the
stipulated period would attract the provisions of  Section  7Q  of  the  EPF
Act, thereby enhancing the liability to include simple interest at the  rate
of 12 per cent per annum on the damages.     It was this Order  of  the  RPF
Commissioner that failed to find favour with the  learned  Single  Judge  of
the High Court at Calcutta, who set  aside  the  Commissioner’s  Orders  and
directed the said Authority to reconsider the  issues  within  a  period  of
three months.   The learned Single Judge had drawn reliance from the  ruling
reported  as  The  Regional  Provident  Fund  Commissioner,   Mangalore   vs
Karnataka Forest Plantations  Corporation  Ltd.,  Bangalore,  2000  (1)  LLJ
1134, which  had  ruled  that  on  an  interpretation  of  Section  17B  the
transferee employer would be liable to  pay  all  outstanding  contributions
even for the period preceding the transfer, but it  could  not  be  fastened
with punitive liability for acts of omission or commission of  the  previous
employer for the period anterior to the transfer. It will  bear  reiteration
that in terms of the judgment of the Division Bench impugned before us,  the
decision of the learned Single Judge in its own turn  was  reversed  on  the
application of the dictum of the Special Three-Judge Bench in  Dalgaon  Agro
Industries Ltd.
4     The Special Bench of the  High  Court  of  Calcutta  in  Dalgaon  Agro
Industries Ltd. has rendered a detailed judgment  on  the  conundrum  before
us.    Succinctly  stated,  the  Special  Bench  has  opined  that  (a)  the
transferor and the  transferee  managements  remain  jointly  and  severally
liable under Sections 14B and 17B of the Act  for  all  sums  due  including
damages; (b) the transferor’s indebtedness comes to a halt on  the  date  of
the transfer but includes the sums computed under both these  Sections  till
the date of transfer; (c) the transfer does not bind  either  the  employees
or the Fund; (d) the transferee stands cautioned by virtue of Sections  1(3)
and  17B  that  the  erstwhile  as  well  as  the  current  employer  remain
responsible for liabilities under both the  Sections  as  a  consequence  of
liability being that of the establishment in  question  of  which  employers
are merely fictional representatives to facilitate  recovery  of  dues;  (e)
recovery of any amount due is protected under  Section  11(2)  of  the  Act,
which grants priority to the amount so due over all other  debts  under  any
other statute as being the first charge on the assets of the  establishment;
(f) the Act has  innovated  radical  and  effective  modes  of  recovery  as
evident from Sections 8B and 8F, which  further  reinforces  the  fact  that
liability to pay dues  is  of  the  establishment  recoverable  through  the
employer; (g) liability  under  Section  14B  admits  no  waiver  except  as
provided; (h) damages  could  be  recovered  regardless  of  any  reasonable
period  of  prescription;  (i)  the  covenants  in  the  Transfer  Deed  are
irrelevant for determination and recovery  of  dues  and  damages;  and  (j)
criminal liability would be attracted only in  the  event  the  outstandings
are not completely recovered.
5     For facility of reference, the relevant provisions of the EPF Act  are
reproduced:-
      An Act to provide for the  institution  of  provident  funds,  pension
fund and deposit-linked insurance fund for employees in factories and  other
establishments.

Section 1(3) Subject to the provisions contained in section 16,  it  applies
-
(a) to every establishment which  is  a  factory  engaged  in  any  industry
specified in Schedule I and in which twenty or more  persons  are  employed,
and
(b) to any other establishment employing twenty or more persons or class  of
such establishments which the Central Government  may,  by  notification  in
the Official Gazette, specify in this behalf:
Provided that the Central Government may, after giving  not  less  than  two
months’ notice of its intention so to do, by notification  in  the  Official
Gazette, apply the provisions of this Act  to  any  establishment  employing
such number of  persons  less  than  twenty  as  may  be  specified  in  the
notification.

Section 2(e) “employer” means
(i) in relation to an  establishment  which  is  a  factory,  the  owner  or
occupier of the factory, including the agent of such owner or occupier,  the
legal representative of a deceased owner or occupier  and,  where  a  person
has been named as a manager of the factory under clause (f)  of  sub-section
(1) of section 7 of the Factories Act, 1948 (63  of  1948),  the  person  so
named; and
(ii) in relation  to  any  other  establishment,  the  person  who,  or  the
authority  which,  has  the  ultimate  control  over  the  affairs  of   the
establishment, and where the  said  affairs  are  entrusted  to  a  manager,
managing director or managing agent,  such  manager,  managing  director  or
managing agent;

      Section 7A. Determination of moneys due  from  employers.  –  (1)  The
Central Provident Fund Commissioner, any Additional Central  Provident  Fund
Commissioner,  any  Deputy  Provident  Fund   Commissioner,   any   Regional
Provident Fund Commissioner or any  Assistant  Provident  Fund  Commissioner
may, by order, -
(a) in a case where a dispute arises regarding  the  applicability  of  this
Act to an establishment, decide such dispute; and
(b) determine the amount due from any employer under any provision  of  this
Act, the Scheme or the [Pension] Scheme or  the  Insurance  Scheme,  as  the
case may be,
        and for any of the aforesaid purposes may conduct  such  inquiry  as
he may deem necessary.

Section 7Q. Interest payable by the  employer  --   The  employer  shall  be
liable to pay simple interest at the rate of twelve per cent  per  annum  or
at such higher rate as may be specified in the  Scheme  on  any  amount  due
from him under this Act from the date on which the amount has become so  due
till the date of its actual payment:
Provided that higher rate of interest specified  in  the  Scheme  shall  not
exceed the lending rate of interest charged by any scheduled bank.

Section 8. Mode of recovery of moneys due from employers– Any amount due -
(a) from the employer in relation to an establishment to  which  any  Scheme
or the Insurance Scheme applies in respect of any
contribution payable to the Fund or, as the case may be, the Insurance  Fund
damages  recoverable  under  section  14B,  accumulations  required  to   be
transferred under sub-section (2) of section 15 or under sub-section (5)  of
section 17, or any charges payable by him under any other provision of  this
Act or of any provision of the Scheme or the Insurance Scheme; or
(b) from the employer in relation to an exempted  establishment  in  respect
of any damages recoverable under section 14B or any charges payable  by  him
to the appropriate Government under any provision of this Act or  under  any
of  the  conditions  specified  under  section  17  or  in  respect  of  the
contribution payable by him  towards  the  Pension  Scheme  under  the  said
section 17,
        may, if the  amount  is  in  arrear,  be  recovered  in  the  manner
specified in sections 8B to 8G.

Section 11(2) Without prejudice to the provisions  of  sub-section  (1),  if
any amount is due from an employer whether  in  respect  of  the  employee’s
contribution deducted from the wages  of  the  employee  or  the  employer’s
contribution, the amount so due shall be deemed to be the  first  charge  on
the  assets  of  the  establishment,  and  shall,  notwithstanding  anything
contained in any other law for the time being force, be paid in priority  to
all other debts.

Section 14B. Power to recover damages - Where an employer makes  default  in
the payment of any  contribution  to  the  Fund  the  Pension  Fund  or  the
Insurance  Fund  or  in  the  transfer  of  accumulations  required  to   be
transferred by him under sub-section (2) of section 15  or  sub-section  (5)
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 (1 of 1986), subject to such terms and  conditions  as
may be specified in the Scheme.

Section 17B. Liability in case of  transfer  of  establishment  -  Where  an
employer, in relation to an establishment, transfers that  establishment  in
whole or in part, by sale, gift, lease or licence or  in  any  other  manner
whatsoever, the employer and the person to  whom  the  establishment  is  so
transferred shall jointly and severally be liable to  pay  the  contribution
and other sums due from the employer under any provision of this Act or  the
Scheme or the Pension Scheme or the Insurance Scheme, as the  case  may  be,
in respect of the period up to the date of such transfer:
Provided that the liability of the transferee shall be limited to the  value
of the assets obtained by him by such transfer.”

6     We shall briefly discuss a  decision  of  this  Court  namely,  Sayaji
Mills Ltd. vs. Regional Provident Fund Commissioner, 1984  (Supp)  SCC  610,
even though the questions before this Court are disparate in quotient.   The
management/owners of the Sayaji Mills had contended that since  the  factory
had been purchased in  1955  in  certain  liquidation  proceedings  and  the
period of three years had not elapsed from the date  of  its  establishment,
the EPF Act would have  no  applicability  to  it  under  unamended  Section
16(1)(b) of the Act.  This Court observed that the statute is  a  beneficent
legislation  and  any  interpretation  facilitating  the  evasion   of   its
provisions should be abjured, as employers  would  “spare  no  ingenuity  in
seeking 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.   Once  this
rationale is applied to the present conundrum, it becomes apparent that  the
inter se covenants between the Eveready Industries  (India)  Ltd.   and  the
erstwhile owners viz. Saroda Tea Company Ltd. would not insulate the  former
from the rigours of damages  imposed  by  the  EPF  Act.   Damages  must  be
calculated, it is plain, and be recovered  by  the  Authority  in  the  most
efficacious and convenient manner.  This decision, Sayaji  Mills  Ltd.,  was
not brought to the notice of the Division Bench of the Karnataka High  Court
in Karnataka Forest Plantations Corporation Limited, otherwise it would  not
have endeavoured  to  explore  which  party/employer  was  ‘guilty’  of  the
infraction of the statutory provisions.   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  perusal  of  its  Preamble  (supra);  and
manifests the ingenuity that employers may devise to circumvent liability.
7     Mr. Jayant Bhushan, learned  Senior  Counsel  for  the  Appellant  has
sought sustainment for  his  submissions  from  Employees’  State  Insurance
Corporation vs HMT Ltd. (2008) 3 SCC 35, but in our consideration, in  vain.
  In that case,  the  ESIC  raised  a  claim  for  deposit  of  interest  on
outstanding contributions of the management  under  the  ESIC  Act  and  the
concerned Regulations, and in addition thereto levied damages  in  terms  of
Section 85B of the Employees’ State Insurance  Act,  1948  (‘ESIC  Act’  for
brevity). Section 85B of the ESIC Act is essentially  para  materia  Section
14B of the EPF Act, and therefore this decision  assumes  great  importance.
The submission of the HMT Management  was  that  damages  ought  not  to  be
levied, since Section 85B was an enabling provision and did  not  intend  to
make levy  of  damages  mandatory.   We  shall  reproduce  for  facility  of
reference and comparison, the statutory  provision  of  ESIC  Act,  1948  to
spotlight the legal nodus with which we are presently engrossed –
85B. Power to recover damages. – (1) Where an  employer  fails  to  pay  the
amount due in respect of any contribution or any other amount payable  under
this Act, the Corporation may recover from the employer by  way  of  penalty
such damages not exceeding the amount of arrears as may be specified in  the
regulations:
Provided that before recovering such damages, the employer shall be given  a
reasonable opportunity of being heard:
Provided further that the  Corporation  may  reduce  or  waive  the  damages
recoverable under this section in relation to an establishment  which  is  a
sick industrial company in respect of which a scheme of  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 (1 of 1986), subject to such terms and  conditions  as
may be specified in regulations.
(2) Any damages recoverable under sub-section (1) may  be  recovered  as  an
arrear of land revenue or under section 45C to section 45-I.

8     In HMT Ltd., this Court noted the beneficial nature of the  ESIC  Act;
that subordinate legislation must conform to the provisions  of  the  parent
Act. Despite giving due regard to the use of the words “may recover  damages
by way of penalty”, and mindful that mens rea and actus reus  to  contravene
a statutory provision are necessary ingredients for levy of damages,    this
Court set aside the interference of the High Court vis-à-vis the  imposition
of damages and further held that imposition of damages  by  way  of  penalty
was not mandated in each and every case.  The dispute was remitted  back  to
the High Court for fresh consideration, i.e. to proceed on the premise  that
the levy of penalty under the Act was  not  a  mere  formality,  a  foregone
conclusion  or  an  inexorable  imposition;  and  that   the   circumstances
surrounding the  failure  to  deposit  the  contribution  of  the  employees
concerned would also have to be cogitated upon.    This  decision  does  not
prescribe that damages or penalties cannot  or  ought  not  to  be  imposed.
Further, the presence or absence of mens rea and/or actus reus  would  be  a
determinative factor in imposing damages under  Section  14B,  as  also  the
quantum thereof since it is not inflexible that 100 per cent of the  arrears
has to be imposed in all the cases.  Alternatively stated, if  damages  have
been imposed under Section 14B it will be only logical that mens rea  and/or
actus reus was prevailing at the relevant time.    We  may  also  note  that
this  Court  had  yet  again  reiterated  the  well-known  but  oft  ignored
principle that High Courts or any Appellate Authority created by  a  statute
should not substitute their perspective of discretion on that of  the  lower
Adjudicatory Authority if the impugned Order  does  not  otherwise  manifest
perversity in the process of decision taking.  HMT Ltd. does  not  proscribe
imposition of damages; that would negate  the  intent  of  the  legislature.
The submission of the petitioner before us is that the liability was of  the
erstwhile management and since the petitioner was not the “employer” at  the
relevant time, default much less deliberate and wilful default on  the  part
of the petitioner was absent.  However, it  seems  to  us  that  once  these
damages have  been  levied,  the  quantification  and  imposition  could  be
recovered from the party which has assumed the management of  the  concerned
establishment.
9     The Two-Judge Bench decision in Organo Chemical  Industries  vs  Union
of India (1979) 4 SCC 573, makes compelling reading not only because of  the
contrasting styles of two of our illustrious predecessors; A.P.  Sen  J  for
his erudite, efficient and precise exposition of the law  and  V.R.  Krishna
Iyer J for his elegance of expression and verve  impregnated  with  humanism
and compassion.   Organo  involved  a  petition  under  Article  32  of  the
Constitution challenging the Constitutional vires of Section 14B of the  EPF
Act.    The contention was that the default  of  the  employer/establishment
was not wilful, rendering inappropriate  the  imposition  of  damages  of  a
penal nature;  and  since  the  computation  of  damages  was  left  totally
unguided  and  untrammelled,  violation  of  Article  14  was  plainly   and
expectedly obvious.   The Court while upholding the Constitutional  validity
of Section 14B held that the raison d’etre for the introduction  of  Section
14B (by Act 40 of 1973) was to deter and thwart  employers  from  defaulting
in forwarding contributions to the  Funds,  most  often  with  the  ulterior
motive  of  misutilizing  not  only  their  own  but  also  the   employees’
contributions. Section 14B originally restricted damages to 25 per  cent  of
the withheld amounts which, having been found  to  be  ineffectual  for  the
attainment to the objectives of  the  Act,  was  increased  to  a  sum  “not
exceeding the amount of arrears”.   This Court also  interred  the  division
or dichotomy of opinions flowing from differing decisions of different  High
Courts by clarifying that the word  ‘damages’  has  been  employed  in  this
dispensation  to  mean  penalty  on  recalcitrant   employers  as  well   as
reparation for loss caused to the Fund.   The  Court  stoutly  repelled  the
contention that damages were merely compensatory in nature  and,  therefore,
should not exceed the interest that would have  accrued  in  favour  of  the
Funds had  the  contributions  been  diligently  dispatched  to  the  Funds.
Organo has been favourably followed in Babubhai & Co. vs. State  of  Gujarat
(1985) 2 SCC 732.
10    There is no gainsaying that  criminal  liability  remains  steadfastly
fastened to the actual perpetrator and cannot be transferred by any  compact
between persons  or  even  by  statute.   But  this  incontrovertible  legal
principle does  not  support  or  validate  the  contention  of  Mr.  Jayant
Bhushan, Learned Senior Advocate for the Appellants, that damages levied  in
terms of Section 14B of the EPF Act cannot  be  foisted  onto  his  clients.
Sections 14, 14A, 14AA, 14AB and 14AC of the  EPF  Act  are  the  provisions
postulating prosecution; in contradistinction Section 14B  contemplates  the
power to “recover from the employer by way  of  penalty  such  damages,  not
exceeding the amount of arrears, as may be specified in the Scheme”.  It  is
true that it is  not  a  river  but  a  mere  rivulet  that  segregates  and
distinguishes the legal concepts  of  damages  or  compensatory  damages  or
exemplary damages or deterrent damages or punitive  damages  or  retributory
damages.  We shall abjure from writing a  dissertation  on  this  compelling
legal nodus; save to clarify that modern jurisprudence recognizes  that  the
imposition  of  punitive   damages,   quintessentially   quasi-criminal   in
character, 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, it seems to us, of Section 14B of the  EPF  Act,  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.
11    It has also been argued that damages  as  postulated  in  Section  14B
would not be transferable under  Section  17B.   This  argument  has  to  be
stated only to be rejected for the  reason  that  Section  17B  specifically
speaks of “the contributions and other sums due from the employer under  any
provision of this Act or the  Scheme”  (emphasis  added).   The  proviso  to
Section 17B indeed clarifies the position inasmuch as  it  restricts  and/or
limits the liability of the transferee up to the date  of  the  transfer  to
the value of the assets obtained by him through such transfer.
12     We are also not impressed by the argument addressed  by  Mr.  Bhushan
to the effect that damages under Section 14B are not jointly and  separately
recoverable from the erstwhile and the  present  managements  under  Section
17B as Section 14B  moves  in  its  own  and  independent  orbit.    Several
amendments have been made to the EPF  Act  so  far  as  the  fasciculous  of
Sections 7A to Section 7Q is concerned.    This is also true of the  pandect
containing Sections 14A, 14AA, 14AB, 14AC, 14B and 14C; and for that  matter
Sections 17A, 17AA and 17B.   Where such widespread amendments  and  changes
are incorporated in a statute,  it  is  always  salutary  and  advisable  to
reposition the provisions and number them sequentially and logically.    The
argument that the phrase “determination of amounts due  from  any  employer”
is found in Section 7A as well as in Section 17B is not  factually  correct.
 Section 17B  speaks  of   “contributions  and  other  sums  dues  from  the
employer under any provision of  this  Act  …….”;  the  latter  Section  is,
therefore, wider in ambit than the previous one.  In  our  opinion,  Section
14B is  complete  in  itself  so  far  as  the  computation  of  damages  is
concerned.   It is conceivable that the money due  from  an  employer  would
have to be calculated under Section 7A, and in  the  event  the  default  or
neglect of the employer is contumacious and contains the requisite mens  rea
and actus reus yet another exercise of  computation  has  to  be  undertaken
under Section 14B.    Where the Authority is of  the  opinion  that  damages
under Section 14B need to be imposed, the  computations  would  come  within
the purview  of  Section  14B  and  it  would  be  recoverable  jointly  and
severally from the  erstwhile  as  well  as  the  current  managements.    A
perusal of the Appeals Section, namely, 7I is illustrative of the fact  that
these exercises are distinct from each other as per the  enumerations  found
in the first sub-Section of Section 7I.   It also appears logical to us,  in
the wake of the numerous and different dates  of  amendments,  that  Section
7A(2) would also be available to proceedings under Section 14B of  the  Act.
 The applicability of  Civil  Procedure  Code,  1908  to  proceedings  under
Section 14B has not specifically been barred by the statute.
13         It is necessary to clarify that Eveready Industries (India)  Ltd.
had in the interregnum of this litigation changed its name to Mcleod  Russel
India Ltd.  In view of our above analysis,  it  is  our  considered  opinion
that the impugned Judgment deserves to be upheld.   It contains  a  detailed
and logical exposition of facts  as  well  as  the  law  pertaining  to  the
present  dispute.  We  also  approve  the  pithy  observations  of  the  RPF
Commissioner, Jalpaiguri in the subject Order that failure on  the  part  of
the employers  to  make  remittances  of  accumulations  and  contributions,
undermines the objectives and purposes of the statute.   We underscore  that
the liability of the Fund to  pay  interest  to  subscribers  regardless  of
whether  employers  have  paid  their   dues,   runs   relentlessly.     The
Commissioner has specifically recorded that he has taken a lenient  view  in
the matter and has eschewed imposition of damages to the extent of  100  per
cent of the arrears even though this is envisaged  by  the  EPF  Act.    The
Appellant-Petitioner has, in  the  circumstances  of  the  case,  been  also
rightly burdened with the payment of interest under Section 7Q  of  the  EPF
Act.   Accordingly, the Appeal is  dismissed  and  the  interim  Orders  are
recalled.   Although, it is our opinion that the Appeal is wholly devoid  of
merit, we refrain from imposing costs.


............................................J.
                                          [T.S. THAKUR]



............................................J.
                                          [VIKRAMAJIT SEN]
New Delhi;
July 02, 2014.

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