IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF AUGUST, 2019 BEFORE THE HON’BLE MR. JUSTICE G NARENDAR WRIT PETITION No.45756/2018 (L – PF) BETWEEN:
Chromous Biotechh Pvt. Ltd Regd. Office: 3rd Floor Metropolis Business Park Yelahanka New Town Bangalore-560064 Represented by the Managing Director Sri Biswajit Roy. .. Petitioner (By Sri Muni Rangaiah M, Advocate) AND 1. Employees Provident Fund Organisation, by the Assistant P F Commissioner Regional Office, No.2, Maruthi Complex, 1st – A Main, HIG A – Sector, Yelahanka New Town, Bengaluru – 560 064.
2. The Union of India By the Secretary Ministry of Labour & Employment, Shramashakthi Bhavan, Rafi Marg New Delhi – 110001. .. Respondents (By Smt.Shwetha Anand, Advocate for R1, R2 - served) This W.P. is filed under Articles 226 and 227 of the constitution of India, praying to quash the impugned order dated 27.6.2016 issued by the R1 is produced and marked as Annexure-A of the writ petition and etc.
This Writ Petition coming on for preliminary hearing this day, the Court passed the following: -
ORDER Heard the learned counsel for the petitioner and learned counsel for respondent No.1.
2. The petitioner is a Private Limited company carrying on its business in the field of Biotechnology. Due to administrative lapses, it was forced to close down, the branches of the petitioner/company that are situated elsewhere and is presently operating within Bengaluru alone. That, the directors of the petitioner’s company are expert in the field of biotechnology and despite company not making any business profits, it has endeaveoured to pay the salaries/wages keeping in mind the welfare of its employees.
3. That, the company was incorporated in the year 2006 and commenced commercial operation in the year 2008. That, the 1st respondent has proceeded to pass the impugned orders without affording any reasonable opportunity and has given incorrect finding thereby making the petitioner liable for payment of contribution under the Act from the period 2002, a period when the company was not even in existence. That, all the four orders have been passed in a hasty manner and on the very same day and further demanded the payment within a span of fifteen days.
4. Learned counsel for the petitioner would contend that the impugned orders of the 1st respondent are passed totally de-hors the factual matrix of the case. He would contend that neither the wages have been quantified nor number of employees have been gone into and without addressing these basic facts, 1st respondent-Authority has proceeded to pass the impugned orders and quantify the alleged contribution. He would further contend that the payment for the period between 2002 and 2006 is legally unsustainable as the company was not functioning and there is no reasoning or finding in the impugned proceedings justifying the demand for the said period.
5. The learned counsel would invite the attention of the Court to Annexure-F and on perusal of the same, it is seen that the same is a certificate of incorporation issued by the Deputy Registrar of Companies and the same is dated 17.11.2006. He would further invite the attention of the Court to Annexure-G and the same details the remittances into the account of establishment code No.KN/43009. He would also invite the attention of the Court to Annexures-H and J, wherein petitioner has furnished the details of the payments made.
6. The learned counsel would submit that despite clarification given under Annexures-H and J, the 1st respondent has proceeded to pass the impugned orders imposing interest and damages. He would contend that the proceedings impugned are vitiated by arbitrariness and non-application of mind.
7. The respondents have filed their statement of objections. On a detailed perusal of the same, it is seen that none of the contentions raised stand controverted.
8. Per contra, learned counsel for the respondents would vehemently contend that petition is not maintainable in view of the availability of alternative remedy before the Tribunal. She would place reliance on the ruling rendered by the Hon’ble High Court of Madras reported in LAWS (MAD) 2011 6 38 in the case of Management of Reynolds Pens India Pvt. Ltd. –vs- Regional Provident Fund Commissioner-II, Employees’ Provident Fund Organisation, wherein learned Single Judge has observed that the petitioners have come forward to challenge the notices issued under Section 7A of the PF Act. Learned Single Judge has taken note of the fact that no order has been passed adjudicating any rights and requiring intervention by way of judicial review. In the instant case, the fact situation is otherwise.
9. Learned counsel for the respondents has also cites the rulings of the Hon’ble Apex Court reported in (2013) 16 SCC page-1 in the case of Arcot Textile Mills Limited –vs- Regional Provident Fund Commissioner and others. The Hon’ble Apex Court has observed in paras-17 and 22 as under:
“17. On a perusal of the aforesaid provision it is evident that an appeal to the Tribunal lies in respect of certain action of the Central Government or order passed by the Central Government or any authority on certain provisions of the Act. We have scanned the anatomy of the said provisions before. On a studied scrutiny, it is quite vivid that though an appeal lies against recovery of damages under Section 14-B of the Act, no appeal is provided for against imposition of interest as stipulated under Section 7-Q. It is seemly to note here that Section 14-B has been enacted to penalize the defaulting employers as also to provide reparation for the amount of loss suffered by the employees. It is not only a warning to the employers in general not to commit a breach of the statutory requirements but at the same time it is meant to provide compensation or redress to the beneficiaries i.e. to recompense the employees for the loss sustained by them. The entire amount of damages awarded under Section 14-B except for the amount relatable to administrative charges is to be transferred to the Employees’ Provident Fund. (See Organo Chemical Industries v. Union of India.) 22. Coming to the case at hand, it is evident that the appellant had sent a communication dated 3-10-2007 to the Regional Provident Fund Commissioner submitting that that establishment could not pay the Provident Fund dues from 1998 due to financial crisis, etc. and it was remitting Rs.83,01,037.80 (Rupees eighty-three lakhs one thousand thirty-seven and eighty paise only) from 1998 to April 2006. Under these circumstances, there was no adjudication with regard to liability as the appellant Company had accepted the fault on its own. As it appears the respondent does not have any cavil with regard to the dues payable towards the Provident Fund by the appellant to the Company. What is disputed is that the third respondent issued a demand notice on 23-10- 2007 requiring the appellant to remit a sum of Rs.94,27,334 towards interest under Section 7-Q of the Act for the belated remittances made from December 1998 to April 2006. The letter stated that a computation sheet was attached to the said demand notice which was rebutted by the petitioner by sending a communication stating that it was not sent and it may be provided so that they may reconcile the accounts. The demand notice manifestly has been issued in exercise of power under Section 7-Q of the Act and is an independent action and against such an order or issue of demand no appeal could have been filed. Therefore, the conclusion of the learned Single Judge as well as by the Division Bench on the said score is not sustainable.”
10. The Apex Court was pleased to hold that no remedy of appeal is provided in respect of proceedings under Section 7Q of the PF Act. In the instant case, the order vide Annexure-B has been passed under Section 7Q of the PF Act. The other ruling of the Hon’ble Apex Court, which is relied upon by the respondent and reported in AIR 2019 SC 1240, the Hon’ble Apex Court was dealing with the issue of definition of `basic wage’. In the instant case, the Authority has failed to even quantify the wages or number of employees that are covered under the order. The ruling reported in (2006) 2 SCC 381 in the case of Regional Provident Fund Commissioner, Mangalore –vs- Central Arecanut & Coca Marketing and Processing Coop. Ltd., Mangalore, pertains to trainees and the issue dealt with by the Apex Court was that as to whether in the light of definition of ‘employee’ the trainees or apprentices, engaged under the standing orders of the establishment stand equated with an employee as defined under the Act. The said ruling is in applicable to the facts of the case.
11. The short point that requires consideration is whether the proceedings are vitiated by arbitrariness and non-application of mind?
12. As rightly canvassed by the learned counsel for the petitioner, the orders appear to be based on first principle. There can be no quarrel with the principles laid down by the Hon’ble Apex Court. That, it is not in doubt that a duty is cast on the fact finding Authority to exercise jurisdiction by settling the quantum of wages and number of employees, who are covered under the ambit of the Act and thereafter it ought to have carried to the exercise quantifying the damages as merely first principle would not partake the character of the factual matrix of the case. The contributions by the employer are necessarily to be in relation to an identifiable employee, on whose account, it is alleged that the employer has failed to remit the contribution.
13. The orders impugned have been passed without identifying such beneficiaries. In the absence of details of beneficiaries or wages paid to them, it must necessarily be construed that the impugned proceedings are an arbitrary exercise of jurisdiction of the 1st respondent/Authority. The impugned proceedings are vitiated by non-application of mind. In that view of the matter, writ petition is allowed. Annexures-A, B, C and D are quashed. The matter is remitted back to the 1st respondent for reconsideration in the light of the observations made herein above.
Petitioner shall appear before the 1st respondent/Authority on 27.8.2019 at 3.00 p.m. without waiting for further notice.
No order as to cost.
Sd/- JUDGE Bkm