Challenge in this Writ Petition is to an order made under Section 14-B of the Employees Provident Fund and Miscellaneous Provisions Act of 1952 passed by the respondent in No.TN/CBE/PDC/789/Cir.18/FLO 2004-2005 dated 02.09.2004, directing the petitioner to pay damages.
2. Learned counsel for the petitioner would contend that the impugned order had been passed without following the principles of natural justice and without application of mind. He relies on a recent judgment of the Hon'ble Supreme Court in "Employees State Insurance Corporation ..vs.. HMT Limited and another" reported in (2008) 1 SCC (L&S) page 558 wherein the Hon'ble Supreme Court had an occasion to consider the earlier judgments of the Hon'ble Supreme Court in Hindustan Times Ltd., ..vs.. Union of India, reported in (1998) 2 SCC Page 242 wherein the Hon'ble Supreme Court had dealt with the scope of
Section 14-B of the Employees Provident Fund and Miscellaneous Provisions Act. The learned counsel would submit that applying the principles stated in these two judgments, the impugned order is liable to be quashed.
3. Learned counsel for the respondent would vehemently oppose the Writ Petition. According to him, the principles stated in the said judgments have got no application with the facts of the present case. He would submit that the imposition of damages is based on the regulation of paragraph 32(a) of Employees Provident Fund Scheme and therefore 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 of the Employees Provident Fund and Miscellaneous Provisions Act, the Hon'ble Supreme Court has held as follows:-
" The authority under Section 14-B has to apply his mind to the facts of the case and the reply to the show cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard: the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on plea of power cut, financial problems relating to other indebtedness or the delay in realisation of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no period of limitation prescribed by the legislature for initiating action for recovery of damages under Section 14-B."
6. When a similar question arose in respect of Employees State Insurance Corporation under Section 85(B) of the Act, the Hon'ble Supreme Court relying on the HMT Limited case cited supra and also relying on another judgment of the Hon'ble Supreme Court in Prestolite (India) Limited ..vs.. Regional Director reported in 1995 SCC (L&S) page 202 has held in paragraphs 25 and 26 as follows :
" 25. The statute itself does not say that a penalty has to be levied only in the manner prescribed. It is also not a case where the authority is left with no discretion. The legislation does not provide that adjudication for the purpose of levy of penalty proceedings would be a mere formality of imposition of penalty as also computation of the quantum thereof became a foregone conclusion. Ordinarily, even such provision would not be held to providing for mandatory imposition of penalty, if the proceeding is an adjudicatory one or compliance with the principles of natural justice is necessary thereunder.
26. Existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof."
7. In Prestolite (India) Limited ..vs.. Regional Director case in paragraph 5, the Hon'ble Supreme Court has held as follows:
"5. ... Even if the regulations have prescribed general guidelines and the upper limits at which the imposition of damages can be made, it cannot be contended that in no case, the mitigating circumstances can be taken into consideration by the adjudicating authority in finally deciding the matter and it is bound to act mechanically in applying the uppermost limit of the table. In the instant case, it appears to us that the order has been passed without indicating any reason whatsoever as to why grounds for delayed payment were not to be accepted. There is no indication as to why the imposition of damages at the rate specified in the order was required to be made. Simply because, the appellant did not appear in person and produce materials to support the objections, the employee's case could not be discarded in limine. On the contrary, the objection ought to have been considered on merits."
8. In view of the law laid down by the Hon'ble Supreme Court in Prestolite (India) Limited case, the regulation relied on by the learned counsel for the respondent can be termed only as a guideline and it cannot be stated that the authority can pass the order mechanically applying the regulations. As held by the Hon'ble Supreme Court in "Employees State Insurance Corporation...vs... HMT Limited and another", the existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the the quantum thereof. In the instant case, a perusal of the impugned order would go to show that there is no finding in respect of mens rea or actus reus. It is also not stated how the quantum was arrived at. The order would go to show that there was no adjudication at all made by the respondent as required under law.
9. I have no hesitation to hold that the the impugned order has been passed mechanically without discharging the duties of adjudication by the respondent. For all these reasons, applying the law laid down by the Judgments stated supra, I have no hesitation to hold that the impugned order is liable to be quashed.
10. In the result, the Writ Petition is allowed and the impugned order is quashed and remanded back to the respondent who shall to issue notice to the petitioner and afford opportunity, then pass appropriate orders strictly in accordance with law as indicated above within a period of three months from the date of receipt of a copy of this order. Consequently, connected Miscellaneous Petition is closed. No costs.
rma To The Assistant Provident Fund Commissioner, Regional Provident Fund Commissioner office, Dr.Balasundaram Road, Coimbatore