ORDER
Sabyasachi Mukherjee, J.
1. The Employees' Provident Fund Act, 1952 which is now known as the Employees' Provident Fund and Family Pension Fund Act, 1952, was made applicable to the petitioners' head office in or about June, 1962. From 6th July, 1962, the said Act was made applicable to the petitioner's factory. From 13th July, 1962, the petitioner No. 1 which is a company paid all provident fund dues but there was some delay in making the payments on certain occasions. During this period the Provident Fund Inspector visited the petitioners' establishment on several occasions. On or about the 12th August, 1968, a copy of the report of the Provident Fund Inspector dated the 31st July, 1968 was received by the petitioner No. 1 in which the petitioner was threatened with legal action and imposition of damages under Section 14B if the petitioner failed to pay off Provident Fund dues. It was also mentioned that if the payments were made Immediately it might not be necessary for the Provident Fund Commissioner to secure compliance through the legal action mentioned in the said report. On the 13th February, 1969, a copy of the report of the Provident Fund Commissioner dated the 4th February, 1969, was received by the petitioner No. 1 inter alia, threatening the petitioner with damages under Section 14B of the Act for belated payment. It was also mentioned in the report that if the amounts were paid off Immediately, It might not be necessary for the authorities to secure compliance through legal action under the Act. On the 1st November, 1973 there was an amendment of the Act and the maximum quantum of damages chargeable was enhanced to 100 per cent instead of 25 per cent of the arrears On the 30th July, 1973, the petitioner No 1 received two notices, both dated the 26th July, 1975, from the Provident Fund Commissioner directing the petitioner to show cause, inter alia, as to why the damages proposed in the last column of the statement enclosed with the notices should not be levied and recovered. The petitioner No. 1 was also directed to appear in person or through an authorised representative before the Regional Provident Fund Commissioner on August 1, 1975. It is alleged that on the 1st August, 1975, the petitioner No. 2 Shri Beharilal Murarka along with Netai Chandra Bhattacharjee attended the office of the Provident Fund Commissioner and met one Shri R.M. Gandhi the Deputy Provident Fund Commissioner and prayed for some time. It is further alleged that Shri Gandhi was pleased to grant time upto the 25th August, 1975, when the petitioners were directed to file objection with documentary evidence, if any. It is further alleged that on the 25th August, 1975, Shri Beharilal Murarka along with the said Netai Chandra Bhattacharjee met the Deputy Provident Fund Commissioner and handed over the letter dated the 23rd August, 1975, along with the balance-sheets and a chart based on the annual reports and Mr. Murarka made necessary submissions before the Deputy Provident Fund Commissioner. On the 3rd October, 1975, the petitioner No. 1 received an order dated the 30th September, 1975. The said order is the subject-matter of challenge in this application under Article 226 of the Constitution. The said order was in cyclostyled form with the gaps filled in Imposing damages including administrative charges for a sum of Rs. 2 30,497 20 paise with a direction to deposit the said amount within thirty days. The said order is to the following effect:
To
M/s. The Murarka Paint & Varnish Works Pvt. Ltd.,
4E, B.B.D. Bag. 29 Stephen House Calcutta 1.
Subi Levy of Damage U/s 14B of the Employees' Provident Fund/Family Pension Fund Act, 1952 against M/S. Murarka Paint & Varnish Works Pvt. Ltd. Code No. WB/5518.
Ref: Show cause notice No. A/045/ 5518/Damage/IV/WB/23 and 24 dated 26-7-75.
In exercise of the powers a conferred upon me by the Government of India, Ministry of Labour and Rehabilitation, Department of Labour and Employment-Notification No. S O. 548 (E) dated the 16th October, 1973 read with Section 14B of the Employees' Provident Funds/Family Pension Fund Act, 1952 and after carefully considering the submissions made before me on 1st August, 25th August by Sri B.L. Murarka, the Director in relation to M/s. Murarka Paint and Varnish Works Pvt. Ltd. and also the explanations contained in the letter No. G/34/1609 dated 23-8-75 received from M/s. Murarka Paint and Varnish Works Pvt. Ltd., in reply to the show cause notice under reference, I, the Regional Provident Fund Commissioner. West Bengal do hereby determine that a sum of (a) Rupees 2,24.236 05 (Rupees Two Lakhs twenty four thousand two hundred thirty six and paise five only) (b) Rupees 842.65 (Rupees Eight hundred forty two and paise sixty five only) and (c) Rupees 5.418.50 (Rupees five thousand four hundred eighteen and paise fifty only) are payable by M/s. Murarka Paint and Varnish Works Pvt. Ltd. as damage for delayed remittance of (a) Provident Fund Contributions for the period from 5/62 to 2/74, (b) Family Pension Fund Contributions for the period from 4/71 to 2/74 and (c) Administrative charges for the period from 5/62 to 2/74 respectively.
I accordingly direct you to deposit the following amounts in the State Bank of India within 30 days from the date of receipt of this notice positively and forward triplicate copies of the Bank challans to this office, failing which necessary legal action will be initiated for realisation of the amount without any further correspondence.
Amount of damage Amount To be credited to on account of Rs.(a) Provident 2,24,236.05 E.P.F. A/c. No. IFund Con-tributions(b) Family 842.65 E.P.F. A/c. No. II PensionFund Con-tribution(c) Adminis- 5,418.50 E.P.F. A/c. No. IIItrativeChargesSd. (P.S. Dhotrekar)Regional Provident Fund Commissioner,West Bengal,The Andaman and Nicobar Islands.
2. Thereafter the petitioners moved this application on 23rd October, 1975, under Article 226 of the Constitution and a rule nisi was issued. The order mentioned hereinbefore has been challenged on various grounds. The first ground of challenge to the order is that the representations on behalf of the petitioners were heard by the Deputy Provident Fund Commissioner R M. Gandhi but the order in question was passed by P.S. Dhotrekar, the Regional Provident Fund Commissioner. Section 14B of the Employees' Provident Funds & Family Pension Fund Act, 1952, as it stood at the relevant time provided as follows:
14B. Power to recover damages.- Where an employer makes default In the payment of any contribution to the 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 charges payable under any other provision of this Act or of any 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 such damages, not exceeding the amount of arrear, as it may think fit to impose. Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard.'
It is obligatory that the order must be passed by the authority who will give an opportunity of being heard. Therefore, the authority hearing objection is obliged under the Act to pass the order. That is also not disputed on behalf of the respondents It Is disputed on behalf of the respondents, however, that the objections were heard by the Deputy Provident Fund Commissioner, Shri Gandhi. It is contended on behalf of the respondents that the objections were heard by the Provident Fund Commissioner who had passed the impugned order. It is significant and was argued rightly that Shri S.A. Ali, Assistant Provident Fund Commissioner, who has affirmed the affidavit in answer to the rule nisi was not the person concerned or competent to make the affidavit denying the allegation which either Shri Dhotrekar or Shri Gandhi was capable of denying. There is no affidavit by either Shri Gandhi or Shri Dhotrekar. In those circumstances. It would have been difficult not to accept the allegation on this aspect of the matter made by the petitioners. However, the original order-sheet was produced before me and the said order-sheet reads as follows:
Shri B.L. Murarka, Director appeared before me to-day. He has received the notices on 30-7-75 and desires three weeks time to make a detailed representation after verifying the records. Time granted. Fixed for personal hearing on 25-8-75 at II A.M. at this office. Shri Murarka informed.
Sd.
Regional Provident Fund Commissioner, West Bengal. 1-8-75.
Shri B.L Murarka appeared before me to-day and handed over letter dated 23-8-75 along with the Balance sheets of the company for the years from 1962 to 1975 in support of the contentions raised by the Co. in the aforesaid letter. Shri Murarka pleads for condoning the delays in the circumstances explained in the letter.
Reserved for orders,
(P.S. Dhotrekar)
Regional Provident Fund Commissioner, West Bengal 25-8-75.
The placement of relevant entry in the said order sheet along with signature of the Regional Provident Fund Commissioner on both the dates in my opinion makes It necessary for me for the purpose of this application under Article 226 of the Constitution to accept the respondents' version and to reject the petitioners' contention that the objections were not heard by the Commissioner himself. The first ground of challenge to the impugned order, therefore, cannot be accepted.
3. The second ground of challenge to the impugned order was that in this case admittedly the payments had been made. There was delay in making the payments. Therefore, it was contended that belated payments were not defaults In terms of Section 14B of the Act and, therefore, on account of belated payments there could not be any scope for recovery of damages as contemplated by Section 14B of the Act. In aid of this submission reliance was placed on the expression 'amount of arrear' which was the limit for position of damages. It was contended that the section covered cases where there was failure to make payments in terms of the Act and the scheme framed thereunder. This construction, it was urged, was in consonance with the scheme and the expression 'amount of arrear' which fixed the limit or extent to which penalty would be imposed. It was contended that according to the common meaning the arrear would be fixed at the time of imposition of penalty. I am, however, unable to accept this contention. A default under the section is made whenever there is a default in payment of the contribution. The Act and the scheme framed under the Act impose obligation on the employer to make the stipulated payments within the stipulated time. Failure to make the payments within the time stipulated results in default of payment of contribution as enjoined by the Act. There is nothing In the language used in the section, In my opinion, which cuts down the meaning of the expression 'default in payment' and limits It only to the failure to pay. Failure to pay within the time stipulated would also be default in the payment of contribution to the Fund. In this connection reliance may be placed on the meaning of the expression 'default in payment in Stroud's Judicial Dictionary, 3rd Edition, Vol. 1.759 where it has been indicated that the expression 'default in pay-mint' means non-payment at the due time and place. It has also been indicated that the expression 'to make default in payment' means a failure to pay at the due date. In this connection reliance may also be placed on the decisions In the cases of Williams v. Stern [1879] 5 QBD 409; Thorn v. City Rice Mills [1889] 40 Ch. D. 357. For the aforesaid reasons it is not possible to accept the contention that In case of belated payments there was no default in terms of Section 14B of the Act and as such no damages could be Imposed.
4. It was, then, contended that under the scheme of the section the Central Government was the authority to impose damages and the Provident Fund Commissioner was the authority to recover the same. This argument was emphasized by stressing upon the word used In the last sentence 'the amount' of arrear as it may think fit to impose It was emphasized that the expression 'It' indicated that the Central Government was the authority which was competent to impose the penalty. I am, however, unable to accept this contention also. The section makes It quite clear that where an employer makes default in payment of the contribution as indicated in the section, the Central Provident Fund Commissioner or such other officer as it may be authored by the Central Government may recover from the employer such damages. The sentence is clear that the Central Provident Fund Commissioner or any other officer authorised by the Central Government can recover from the employer such damages not exceeding the amount of arrears as it may think fit to impose. There is no dual authority in the section-one for the Imposition and the other for the recovery. The right to recover is given to the authority which imposes the penalty. That in my opinion would be a hormonious construction of the provisions of the section. The expression 'it' denotes the authority who Imposes the penalty or recovers the same. Therefore, it is not inconsistent with the office of the Central Provident Fund Commissioner If it is treated as an authority.
5. It was, then, contended that in view of the assurance given In the Inspector's report that if payments were made in time, then other legal action might not be taken against the petitioners. The present order imposing maximum penalty was, therefore, harsh and bad. In aid of this submission reliance was placed on the observations of a learned single Judge of the Punjab High Court In the case of Amin Chand & Sons v. State of Punjab AIR 1965 Punj. 441. With great respect I am unable to accept the ratio of the said decision. If the Act gives a right to recover certain amount as damages to an authority for breach of the provisions of the Act, by asking the party to comply with the provisions of the Act, there is no estoppel against the statute. The statute in my opinion Is clear on this point. It gives the discretion to the authority concerned and that discretion cannot in my opinion be cut down in any manner by any representation made by the Provident Fund Inspector. Furthermore In the facts and circumstances of the case I find that no such representation as such that damages under Section 14B would not be Imposed was ever given to the petitioners concerned. What was represented to the petitioners was as follows:
The management is requested to pay off the above P.P. dues Immediately so that it may not be necessary for this office to secure compliance through legal action under the provisions of the E.P.F. Act, 1952 and the scheme framed thereunder.
Recovery of damages for belated payment is not securing compliance through legal action. There is no limitation of period or time during which such recovery can be made and, therefore, in my opinion It cannot be said that in the facts and circumstances of the case the order was harsh and bad on the ground that the Provident Fund Inspector had represented to the petitioners that if dues were paid, no legal action would be taken. There is, however, another aspect of the order which requires closer examination. Section 14B deals with the power to recover damages. It is not the power to Impose penalties. Though the maximum amount of damages that can be recovered has been indicated in the section, damages must have some correlation with the loss suffered as a result of delayed payments. The authority imposing the penalty must apply its mind to this aspect o f the matter. The impugned order is not a speaking order in the sense that it does not indicate why the amount of penalty was imposed. It does not indicate that the amount imposed bad any correlation with the loss suffered. From this aspect of the matter, in my opinion, the order is unreasonble. In this connection, reliance may be placed on the observations of the Supreme Court In the case of Commissioner of Coal Mines Provident Fund v. J.P. Lala : (1976)IILLJ91SC , where it dealt with Section 10(f) of the Coal Mines Provident Fund & Bonus Schemes Act, 1948 which used the expression 'such damages not exceeding 25% of the amount of arrears as It may think fit to Impose.' The Supreme Court observed that two important features were first the damages not exceeding 25% ; these words showed that the determination of damages was not an inflexible application of rigid formula. Second, the words 'as it may think fit to impose' showed that the authorities were required to apply their mind to the facts and circumstances of the case. As the order does not indicate any reason in this respect, it is not manifest whether the authority had applied its mind to this aspect of the matter. Therefore, In my opinion, the order is liable to be quashed and I accordingly quash the order dated 30th September, 1975 and direct the Regional Provident Fund Commissioner to proceed afresh in accordance with law after giving the petitioners further opportunity and after recording his reasons and after bearing in mind that the purpose of Section 14B was to recover damages and not to Impose penalty and the maximum amount of penalty that could be imposed was as indicated in the section itself.
6. Before I conclude I must note that on behalf of the respondents reliance was placed on the decisions In the case of Lord Krishna Sugar Mills Ltd v. Income-tax Officer, Ambala 0043/1953 , In the case of Mayor & Co. of Westminster London & North Western Railway Company [1905] A.C. 426, in the case of City of Nagpur Corporation?, J.S, Philip : AIR1963SC897 . for the proposition that discretion exercised by an authority should not be interfered with by Court. There is no dispute with the proposition. The discretion If exercised properly in accordance with law cannot be interfered with In a writ application. But if an order has been passed which is not a speaking order and which has indicated non-application of mind It Is not a question of Interfering with the discretion exercised by the authority concerned.
7. For the reasons mentioned, the impugned order is set aside and I direct the Commissioner to proceed afresh In accordance with law and in the light of the observations made in this judgment. The rule is made absolute to the extent indicated above. The Commissioner must determine this matter within ten weeks from this date and until the Commissioner disposes of the matter the bank guarantee given by the petitioner will continue. The petitioners will be at liberty to apply for discharge of bank guarantee if the Commissioner does not dispose of the matter within ten weeks from this date.
8. There will be no order as to cost.