Coventary Metals Rajasthan (P.) Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

SooperKanoon Citationsooperkanoon.com/753748
SubjectLabour and Industrial
CourtRajasthan High Court
Decided OnJan-30-1991
Case NumberS.B.C.W.P. No. 1718 of 1984
Judge G.S. Singhvi, J.
Reported in(1993)IIILLJ494Raj
ActsEmployees' Provident Funds Miscellaneous Provisions Act, 1952 - Sections 14B
AppellantCoventary Metals Rajasthan (P.) Ltd.
RespondentUnion of India (Uoi) and ors.
Appellant Advocate Paras Kuhad, Adv.
Respondent Advocate Narendra Jain, Adv.
DispositionPetition dismissed
Cases ReferredIn Calicut Modern Spinning and Weaving Mills Ltd. v. R.P.F.C.
Excerpt:
- - 2) as well as the requisition dated 15.1 1.1984 issued by collector (pdr, jaipur) respondent no. the petitioner had failed to deposit the amount within a statutory period and, therefore, the respondent no. the conferral of power to award damages under section 14b is to ensure the success of the measure. -the traditional view of damages as meaning actual loss does not take into account the social content of a provision like section 14b contained in a socio-economic measure like the act in question. we are clearly of the opinion that the imposition of damages under section 14b serves both the purposes. the word 'damages' in section 14b is related to the word 'default' and, therefore, the word 'default'.the words used in section 14b are 'default in the payment of contribution' and, therefore, the word 'default' must be construed in the light of para 38 of the scheme which provides that the payment of contribution has got to be made by the 15th of the following month and, therefore, the word 'default' in section 14b must mean 'failure in performance' or 'failure to act'.at the same time, the imposition of damages under section 14b is to provide reparation for the amount of loss suffered by the employees. there may be cases where for good reasons, the authority may decide not to assess damage and once he decided to levy damage, it is in the discretion of the authority to quantify the damage within the upper limit depending upon the facts of the case. case law ref'.11. in shri rajendra mills case (supra) the learned single judge of madras high court held that factors which are not within the control of the industry like power cuts, flood, closure of factory during the public unrest, must be taken into consideration for sympathetically considering the schemes of such industries for non-payment of contribution and other remittances under the act. the act is a beneficial legislation enacted for the welfare of the poor employees of the establishment'.17. in krishna mills' case (supra) also the division bench negatived the plea of financial difficulty on account of the closure of establishment. failure to make the contribution resulting in default will have to be vested by damages under section 14b. 21. in my opinion the sweeping observations made by the single bench of the madras high court is not well founded and is against the object and spirit of the provisions of 1952 act and particularly section 14b.g. s. singhvi, j. 1. the petitioner has challenged the order dated 12.9.1984 passed by the regional provident fund commissioner (here in after referred to as the respondent no. 2) as well as the requisition dated 15.1 1.1984 issued by collector (pdr, jaipur) respondent no. 3.2. the petitioner is a private ltd. company and has its establishment in rajasthan which is covered by the provisions of employees, provident fund and miscellaneous provisions act, 1952 (hereinafter referred to as the '1952 act'). according to the petitioner due to various drastic power cuts, which were upto 100% at times, since december 19, 1979, the company's production was adversely affected. workmen of the petitioner-company started slow down in the factory from 13.3.1981 with a view to pressurise the management to concede to their demands. since the management refused to accept their demands, the workmen of the company struck work from 15.7.1981. due to power cut and strike, financial position of the company deteriorated and the customers of the company developed alternative source of supply. the overdrafts given to the company were also suspended by the financial institutions since closure w.e.f. 24.12.1981. the company informed to respondent no. 2 vide its letter dated 27.6.1983 about the closure on account of illegal strike of the workmen, the company requested cancellation of its registration under '1952 act'. the company had delayed making the payments of certain dues under the act of 1952 for the period of 1981-82. however, all the arrears were cleared in the year 1982. despite this respondent no. 2 initiated action against the petitioner-company under section 14b of 1952 act'. the petitioner was given hearing by respondent no. 2 on 19.6.1984. on that day a written representation was made by the petitioner company. thereafter on 12.9.1984 respondent no. 2 passed order under section 14b and ordered the recovery of damages at the rate of 100% of the amount on account of delay in making payments of dues under '1952 act'. thereafter respondent no. 2 sent a requisition dt. 15.11.1984 to the collector (pdr) for recovery of various sums from the petitioner-company.3. the petitioner has challenged the order dated 12.9.1984 and also the letter of recovery dated 15.11.1984, on the ground that the respondent no. 2 passed the order for payment of damages in arbitrary manner, without proper application of mind to the circumstances of the case. the petitioner had made prayer for imposing of minimum amount of damages permissaible under the act but the respondent no. 2 did not consider the representation of the petitioner in a proper perspective. power under section 14b cannot be exercised arbitrarily. the petitioner has also relied upon annexure-2 which contains a decision of the employees, provident fund review committee. this decision has been approved by the government of india. according to the petitioner in view of this decision the damages only upto extent of 25% per annum could have been levied against the petitioner.4. the respondents have filed a reply. it has been stated in the reply that establishment was regularly complying with the provisions of '1952 act' but the petitioner did not deposit the dues in time for the period from may, 1981 to june, 1982. notice dated 30th july, 1983 was issued under section 14b of 1952 act but same was returned with the remarks 'factory band ho gai hai atah wapas hai'notice was again sent on 24.10.1983. after a lot of efforts the notice could be served on the establishment. representation was filed on be half of the establishment and after considering the representation, order dated 12.10.1984was passed by the respondent no. 2. according to the respondent nos. 1 and 2, petitioner had disbursed the salary/wages to the employees in time i.e. in the first week of the next month and accordingly the petitioner was liable to deposit the amount of provident fund dues on or before the 15th of the following month as per the requirement of the law. it was the duty of the petitioner to pay the amount found due. according to the respondents the question of power cuts and strike by the employees of the concern of the establishment were not relevant for the purpose of determination of liability under section 14b of the act. the petitioner had failed to deposit the amount within a statutory period and, therefore, the respondent no. 2 was fully justified in giving notice to the petitioner. 100% damages have been levied only for the period beginning from may, 1981 onwards. but for the period prior to may, 1981 it has been levied at the rate of 35%. according to the respondents the percentage of damages differ from case to case. it is the discretion of the regional provident fund commissioner to impose damages after taking into consideration the facts and circumstances of the each case. according to the respondents in the present case the discretion which vests with the respondent no. 2 has not been exercised arbitrarily or capriciously. it cannot be said that there was no application of mind because in respect of delay of shorter period, damages at the rate of 35% only have been imposed. there had been full compliance of the principles of the natural justice. the respondents have also stated that the circular annexure 2 stands superseded by a subsequent circular dated 13.5.1983 and as provided in 1952 act, it is the discretion of the regional provident fund commissioner to impose the amount of damages.5. shri paras kuhad learned counsel for the petitioner has placed reliance on the decision of the supreme court in organo chemical industries v. union of india 1979(2) llj 416, in support of his submission that the power of the commissioner is quasi-judicial. the commissioner is bound to comply with the principles of natural justice and his order must be a speaking order. he also relied on the decision of a division bench of the orissa high court in prajatantra prachar samity v. r.p.f.c. 1919 lic 307 and shri rajendra mills v. r.p.f.c. tamil nadu 1982 illj 352, (a single bench of madras high court) in support of his submission that there must be an application of mind by the competent authority and the merits of each case must be examined. the power cut which immobilised the industry for a considerable period is relevant factor and the factors which are not within the control of the industry would also be relevant circumstances for sympathetical consideration of the claim of such industry.6. shri jain learned counsel for the respondent on the other hand referred to the division bench of gujarat high court in arvind mills ltd. v. r.m. gandhi 1982 lic 344, in support of his submission that financial position of the company is irrelevant for determination of its liability under section 14b of the act. he also placed reliance on the decision jyoti printing press rampura bazar, kola v. r.p.f.c. and ors. dated 12.1.1982 in s.b. civil writ petition no. 967/81. mayur travels pvt. ltd. v. union of india and ors. judgment dated 8.5.1987 in d.b. civil writ petition no. 250/1987, raj mineral & company v. r.p.f.c. and ors. judgment dated 7.4.1986 in s.b. civil writ petition no. 1399/85 mehboob ali v. r.p.f.c. and anr. judgment dated 10th november, 1987 in d.b. civil writ petition no. 2254/86 and krishna mills ltd. v. union of india and ors. judgment dated 28th august, 1987 in d.b. civil writ petition no. 368/85.7. section 14b of 1952 act, the interpretation of which is involved in the present case, reads as under: -'power to recover damages : where an employer makes defaults in the payment of any contribution to the fund (the family fund or the insurance fund) or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 [for sub-section (5) of section 17 ] or in the payment of any charges payable under any other provisions 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 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.''8. in organo chemical industries v. union of india and ors. (supra) the supreme court rejected the challenge made to the constitutionality of section 14b of '1952 act'. a.p. sen, j., observed as under:'the contention that section 14b confers unguided and uncontrolled discretion upon the regional provident fund commissioner to impose such damages 'as he may think fit' is, therefore, violative of article 14 of the constitution, cannot be accepted. nor can it be accepted that there are no guidelines provided for fixing the quantum of damages. the power of the regional provident fund commissioner to impose damages under section 14b is a quasi-judicial function. it must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard. the discretion to award damages could be exercised within the limits fixed by the statute. having regard to the punitive nature of the power exercisable under section 14b and the consequences that ensue therefrom, an order under section 14b must be a 'speaking order' containing the reasons in support of it. the guidelines are provided in the act and its various provisions, particularly in the word 'damages' the liability for which in section 14b arises on the 'making of default'. while fixing the amount of damages, the regional provident fund commissioner usually takes into consideration, as he has done here, various factors viz. the number of defaults, the period of delay, the frequency of defaults and the amounts involved. the word 'damages' in section 14b lays down sufficient guidelines for him to levy damages.'9. rejecting the plea that section 14b was arbitrary because no remedy was provided under the act to the employer, the court further observed as under :-'mere absence of provision for an appeal does not imply that the regional provident fund commissioner is invested with arbitrary or uncontrolled power, without any guidelines. the conferral of power to award damages under section 14b is to ensure the success of the measure. it is dependent on existence of certain facts; there has to be an objective determination, not subjective. the regional provident fund commissioner has not only to apply his mind to the requirements of section 14b but is cast with duty of making a 'speaking order', after conforming to the rules of natural justice.'the court then considered the argument that section 14b does not authorise levy of penal damages that is as a penalty or fine but deals with power to recover damages. after noticing the conflict of opinion between different high courts, the supreme court gave following meaning to the word damages: - 'the traditional view of damages as meaning actual loss does not take into account the social content of a provision like section 14b contained in a socio-economic measure like the act in question. the word 'damages' has different shades of meaning. it must take its colour and contents from its context, and it cannot be read in isolation, nor can section 14b be read out of context. the very object of the legislation would be frustrated if the word 'damages' appearing in section 14b of the act was not construed to mean penal damages. the imposition of damages under section 14b serves a two-fold purpose. it results in damnification and also serves as a deterrent. the predominant object is to penalise, so that an employer may be thwarted or deterred from making any further defaults.the expression 'damages' occurring in section 14b is, in substance, a penalty imposed on the employer for the breach of the statutory obligation. the object of imposition of penalty under section 14b is not merely to provide compensation for the employees. we are clearly of the opinion that the imposition of damages under section 14b serves both the purposes. it is meant to penalise defaulting employer as also to provide reparation for the amount of loss suffered by the employees. it is not only a warning to employer in general not to commit a breach of the statutory requirements of section 6, 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. there is nothing to show that the damages must bear relationship to the loss which is caused to the beneficiaries under the scheme. the word 'damages' in section 14b is related to the word 'default' and, therefore, the word 'default'. the words used in section 14b are 'default in the payment of contribution' and, therefore, the word 'default' must be construed in the light of para 38 of the scheme which provides that the payment of contribution has got to be made by the 15th of the following month and, therefore, the word 'default' in section 14b must mean 'failure in performance' or 'failure to act'. at the same time, the imposition of damages under section 14b is to provide reparation for the amount of loss suffered by the employees. 10. in prajatantra prachar samity's case (supra) a division bench of the orissa high court agreed with the views expressed by calcutta and kerala high courts that the act, 1952 does not authorise levy of any penal damage and section 14b refers to damages only. the division bench proceeded to make the following observations :-'the damage referred to in section 14b is different from fine and penalty and is intended to compensate the loss to the beneficiaries of the scheme. levy of damage, is not a must in every case. discretion seems to have been vested in the appropriate authority to recover damage along with with the contribution. there may be cases where for good reasons, the authority may decide not to assess damage and once he decided to levy damage, it is in the discretion of the authority to quantify the damage within the upper limit depending upon the facts of the case. in the absence of definition of the term 'damage' it means: 'the pecuniary reparation due for loss or injury sustained by one person through the fault or negligence of another'', and it is for the authority under the act to quantify the same. case law ref'.11. in shri rajendra mills case (supra) the learned single judge of madras high court held that factors which are not within the control of the industry like power cuts, flood, closure of factory during the public unrest, must be taken into consideration for sympathetically considering the schemes of such industries for non-payment of contribution and other remittances under the act.12. in shri arvind mills case (supra) a division bench of gujarat high court took notice of the observations of the supreme court in the organo chemical industries case and held that even if it was established that the financial position of the company was embarrassing it would not justify the plea that no damages should be levied. the court further observed that even the fact that the company is running at a loss for some years it would not justify committing defaults in respect of the payments due under the act and the scheme. the court took notice of the fact before the competent authority no material was placed to show that at the time when the payments become due to financial position of the company was such that these payments could not have been made from its resources then.13. in jyoti printing press case (supra) (hon'ble s.c. agarwal, j. as he then was) considered the question of damages and observed as under :-the question as to what should be the amount of damages which should be imposed under section 14b of the act is a matter which lies in the discretion of the commissioner. this court, in exercise of its jurisdiction under article 226 of the constitution, normally does not interfere with the exercise of a discretionary power except in cases where the said discretion has been exercised in an arbitrary or perverse manner. in his order dated september 15, 1979, the commissioner has taken into account the past conduct of the petitioner and has observed that the petitioner had been wilfully defaulting in the matter of depositing the provident fund contributions. taking into account the said past conduct of the petitioner the commissioner has taken the view that damages should be levied on the petitioner's establishment to the maximum extent admissible under the act. in the facts and circumstances of the case it is not possible to hold that in taking the aforesaid view and in imposing the damages to the maximum extent admissible under the act, the commissioner had exercised its discretion arbitrarily or in a perverse manner'.14. in mayur travels case (supra) a division bench of this court held that it was within the jurisdiction of the regional provident fund commissioner to levy damages upto 100% of the arrears of the funds.15. in m/s. raj mineral & company case (supra) a learned single judge (m.b. sharma, j.) followed the observations of justice agarwal in jyoti printing press case.16. in mehboob ali's case the division bench (s.n. bhargava, j & g.k. sharma, j.) negatived the argument of financial difficulty in the following words :-'financial difficulty is no ground to interfere in the writ jurisdiction. the act is a beneficial legislation enacted for the welfare of the poor employees of the establishment'.17. in krishna mills' case (supra) also the division bench negatived the plea of financial difficulty on account of the closure of establishment. reliance has been placed by the division bench on the observations of the gujarat high court and in arvind mills, case and kerala high court in calicut modern spinning and weaving mills ltd. v. r.p.f.c. 1982 lic 1422.18. in calicut modern spinning and weaving mills ltd. v. r.p.f.c. a division bench of kerala high court considered the matter at length and held that the provisions of the act, 1952 and scheme cast an obligation on the part of the employer to make the contributions payable by him and on behalf of the member to the fund in the first instance of every due date. the court further held that phrase 'in the first instance' means payment by the employer for every month irrespective of the fact whether wages have been paid or not.the court further observed as under : -'to accept the petitioner's contentions in this case would enable the employer to direct remittances to the funds to suit his convenience putting forward sometimes reasonable grounds, sometimes justifiable ground and most often unjustifiable grounds. the authority under the act has discretion to mitigate damages depending upon the circumstances of the case but never a discretion to condone the delay''.a division bench further observed as under :-'as a result of this discussion we hold disagreeing with the petitioner's contentions that even in case of lock-out, strike, etc. failure to make the contribution resulting in default will have to be vested by damages under section 14b. the only question that can be considered by the authority the mitigation of damages having regard to the attendant circumstances of that had resulted in the delay'.19. in the light of the various decisions referred to hereinabove it must be observed that the division bench of orissa high court had decided the case on the premise that section 14b does not contemplate penal damage. this view of the orissa high court is in direct conflict with the decision of the supreme court in organo chemical industries' case because according to their lordships of the supreme court, the expression 'damages' occurring in section 14b is in substance a penalty imposed on the employer for the breach of the statutory obligation and the object of section 14b is not merely to provide compensation to the employees. in view of these observations of the supreme court it must be held that the decision of the orissa high court docs not lay down correct proposition of law.20. the object and purpose of section 14b is to authorise the regional provident fund commissioner to impose punitive damage and thereby prevent an employer from making defaults. therefore mere financial difficulty of the employer on account of strike, closure, lock-out, flood or power cuts, etc. cannot afford justifiable grounds for pleadings that no damages can be levied for non-compliance of the statutory duty imposed on the employer by the provisions of 1952 act and the scheme framed thereunder. the two division benches of this court in mehboob alis's case, and krishna mills, case have unequivocally rejected the plea of financial difficulty as grounds for non-payment of dues.21. in my opinion the sweeping observations made by the single bench of the madras high court is not well founded and is against the object and spirit of the provisions of 1952 act and particularly section 14b. the same are also contrary to the views expressed by the division bench of gujarat high court which have been followed by this court in various cases referred to hereinabove.22. in the light of the principles laid down in the various decisions, if the facts of the present case are examined it becomes clear that the respondent no. 2 had considered the representation submitted by the petitioner. the respondent no. 2 recorded a finding that the power cut which is said to have been imposed from december 1979 and during the year 1980 are not relevant because the failures of the establishment to pay the dues relate to the period of may, 1981 and onwards. the respondent no. 2 took notice of the fact that no evidence had been placed before him in respect of such power cut. the respondent no. 2 took cognizance of the fact that there was suspension of the facility of the overdraft but found that no evidence had been placed in respect of that statement about closure of the said facility. respondent no. 2 also held that the closure which took place on 24.12.1981 did not afford justification for long delay in making payment of dues. the respondent no. 2 did not impose 100% penalty for the entire period. this also goes to show that there has been an application of mind by the respondent no. 2. the petitioner was given full opportunity to make its submission before respondent no. 2. the order passed by the respondent no. 2 contains detailed reasons for imposition of damages for the delayed payment. thus it is a speaking order. the reasons given by the respondent no. 2 cannot be termed as perverse or arbitrary.23. as far as the application of circular is concerned, in my opinion the petitioner is not entitled to any benefit of annexure-2. firstly annexure-2 has been superseded by subsequent circular dated 13.5.1983. secondly an administrative decision of this nature could hardly have restricted the discretion which vests in the respondent no. 2 by section 14b.24. in my opinion the order passed by respondent no. 2 does not suffer from any error of law so as to warrant interference by this court under article 226 of the constitution of india.25. consequently the writ petition is dismissed. the parties are left to bear their own costs.
Judgment:

G. S. Singhvi, J.

1. The petitioner has challenged the order dated 12.9.1984 passed by the Regional Provident Fund Commissioner (here in after referred to as the Respondent No. 2) as well as the requisition dated 15.1 1.1984 issued by Collector (PDR, Jaipur) Respondent No. 3.

2. The petitioner is a Private Ltd. Company and has its establishment in Rajasthan which is covered by the provisions of Employees, Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the '1952 Act'). According to the petitioner due to various drastic power cuts, which were upto 100% at times, since December 19, 1979, the Company's production was adversely affected. Workmen of the petitioner-company started slow down in the factory from 13.3.1981 with a view to pressurise the management to concede to their demands. Since the management refused to accept their demands, the workmen of the company struck work from 15.7.1981. Due to power cut and strike, financial position of the company deteriorated and the customers of the company developed alternative source of supply. The overdrafts given to the company were also suspended by the financial institutions since closure w.e.f. 24.12.1981. The company informed to Respondent No. 2 vide its letter dated 27.6.1983 about the closure on account of illegal strike of the workmen, the company requested cancellation of its registration under '1952 Act'. The company had delayed making the payments of certain dues under the Act of 1952 for the period of 1981-82. However, all the arrears were cleared in the year 1982. Despite this Respondent No. 2 initiated action against the petitioner-company under Section 14B of 1952 Act'. The petitioner was given hearing by Respondent No. 2 on 19.6.1984. On that day a written representation was made by the petitioner company. Thereafter on 12.9.1984 Respondent No. 2 passed order under Section 14B and ordered the recovery of damages at the rate of 100% of the amount on account of delay in making payments of dues under '1952 Act'. Thereafter Respondent No. 2 sent a requisition dt. 15.11.1984 to the Collector (PDR) for recovery of various sums from the petitioner-company.

3. The petitioner has challenged the order dated 12.9.1984 and also the letter of recovery dated 15.11.1984, on the ground that the Respondent No. 2 passed the order for payment of damages in arbitrary manner, without proper application of mind to the circumstances of the case. The petitioner had made prayer for imposing of minimum amount of damages permissaible under the Act but the Respondent No. 2 did not consider the representation of the petitioner in a proper perspective. Power under Section 14B cannot be exercised arbitrarily. The petitioner has also relied upon Annexure-2 which contains a decision of the Employees, Provident Fund Review Committee. This decision has been approved by the Government of India. According to the petitioner in view of this decision the damages only upto extent of 25% per annum could have been levied against the petitioner.

4. The respondents have filed a reply. It has been stated in the reply that establishment was regularly complying with the provisions of '1952 Act' but the petitioner did not deposit the dues in time for the period from May, 1981 to June, 1982. Notice dated 30th July, 1983 was issued under Section 14B of 1952 Act but same was returned with the remarks 'FACTORY BAND HO GAI HAI ATAH WAPAS HAI'

Notice was again sent on 24.10.1983. After a lot of efforts the notice could be served on the establishment. Representation was filed on be half of the establishment and after considering the representation, order dated 12.10.1984was passed by the Respondent No. 2. According to the Respondent Nos. 1 and 2, petitioner had disbursed the salary/wages to the employees in time i.e. in the first week of the next month and accordingly the petitioner was liable to deposit the amount of Provident Fund dues on or before the 15th of the following month as per the requirement of the law. It was the duty of the petitioner to pay the amount found due. According to the respondents the question of power cuts and strike by the employees of the concern of the establishment were not relevant for the purpose of determination of liability under Section 14B of the Act. The petitioner had failed to deposit the amount within a statutory period and, therefore, the Respondent No. 2 was fully justified in giving notice to the petitioner. 100% damages have been levied only for the period beginning from May, 1981 onwards. But for the period prior to May, 1981 it has been levied at the rate of 35%. According to the respondents the percentage of damages differ from case to case. It is the discretion of the Regional Provident Fund Commissioner to impose damages after taking into consideration the facts and circumstances of the each case. According to the respondents in the present case the discretion which vests with the Respondent No. 2 has not been exercised arbitrarily or capriciously. It cannot be said that there was no application of mind because in respect of delay of shorter period, damages at the rate of 35% only have been imposed. There had been full compliance of the principles of the natural justice. The respondents have also stated that the circular Annexure 2 stands superseded by a subsequent circular dated 13.5.1983 and as provided in 1952 Act, it is the discretion of the Regional Provident Fund Commissioner to impose the amount of damages.

5. Shri Paras Kuhad learned counsel for the petitioner has placed reliance on the decision of the Supreme Court in Organo Chemical Industries v. Union of India 1979(2) LLJ 416, in support of his submission that the power of the Commissioner is quasi-judicial. The Commissioner is bound to comply with the principles of natural justice and his order must be a speaking order. He also relied on the decision of a Division Bench of the Orissa High Court in Prajatantra Prachar Samity v. R.P.F.C. 1919 LIC 307 and Shri Rajendra Mills v. R.P.F.C. Tamil Nadu 1982 ILLJ 352, (a Single Bench of Madras High Court) in support of his submission that there must be an application of mind by the competent authority and the merits of each case must be examined. The power cut which immobilised the industry for a considerable period is relevant factor and the factors which are not within the control of the industry would also be relevant circumstances for sympathetical consideration of the claim of such industry.

6. Shri Jain learned Counsel for the respondent on the other hand referred to the Division Bench of Gujarat High Court in Arvind Mills Ltd. v. R.M. Gandhi 1982 LIC 344, in support of his submission that financial position of the company is irrelevant for determination of its liability under Section 14B of the Act. He also placed reliance on the decision Jyoti Printing Press Rampura Bazar, Kola v. R.P.F.C. and Ors. dated 12.1.1982 in S.B. Civil Writ Petition No. 967/81. Mayur Travels Pvt. Ltd. v. Union of India and Ors. Judgment dated 8.5.1987 in D.B. Civil Writ petition No. 250/1987, Raj Mineral & Company v. R.P.F.C. and Ors. Judgment dated 7.4.1986 in S.B. Civil Writ Petition No. 1399/85 Mehboob Ali v. R.P.F.C. and Anr. Judgment dated 10th November, 1987 in D.B. Civil Writ Petition No. 2254/86 and Krishna Mills Ltd. v. Union of India and Ors. Judgment dated 28th August, 1987 in D.B. Civil Writ Petition No. 368/85.

7. Section 14B of 1952 Act, the interpretation of which is involved in the present case, reads as under: -

'Power to recover damages : Where an employer makes defaults in the payment of any contribution to the Fund (the Family Fund or the Insurance Fund) or in the transfer of accumulations required to be transferred by him under Sub-section (2) of Section 15 [for Sub-section (5) of Section 17 ] or in the payment of any charges payable under any other provisions 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 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.''

8. In Organo Chemical Industries v. Union of India and Ors. (supra) the Supreme Court rejected the challenge made to the constitutionality of Section 14B of '1952 Act'. A.P. Sen, J., observed as under:

'The contention that Section 14B confers unguided and uncontrolled discretion upon the Regional Provident Fund Commissioner to impose such damages 'as he may think fit' is, therefore, violative of Article 14 of the Constitution, cannot be accepted. Nor can it be accepted that there are no guidelines provided for fixing the quantum of damages. The power of the Regional Provident Fund Commissioner to impose damages under Section 14B is a quasi-judicial function. It must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard. The discretion to award damages could be exercised within the limits fixed by the statute. Having regard to the punitive nature of the power exercisable under Section 14B and the consequences that ensue therefrom, an order under Section 14B must be a 'speaking order' containing the reasons in support of it. The guidelines are provided in the Act and its various provisions, particularly in the word 'damages' the liability for which in Section 14B arises on the 'making of default'. While fixing the amount of damages, the Regional Provident Fund Commissioner usually takes into consideration, as he has done here, various factors viz. the number of defaults, the period of delay, the frequency of defaults and the amounts involved. The word 'damages' in Section 14B lays down sufficient guidelines for him to levy damages.'

9. Rejecting the plea that Section 14B was arbitrary because no remedy was provided under the Act to the employer, the Court further observed as under :-

'Mere absence of provision for an appeal does not imply that the Regional Provident Fund Commissioner is invested with arbitrary or uncontrolled power, without any guidelines. The conferral of power to award damages under Section 14B is to ensure the success of the measure. It is dependent on existence of certain facts; there has to be an objective determination, not subjective. The Regional Provident Fund Commissioner has not only to apply his mind to the requirements of Section 14B but is cast with duty of making a 'speaking order', after conforming to the rules of natural justice.

'The Court then considered the argument that Section 14B does not authorise levy of penal damages that is as a penalty or fine but deals with power to recover damages. After noticing the conflict of opinion between different High Courts, the Supreme Court gave following meaning to the word damages: -

'The traditional view of damages as meaning actual loss does not take into account the social content of a provision like Section 14B contained in a socio-economic measure like the Act in question. The word 'damages' has different shades of meaning. It must take its colour and contents from its context, and it cannot be read in isolation, nor can Section 14B be read out of context. The very object of the legislation would be frustrated if the word 'damages' appearing in Section 14B of the Act was not construed to mean penal damages. The imposition of damages under Section 14B serves a two-fold purpose. It results in damnification and also serves as a deterrent. The predominant object is to penalise, so that an employer may be thwarted or deterred from making any further defaults.

The expression 'damages' occurring in Section 14B is, in substance, a penalty imposed on the employer for the breach of the statutory obligation. The object of imposition of penalty under Section 14B is not merely to provide compensation for the employees. We are clearly of the opinion that the imposition of damages under Section 14B serves both the purposes. It is meant to penalise defaulting employer as also to provide reparation for the amount of loss suffered by the employees. It is not only a warning to employer in general not to commit a breach of the statutory requirements of Section 6, 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. There is nothing to show that the damages must bear relationship to the loss which is caused to the beneficiaries under the Scheme. The word 'damages' in Section 14B is related to the word 'default' and, therefore, the word 'default'. The words used in Section 14B are 'default in the payment of contribution' and, therefore, the word 'default' must be construed in the light of para 38 of the Scheme which provides that the payment of contribution has got to be made by the 15th of the following month and, therefore, the word 'default' in Section 14B must mean 'failure in performance' or 'failure to act'. At the same time, the imposition of damages under Section 14B is to provide reparation for the amount of loss suffered by the employees.

10. In Prajatantra Prachar Samity's case (supra) a Division Bench of the Orissa High Court agreed with the views expressed by Calcutta and Kerala High Courts that the Act, 1952 does not authorise levy of any penal damage and Section 14B refers to damages only. The Division Bench proceeded to make the following observations :-

'The damage referred to in Section 14B is different from fine and penalty and is intended to compensate the loss to the beneficiaries of the scheme. Levy of damage, is not a must in every case. Discretion seems to have been vested in the appropriate authority to recover damage along with with the contribution. There may be cases where for good reasons, the authority may decide not to assess damage and once he decided to levy damage, it is in the discretion of the authority to quantify the damage within the upper limit depending upon the facts of the case. In the absence of definition of the term 'damage' it means: 'the pecuniary reparation due for loss or injury sustained by one person through the fault or negligence of another'', and it is for the authority under the Act to quantify the same. Case law ref'.

11. In Shri Rajendra Mills case (supra) the learned Single Judge of Madras High Court held that factors which are not within the control of the industry like power cuts, flood, closure of factory during the public unrest, must be taken into consideration for sympathetically considering the schemes of such industries for non-payment of contribution and other remittances under the Act.

12. In Shri Arvind Mills case (supra) a Division Bench of Gujarat High Court took notice of the observations of the Supreme Court in the Organo Chemical Industries case and held that even if it was established that the financial position of the Company was embarrassing it would not justify the plea that no damages should be levied. The Court further observed that even the fact that the company is running at a loss for some years it would not justify committing defaults in respect of the payments due under the Act and the scheme. The Court took notice of the fact before the competent authority no material was placed to show that at the time when the payments become due to financial position of the company was such that these payments could not have been made from its resources then.

13. In Jyoti Printing Press case (supra) (Hon'ble S.C. Agarwal, J. as he then was) considered the question of damages and observed as under :-

The question as to what should be the amount of damages which should be imposed under Section 14B of the Act is a matter which lies in the discretion of the Commissioner. This Court, in exercise of its jurisdiction under Article 226 of the Constitution, normally does not interfere with the exercise of a discretionary power except in cases where the said discretion has been exercised in an arbitrary or perverse manner. In his order dated September 15, 1979, the Commissioner has taken into account the past conduct of the petitioner and has observed that the petitioner had been wilfully defaulting in the matter of depositing the provident fund contributions. Taking into account the said past conduct of the petitioner the Commissioner has taken the view that damages should be levied on the petitioner's establishment to the maximum extent admissible under the Act. In the facts and circumstances of the case it is not possible to hold that in taking the aforesaid view and in imposing the damages to the maximum extent admissible under the Act, the Commissioner had exercised its discretion arbitrarily or in a perverse manner'.

14. In Mayur Travels case (supra) a Division Bench of this Court held that it was within the jurisdiction of the Regional Provident Fund Commissioner to levy damages upto 100% of the arrears of the funds.

15. In M/s. Raj Mineral & Company case (supra) a learned Single Judge (M.B. Sharma, J.) followed the observations of Justice Agarwal in Jyoti Printing Press case.

16. In Mehboob Ali's case the Division Bench (S.N. Bhargava, J & G.K. Sharma, J.) negatived the argument of financial difficulty in the following words :-

'Financial difficulty is no ground to interfere in the writ jurisdiction. The Act is a beneficial legislation enacted for the welfare of the poor employees of the establishment'.

17. In Krishna Mills' case (supra) also the Division Bench negatived the plea of financial difficulty on account of the closure of establishment. Reliance has been placed by the Division Bench on the observations of the Gujarat High Court and in Arvind Mills, case and Kerala High Court in Calicut Modern Spinning and Weaving Mills Ltd. v. R.P.F.C. 1982 LIC 1422.

18. In Calicut Modern Spinning and Weaving Mills Ltd. v. R.P.F.C. a Division Bench of Kerala High Court considered the matter at length and held that the provisions of the Act, 1952 and scheme cast an obligation on the part of the employer to make the contributions payable by him and on behalf of the member to the Fund in the first instance of every due date. The Court further held that phrase 'in the first instance' means payment by the employer for every month irrespective of the fact whether wages have been paid or not.

The Court further observed as under : -

'to accept the petitioner's contentions in this case would enable the employer to direct remittances to the Funds to suit his convenience putting forward sometimes reasonable grounds, sometimes justifiable ground and most often unjustifiable grounds. The authority under the Act has discretion to mitigate damages depending upon the circumstances of the case but never a discretion to condone the delay''.

A Division Bench further observed as under :-

'As a result of this discussion we hold disagreeing with the petitioner's contentions that even in case of lock-out, strike, etc. failure to make the contribution resulting in default will have to be vested by damages under Section 14B. The only question that can be considered by the authority the mitigation of damages having regard to the attendant circumstances of that had resulted in the delay'.

19. In the light of the various decisions referred to hereinabove it must be observed that the Division Bench of Orissa High Court had decided the case on the premise that Section 14B does not contemplate penal damage. This view of the Orissa High Court is in direct conflict with the decision of the Supreme Court in Organo Chemical Industries' case because according to their Lordships of the Supreme Court, the expression 'damages' occurring in Section 14B is in substance a penalty imposed on the employer for the breach of the statutory obligation and the object of Section 14B is not merely to provide compensation to the employees. In view of these observations of the Supreme Court it must be held that the decision of the Orissa High Court docs not lay down correct proposition of law.

20. The object and purpose of Section 14B is to authorise the Regional Provident Fund Commissioner to impose punitive damage and thereby prevent an employer from making defaults. Therefore mere financial difficulty of the employer on account of strike, closure, lock-out, flood or power cuts, etc. cannot afford justifiable grounds for pleadings that no damages can be levied for non-compliance of the statutory duty imposed on the employer by the provisions of 1952 Act and the scheme framed thereunder. The two Division Benches of this Court in Mehboob Alis's case, and Krishna Mills, case have unequivocally rejected the plea of financial difficulty as grounds for non-payment of dues.

21. In my opinion the sweeping observations made by the Single Bench of the Madras High Court is not well founded and is against the object and spirit of the provisions of 1952 Act and particularly Section 14B. The same are also contrary to the views expressed by the Division Bench of Gujarat High Court which have been followed by this Court in various cases referred to hereinabove.

22. In the light of the principles laid down in the various decisions, if the facts of the present case are examined it becomes clear that the Respondent No. 2 had considered the representation submitted by the petitioner. The Respondent No. 2 recorded a finding that the power cut which is said to have been imposed from December 1979 and during the year 1980 are not relevant because the failures of the establishment to pay the dues relate to the period of May, 1981 and onwards. The Respondent No. 2 took notice of the fact that no evidence had been placed before him in respect of such power cut. The Respondent No. 2 took cognizance of the fact that there was suspension of the facility of the overdraft but found that no evidence had been placed in respect of that statement about closure of the said facility. Respondent No. 2 also held that the closure which took place on 24.12.1981 did not afford justification for long delay in making payment of dues. The Respondent No. 2 did not impose 100% penalty for the entire period. This also goes to show that there has been an application of mind by the Respondent No. 2. The petitioner was given full opportunity to make its submission before Respondent No. 2. The order passed by the Respondent No. 2 contains detailed reasons for imposition of damages for the delayed payment. Thus it is a speaking order. The reasons given by the Respondent No. 2 cannot be termed as perverse or arbitrary.

23. As far as the application of circular is concerned, in my opinion the petitioner is not entitled to any benefit of Annexure-2. Firstly Annexure-2 has been superseded by subsequent circular dated 13.5.1983. Secondly an administrative decision of this nature could hardly have restricted the discretion which vests in the Respondent No. 2 by Section 14B.

24. In my opinion the order passed by Respondent No. 2 does not suffer from any error of law so as to warrant interference by this Court under Article 226 of the Constitution of India.

25. Consequently the writ petition is dismissed. The parties are left to bear their own costs.