Emloyees' Provident Fund Organization and Ors. Vs. Birlapur Vidyalaya and Ors. (26.09.2005 - CALHC) - Court Judgment

SooperKanoon Citationsooperkanoon.com/887430
SubjectLabour and Industrial
CourtKolkata High Court
Decided OnSep-26-2005
Case NumberT. Nos. 155 and 156 of 2005 and APOT No. 490 of 2005
JudgeD.K. Seth and ;Maharaj Sinha, JJ.
Reported in2007(1)CHN173
ActsEmployees' Provident Fund and Miscellaneous Provisions Act, 1952 - Sections 2, 6, 7A, 14B and 36
AppellantEmloyees' Provident Fund Organization and Ors.
RespondentBirlapur Vidyalaya and Ors.
Appellant AdvocateA.K. Dasadhikary and ;Anil Kumar Gupta, Advs.
Respondent AdvocateArunava Ghosh and ;Soumya Majumder, Advs.
Cases ReferredCalicut Modern Spinning & Weaving Mills Ltd. v. Regional Provident Fund Commissioner
Excerpt:
- 1. two points were urged by mr. ghosh in support of the cross-appeal preferred on behalf of the employer that the authority under section 7a and the recovery officer are two different entities and the one person cannot discharge the dual-function, as sought to be done in the present case. however, ultimately mr. ghosh, in his usual fairness, has submitted that he would not press that point. having regard to the scheme, we are of the view that the same officer can discharge dual function and if he does so, the same would not contravene the provisions of the employees' provident fund and miscellaneous provisions act, 1952.2. the second point that he had urged was that the provisions of section 2(c) and 6, read with paragraphs 29, 30, 32, 36, 36(b), 38, 40, 41 and 59 of the employees' provident fund scheme, 1952 indicates that the employee's contribution and the employer's contribution are payable only when the salary or wages are actually paid. unless there is actual payment, there is no question of deduction or recovery of any amount from the salary/wages payable to an employee. he pointed out that section 2(c) has not used the expression 'paid', on the other hand, it has used the expression 'payable' while defining contribution. similarly, section 6 also uses the expression 'being payable'. thus, according to mr. ghosh, the expression 'payable' has a nexus with the actual payment. he also drew our attention to paragraph 29 whrein the word 'payable' has been used. similarly, he points out that the expression 'payable' is used in paragraphs 30 and 38. on the other hand section 36 in paragraphs 1 and 5 provides for the duties of the employer to submit return in the form specified by the commissioner showing the basic wages, retaining allowance etc. paid to each of the employees and that the employer has a duty to maintain an account in relation to the amounts contributed to the fund by him by the employees, whereas paragraph 38 requires making of deduction of the employee's contribution from the wages paid. paragraph 30 requires the employer to enter the contribution made by the employee and the employer in the contribution card, the currency whereof is for one year. relying on these provisions, he submitted that unless the amounts are paid, no amounts can be deducted and nothing can be recovered. but the proposition seems to be falacious inasmuch as section 2(c) defining contribution provides that the contribution means contribution payable in respect of the employee by the principal under the scheme or the contribution payable by an employee to whom the insurance scheme applies. the definition does not use the expression 'paid', neither section 6 says so. on the contrary, it says that the percentage of the contribution, as stipulated therein, calculated on the basis of the basic wages etc. for the time being is payable to each of the employees. these two provisions clearly indicate that the contribution is calculable on the basic charges etc. payable. these provisions do not use the expression 'paid'. when the legislature chooses a particular expression, the same follows the intention of the legislature. the word 'payable' indicates the amount which becomes payable on the basis of which the employer's liability accrues. nowhere from the scheme of the act or from the arrangement of the scheme, it is possible to hold that such contribution are to be recovered or deducted only when the amount is paid. if such a proposition is accepted, in that event the entire scheme would toe stultified. the paragraph 29 also uses the word 'payable' as is used in paragraph 30. an amount becomes payable as soon the amount accrues and becomes due to be paid. if it is not paid on the due date but paid at a later date, the payability starts from the due date and remains payable until paid. therefore, the crucial point would be the date when the wages become payable. paragraph 32 prescribes that the employer's contribution paid shall be recoverable by means of deduction from the wages. but this payment is to be deducted as soon as the wages are paid, but that does not mean that the liability will accrue only when the wages could be paid. if the employer makes the payment according to its convenience, the same would not enable the employer to pay at his whims or at his will for the reasons which may be justifiable or may not be justifiable. the sending of the return is not dependent on the payment but it is to be sent on the date it is supposed to be sent. the delay in payment of wages does not absolve the employer from submitting the return in terms of the scheme or the act itself. a reading of sub-paragraphs 1 and 4 of paragraph 36 does not imply that the contribution is to be deducted only when the wages are paid. the liabilities that have been mentioned in paragraphs 40 and 41 are to be entered into the card. to take a different view would not be in commensurate with the scheme or the act and the scheme so framed was simply because that certain liabilities have been imposed on the employer to maintain certain accounts. this maintenance of accounts is not dependent on the whims and caprice of the employer for choosing the time for payment or making payment at a later date. this question arose in organo chemical industries v. union of india 1979 (2) lab ic 1261 : 1979 (2) lab lj 416. in the said decision it was held-the whole project gets stultified if employers thwart contributory responsibility and this wider fall-out must colour the concept of damages when the court seeks to define its content in the special setting of the act.3. to allow the employer to make the contribution only when he pays the wages would be to stultify the project. to accept the petitioner's contention in this case would be to enable the employer to divert remittances to the fund to suit his convenience putting forward sometimes reasonable grounds, sometimes justifiable grounds 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; damages in rare cases can be nil percentage but failure to pay will always attract section 14b. in reinforcement of the view that we take we think it necessary to refer to para 32 also, which reads:32. recovery of a member's share or contribution. - (1) the amount of a member's contribution paid by the employer or a contractor shall, notwithstanding the provisions in this scheme or any law for the time being in force or any contract to the contrary, be recoverable by means of deduction from the wages of the member and otherwise:xx xx xxthe caption of this para is recovery of a member's share or contribution. a close reading of this para makes it abundantly clear that it relates to the recovery by the employers of the member's contribution paid by him. this contemplates the earlier payment by the employer of the employee's contribution before deduction is made from the wages to be paid. a combined reading of paras 30 and 32 shows that in cases where due payment of wages is made impracticable for certain reasons, the obligation of the employer to pay both the contributions payable by himself and on behalf of the member continues. if the two paras are so understood it is not difficult to reject the submission made by the petitioner, that his obligation arises only when wages are paid. paras 30 and 32 occur in chapter v of the scheme under the heading 'contributions' and para 38 occurs in chapter vi under the headings 'declaration, contribution cards and returns'. though the sub-heading of para 38 is 'mode of payment of contributions', it is to be understood as the mode in the normal circumstances where wages are paid by the employer in due time. in unusual circumstances, para 30 comes into operation and para 32 enable the employer to recover the contribution paid by him in the first instance.as a result of this discussion we hold disagreeing with the petitioner's contention that even in cases of a lockout, strike etc. failure to make the contribution resulting in default will have to be visited by damages under section 14b. the only when that can be considered by the authority is mitigation of damages having regard to the attendant circumstances that had resulted in the delay.7. in the organo chemical industries v. union of india 1979 (2) lab lj 416 : 1979 (2) lab ic 1261 (sc), sen j. delivering the main judgment observed thus in paras 30 and 38 of the scheme:33. the initial responsibility for making payment of the contribution of the employer as well as of the employee lies on the employer. para 30 of the scheme makes it incumbent on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. under para 38, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. it further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month, i.e. a contribution for a particular month has got to be deposited by the 15th day of the month following. a breach of any of these requirements is made a penal offence.the position has thus been made clear that the initial responsibility for making payment of the contribution lies on the employer. in para 35 the learned judge has outlined the reason that motivated enactment of section 14b of the act in these words:the reason for enacting section 14b is that employers may be deterred and thwarted from making defaults in carrying out statutory obligations to make payments to the provident fund. the object and purpose of the section is to authorise the regional provident fund commissioner to impose exemplary or punitive damages and thereby to prevent employers from making defaults.4. this decision was considered by the kerala high court in calicut modern spinning & weaving mills ltd. v. regional provident fund commissioner, wherein it was held that default is synonymous with failure to make the payment while considering the question of imposing damages under section 14b.5. when a particular provision is to be interpreted, in that event, it has to be reconciled with the entire scheme or the act. it cannot be read out of context. in case we accept the proposition advanced by mr. ghosh, in that event it would be inconsistent with the provisions of section 14b and certain other provisions provided in the act itself.6. in the circumstances, we are unable to accede to the contention raised by mr. ghosh. we, therefore, hold that the contribution, both employee's and employer's share, becomes payable as soon the wages become payable or due, not on actual payment.6. mr. dasadhikary submitted on behalf of the department, who had preferred the main appeal, only in respect of the order directing refund of the amount. in view of the decision we have arrived at in the other appeal, we do not think that anything remains to be decided in the appeal filed by the department, which is bound to succeed on the question of refund, as held by the learned single judge. the question of refund does not arise when it is found that the amount is payable when it accrues and becomes due, not actually paid.7. in the circumstances, the appeals being t. no. 155 of 2005 and t. no. 156 of 2005, filed by the department, succeed and are allowed. the order of the learned single judge, so far as it relates to the refund of the amount, is hereby set aside. rest of the order is hereby affirmed. so far the other appeal being a.p.o. t. no. 490 of 2005 is concerned, the same is dismissed.8. however, there will be no order as to costs.9. all parties concerned are to act on a xerox signed copy of this dictated order on the usual undertaking.
Judgment:

1. Two points were urged by Mr. Ghosh in support of the cross-appeal preferred on behalf of the employer that the authority under Section 7A and the Recovery Officer are two different entities and the one person cannot discharge the dual-function, as sought to be done in the present case. However, ultimately Mr. Ghosh, in his usual fairness, has submitted that he would not press that point. Having regard to the scheme, we are of the view that the same officer can discharge dual function and if he does so, the same would not contravene the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.

2. The second point that he had urged was that the provisions of Section 2(c) and 6, read with paragraphs 29, 30, 32, 36, 36(b), 38, 40, 41 and 59 of the Employees' Provident Fund Scheme, 1952 indicates that the employee's contribution and the employer's contribution are payable only when the salary or wages are actually paid. Unless there is actual payment, there is no question of deduction or recovery of any amount from the salary/wages payable to an employee. He pointed out that Section 2(c) has not used the expression 'paid', on the other hand, it has used the expression 'payable' while defining contribution. Similarly, Section 6 also uses the expression 'being payable'. Thus, according to Mr. Ghosh, the expression 'payable' has a nexus with the actual payment. He also drew our attention to paragraph 29 whrein the word 'payable' has been used. Similarly, he points out that the expression 'payable' is used in paragraphs 30 and 38. On the other hand Section 36 in paragraphs 1 and 5 provides for the duties of the employer to submit return in the form specified by the Commissioner showing the basic wages, retaining allowance etc. paid to each of the employees and that the employer has a duty to maintain an account in relation to the amounts contributed to the fund by him by the employees, whereas paragraph 38 requires making of deduction of the employee's contribution from the wages paid. Paragraph 30 requires the employer to enter the contribution made by the employee and the employer in the contribution card, the currency whereof is for one year. Relying on these provisions, he submitted that unless the amounts are paid, no amounts can be deducted and nothing can be recovered. But the proposition seems to be falacious inasmuch as Section 2(c) defining contribution provides that the contribution means contribution payable in respect of the employee by the principal under the scheme or the contribution payable by an employee to whom the insurance scheme applies. The definition does not use the expression 'paid', neither Section 6 says so. On the contrary, it says that the percentage of the contribution, as stipulated therein, calculated on the basis of the basic wages etc. for the time being is payable to each of the employees. These two provisions clearly indicate that the contribution is calculable on the basic charges etc. payable. These provisions do not use the expression 'paid'. When the legislature chooses a particular expression, the same follows the intention of the legislature. The word 'payable' indicates the amount which becomes payable on the basis of which the employer's liability accrues. Nowhere from the scheme of the Act or from the arrangement of the Scheme, it is possible to hold that such contribution are to be recovered or deducted only when the amount is paid. If such a proposition is accepted, in that event the entire scheme would toe stultified. The paragraph 29 also uses the word 'payable' as is used in paragraph 30. An amount becomes payable as soon the amount accrues and becomes due to be paid. If it is not paid on the due date but paid at a later date, the payability starts from the due date and remains payable until paid. Therefore, the crucial point would be the date when the wages become payable. Paragraph 32 prescribes that the employer's contribution paid shall be recoverable by means of deduction from the wages. But this payment is to be deducted as soon as the wages are paid, but that does not mean that the liability will accrue only when the wages could be paid. If the employer makes the payment according to its convenience, the same would not enable the employer to pay at his whims or at his will for the reasons which may be justifiable or may not be justifiable. The sending of the return is not dependent on the payment but it is to be sent on the date it is supposed to be sent. The delay in payment of wages does not absolve the employer from submitting the return in terms of the scheme or the Act itself. A reading of sub-paragraphs 1 and 4 of paragraph 36 does not imply that the contribution is to be deducted only when the wages are paid. The liabilities that have been mentioned in paragraphs 40 and 41 are to be entered into the card. To take a different view would not be in commensurate with the scheme or the Act and the scheme so framed was simply because that certain liabilities have been imposed on the employer to maintain certain accounts. This maintenance of accounts is not dependent on the whims and caprice of the employer for choosing the time for payment or making payment at a later date. This question arose in Organo Chemical Industries v. Union of India 1979 (2) Lab IC 1261 : 1979 (2) Lab LJ 416. In the said decision it was held-

The whole project gets stultified if employers thwart contributory responsibility and this wider fall-out must colour the concept of damages when the Court seeks to define its content in the special setting of the Act.

3. To allow the employer to make the contribution only when he pays the wages would be to stultify the project. To accept the petitioner's contention in this case would be to enable the employer to divert remittances to the Fund to suit his convenience putting forward sometimes reasonable grounds, sometimes justifiable grounds 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; damages in rare cases can be nil percentage but failure to pay will always attract Section 14B. In reinforcement of the view that we take we think it necessary to refer to para 32 also, which reads:

32. Recovery of a member's share or contribution. - (1) The amount of a member's contribution paid by the employer or a contractor shall, notwithstanding the provisions in this scheme or any law for the time being in force or any contract to the contrary, be recoverable by means of deduction from the wages of the member and otherwise:xx xx xx

The caption of this para is recovery of a member's share or contribution. A close reading of this para makes it abundantly clear that it relates to the recovery by the employers of the member's contribution paid by him. This contemplates the earlier payment by the employer of the employee's contribution before deduction is made from the wages to be paid. A combined reading of paras 30 and 32 shows that in cases where due payment of wages is made impracticable for certain reasons, the obligation of the employer to pay both the contributions payable by himself and on behalf of the member continues. If the two paras are so understood it is not difficult to reject the submission made by the petitioner, that his obligation arises only when wages are paid. Paras 30 and 32 occur in Chapter V of the Scheme under the heading 'Contributions' and para 38 occurs in Chapter VI under the headings 'Declaration, Contribution Cards and Returns'. Though the sub-heading of para 38 is 'Mode of payment of contributions', it is to be understood as the mode in the normal circumstances where wages are paid by the employer in due time. In unusual circumstances, para 30 comes into operation and para 32 enable the employer to recover the contribution paid by him in the first instance.

As a result of this discussion we hold disagreeing with the petitioner's contention that even in cases of a lockout, strike etc. failure to make the contribution resulting in default will have to be visited by damages under Section 14B. The only when that can be considered by the authority is mitigation of damages having regard to the attendant circumstances that had resulted in the delay.

7. In the Organo Chemical Industries v. Union of India 1979 (2) Lab LJ 416 : 1979 (2) Lab IC 1261 (SC), Sen J. delivering the main judgment observed thus in paras 30 and 38 of the scheme:

33. The initial responsibility for making payment of the contribution of the employer as well as of the employee lies on the employer. Para 30 of the Scheme makes it incumbent on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. Under para 38, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month, i.e. a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence.

The position has thus been made clear that the initial responsibility for making payment of the contribution lies on the employer. In para 35 the learned Judge has outlined the reason that motivated enactment of Section 14B of the Act in these words:

The reason for enacting Section 14B is that employers may be deterred and thwarted from making defaults in carrying out statutory obligations to make payments to the Provident Fund. The object and purpose of the section is to authorise the Regional Provident Fund Commissioner to impose exemplary or punitive damages and thereby to prevent employers from making defaults.

4. This decision was considered by the Kerala High Court in Calicut Modern Spinning & Weaving Mills Ltd. v. Regional Provident Fund Commissioner, wherein it was held that default is synonymous with failure to make the payment while considering the question of imposing damages under Section 14B.

5. When a particular provision is to be interpreted, in that event, it has to be reconciled with the entire scheme or the Act. It cannot be read out of context. In case we accept the proposition advanced by Mr. Ghosh, in that event it would be inconsistent with the provisions of Section 14B and certain other provisions provided in the Act itself.

6. In the circumstances, we are unable to accede to the contention raised by Mr. Ghosh. We, therefore, hold that the contribution, both employee's and employer's share, becomes payable as soon the wages become payable or due, not on actual payment.

6. Mr. Dasadhikary submitted on behalf of the Department, who had preferred the main appeal, only in respect of the order directing refund of the amount. In view of the decision we have arrived at in the other appeal, we do not think that anything remains to be decided in the appeal filed by the department, which is bound to succeed on the question of refund, as held by the learned Single Judge. The question of refund does not arise when it is found that the amount is payable when it accrues and becomes due, not actually paid.

7. In the circumstances, the appeals being T. No. 155 of 2005 and T. No. 156 of 2005, filed by the department, succeed and are allowed. The order of the learned Single Judge, so far as it relates to the refund of the amount, is hereby set aside. Rest of the order is hereby affirmed. So far the other appeal being A.P.O. T. No. 490 of 2005 is concerned, the same is dismissed.

8. However, there will be no order as to costs.

9. All parties concerned are to act on a xerox signed copy of this dictated order on the usual undertaking.