IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH PRESENT. THE HON' BLE Dr. JUSTICE JAWAD RAHIM AND THE HON' BLE MR. JUSTICE B.

Transcription

1 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 20 TH DAY OF DECEMBER, 2013 PRESENT THE HON' BLE Dr. JUSTICE JAWAD RAHIM AND THE HON' BLE MR. JUSTICE B.SREENIVASE GOWDA BETWEEN: WRIT APPEAL NO.6165/2011 (EPF) M/S. TIMES VPL LIMITED (FORMERLY KNOWN AS M/S VIJAYANAND PRINTE LTD. EARLIER KNOWN M/S ANAND PRINTERS & PUBLISHERS, GIRIRAJ ANEEX, CIRCUIT HOUSE ROAD, HUBLI, REP: BY ITS HEAD HR. SHRI. R SURESH KUMAR... APPELLANT (By Sri S.N.MURTHY,SENIOR COUNSEL FOR SRI R B GADAGKAR) AND 1. UNION OF INDIA BY ITS SECRETARY, MINISTRY OF LABOUR AND EMPLOYMENT, GOVERNMENT OF INDIA, SHRAM SHAKTI BHAVAN, NEW DELHI, 2. THE REGIONAL PROVIDENT FUND COMMISSIONER-II, EMPLOYEES, PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, 4TH FLOOR, SHRINATH COMPLEX,

2 2 NEW COTTON MARKET, HUBLI,... RESPONDENTS (By Sri MRUTHYUNJAYA TATA BANGI, ADV.FOR R-1; SRI P.V.GUNJAL, ADV.FOR R-2) THIS WRIT APPEAL IS FILED U/S.4 OF THE KARNATAKA HIGH COURT ACT, 1961, PRAYING TO, SET ASIDE THE IMPUGNED ORDER DATED:11/04/2011 IN W.P. NO.62502/2011 (L-PF) PASSED BY THE LEARNED SINGLE JUDGE OF THIS HON'BLE COURT AND ALLOW THE WRIT PETITION AS PRAYED FOR. This appeal having been heard and reserved for pronouncement of judgment, this day JAWAD RAHIM J., pronounced the following: J U D G M E N T The appellant has brought in question the order of the learned Single Judge in W.P.No.62502/2001 dated whereby the learned Single Judge has rejected the appellant s request to quash the order of levy of damages upon it by the Regional Provident Fund No.2 under Section 14(b) of the Employees Provident Fund and Provisions Act, Heard the learned counsel for the appellant and the learned standing counsel for the respondent and perused

3 3 the records in supplementation thereto, which reveals the following factual matrix: a) Appellant-M/s Times VPL Limited, formerly known as Vijayanand Printers Limited is an off-shoot of M/s Anand Printers and Publishers which converted itself from a proprietary concern to a public limited company under the provisions of the Companies Act, It is engaged in printing and publishing of Kannada daily newspaper in the name and style VIJAYA KARNATAKA at Bangalore, Hubli, Gulbarga, Mangalore, Shimoga and Mysore, and is also engaged in printing and publishing of other magazines. b) The TIMES OF INDIA group took over the establishment of Vijayanand Printers Limited with its employees with effect from Appellant had in its employment around 325 employees during the year 2000 with an average salary of Rs.8,000/- p.m. Section 15 of the Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955, imposes the Employees Provident Fund Act, 1952,

4 4 (hereinafter referred to as the EPF Act, for brevity) applicable to every newspaper establishment in which 20 or more persons are employed on any day as if such newspaper establishment were a factory to which such the EPF Act applies. However, newspaper employees are to be treated as employees within the definition of employee under the Employees Provident Fund and Miscellaneous Provisions Act, 1952, (hereinafter referred to as the EPF & MP Act, 1952, for brevity). c) Appellant claims it has covered its employees who were on the rolls under the provisions of the EPF Act and contributions are paid regularly to the 2 nd respondent- Regional Provident Fund Commissioner in respect of employees covered. Those employees who were on the rolls of the appellant s erstwhile establishment namely, Vijayanand Printers Limited/Anand Printers and Publishers and who were drawing a salary of more than Rs.5,000/- p.m. (then ceiling limit under the EPF scheme during 2000) requested the erstwhile company, viz., Vijayanand Printers Limited/Anand Printers and Publishers not to deduct EPF

5 5 contribution from their entire salary but to restrict it to Rs.5,000/- as provided under the EPF Act. They referred to paragraph 80(2) of the EPF Scheme of 1952 which had made special provisions in the case of newspaper establishments. d) Two major changes in the Act/Scheme of 1952 became noticeable. The first is, with regard to the definition of excluded employee under Section 2(f) of the Scheme. Under the substituted definition of excluded employee for the purpose of newspaper establishments, all the employees of the establishment will come within the applicability of the scheme with the ceiling of Rs.5,000/- p.m. e) The appellant s contention is, employees irrespective of their pay were required to be covered under the Scheme insofar as newspaper establishments are concerned. Some of the employees not willing to allow deduction of Provident Fund from the entire salary including DA (Dearness Allowance) with a view to retaining allowance and cash value of food concession, filed W.P.27726/00 and

6 6 W.P.29904/00 before this court challenging the constitutional validity of paragraph 80(2) of the Scheme of f) The management also filed W.P.8063/01 challenging validity of the same provision on the ground management was overburdened in having to remit equal percentage of contribution on the entire wages paid to its employees. g) During the pendency of the writ petitions, the appellant was covering only those employees whose basic pay + DA was less than the ceiling limit of Rs.5,000/- p.m. During the same period, when the above writ petitions were pending, the Hon ble Supreme Court in the case of EXPRESS PUBLICATION (MADURAI) LIMITED & ANOTHER.vs. UNION OF INDIA reported in 2004 AIR SCW 1739 held that para 80(2) of the EPF Scheme is constitutional. h) Based on the said judgment, a common order was passed by this court on dismissing all the three

7 7 writ petitions, two filed by the employees and one by the appellant, upholding the constitutional validity of paragraph 80(2) of the Scheme. Consequently 2 nd respondent issued a notice of enquiry under Section 7-A of the EPF & MP Act, 1952, requiring the appellant to appear on and substantiate payment of PF contribution. i) Appellant claims to have submitted its records to be verified by the 2 nd respondent which concluded the enquiry on and passed an order on determining PF contribution at Rs.69,75,462/- payable by the appellant vide Annexure-A. Immediately upon determination of the amount, appellant-management claims to have paid the entire sum without any delay in paying contribution in respect of employees drawing salary of more than Rs.5,000/- p.m. for the period October 1999 to November j) After receipt of EPF contribution from the appellants, the 2 nd respondent issued yet another notice under Section 14-B of the EPF & MP Act, 1952, directing the

8 8 appellant management to appear for personal hearing to determine the quantum of damages to be levied for delayed payment of contribution for the period October 1999 to November k) Appellant being aggrieved by the action under Section 14-B of the EPF & MP Act, 1952, contested the proceedings, assertively contending there was no delay in payment of EPF contribution for the period October 1999 to November 2005 and as such it was not liable to pay damages. Despite its protest against the contemplated action to require the appellant to pay damages, 2nd r espondent passed an order on vide Annexure-C determining damages at Rs.52,68,099/-. l) Appellant challenged the said order before the EPF Appellate Tribunal at New Delhi reiterting its stand that there was no delay in payment of EPF contribution and hence was not liable to pay damages. m) The EPF Appellate Tribunal at New Delhi rejecting all contentions urged by the appellant confirmed the order

9 9 of the 2 nd respondent rejecting the appeal on Aggrieved by it, appellant filed W.P.62502/11 before this court which learned single Judge on hearing, found no merit and dismissed it by order dated which is impugned in this appeal. 3. Learned counsel for the appellant would contend, appellant was diligently prosecuting legal proceedings questioning the validity of paragraph 80(2) of the Scheme of 1952 whereby the ceiling of income of Rs.5,000/- p.m. was removed so far as the employees working in the new establishment are concerned. As hitherto the ceiling limit of Rs.5,000/- was fixed to require employer s contribution, it was seriously aggrieved when such restriction was removed and it had bona fide pursued legal course of action. As the employees had also sought to question the validity of paragraph 80(2) of the EPF & MP Act, 1952, through their two writ petitions, viz., W.Ps.27726/00 and 29904/00 which was clubbed with the appellant s writ petition, viz., W.P.8063/01, the appellant had not paid contribution in respect of employees whose salary was above Rs.5,000/-.

10 10 4. Learned counsel submits, as the matter was sub judice and the issue of para 80(2) of the Scheme was under consideration, appellant was entitled in law to await the decision. Because of such fact situation, appellant did not pay its contribution in respect of employees drawing salary of more than Rs.5,000/- p.m. till the Hon ble Supreme Court in similarly initiated legal action by EXPRESS PUBLICATION (MADURAI) LIMITED (supra) held that paragraph 80(2) of the Scheme to be constitutionally valid. He submits, upon the decision of the Hon ble Supreme Court, the writ actin of the appellant was frustrated and soon thereafter when the 2 nd respondent issued the notice under Section 7-A of the EPF & MP Act, 1952, on , appellant has promptly paid the amount determined in entirety in a sum of Rs.69,75,462/-. Appellant has meekly obeyed the demand raised by the 2 nd respondent without prejudice and has shown its bona fides by prompt payment of the amount determined as its contribution. He submits, in this fact situation, appellant cannot be attributed with the conduct of

11 11 defaulter to be saddled with damages permissible under Section 14-B of the EPF & MP Act, Learned counsel submits, the said provision is attracted only on proof that delay in payment was deliberate, unjust and adverse to the interest of the employees. He submits, when this issue was canvassed before the learned single Judge, learned single Judge has mechanically confirmed the order of the 2 nd respondent and the EPF Appellate Tribunal without appreciating the legal grounds urged. 6. To seek exemption from payment of damages, learned counsel relies on the decision of the apex court in the case of EMPLOYEES STATE INSURANCE CORPORATION.vs. HMT LIMITED AND ANOTHER reported in (2008) 3 SCC 35 wherein the apex court interpreting the penal provisions for recovery of damages in the event of employer s failure to make the contribution, held:

12 12 Penal provision must be construed strictly. Only because the provision has been made for levy of penalty, it would not by itself lead to the conclusion that penalty must be levied in all situations. Such an intention on the part of the Legislature is not decipherable from Section 85-B of the Act. When a discretionary jurisdiction has been conferred on a statutory authority to levy penal damages by reason of an enabling provision, the same cannot be construed as imperative. Endeavour should be made to construe such penal provisions as discretionary, unless under the statute it is held to be mandatory in character. Existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum. Thus he submits, in the instant case the proposition of law enunciated by the apex court in the case of EMPLOYEES STATE INSURANCE CORPORATION.vs. HMT LIMITED & ANOTHER mutatis mutandi applies and the benefit of that proposition must reach the appellant in this case also. 7. We have given serious concern to the grounds urged by the learned counsel against the order of the 2 nd respondent levying damages and the order of the learned single Judge declining to interfere with it. 8. Before we proceed to deal with the factual matrix of this case, it would be essential to refer to the circumstances

13 13 in which the Hon ble Supreme Court had rendered the judgment in the case of EMPLOYEES STATE INSURANCE CORPORATION (supra). The facts in that case are: By virtue of the notification dated , the wage ceiling limit of employees which was restricted to Rs.1,600/- p.m. was increased to Rs.3,000/- p.m. with a view to bring them within the purview of the Act. The validity of the said notification was challenged in a number of writ petitions by employees. When interim order was passed by the High Court, operation of the notification was stayed. The writ petitions, however, were dismissed on Writ appeals filed by the employees through their respective Trade Unions were admitted and the interim order was continued. Later the writ appeals were dismissed by the Division Bench of the High Court on , inter alia on the premise there was no impediment for the respondent to deposit the contribution of employees concerned. On and from the said date, interest was claimed till the date of actual payment. The appellant-esic thereafter raised claim for payment of interest for delayed payment and levied damages under

14 14 Section 85-B of the Employees State Insurance Act, The writ petition filed by the respondent-employer questioning the validity of the notice dated issued by the ESIC was dismissed on Review petition was also dismissed. Intra-court appeal was preferred which was allowed in part, holding that though the period of delay is slightly more than 2 years, some reasonable time should be allowed for paying the amount and thus restricted the payment of interest to two years. It was further ordered no damage should be directed to be levied in the facts and circumstances of the case as Section 85-B of the Act provides for enabling provision and does not make it mandatory to levy damages. Said order was questioned before the apex court. The apex court referring to the conduct of parties opined, the subordinate legislation cannot override principle legislative provisions. The statute itself does not say that a penalty has to be levied only in the manner prescribed. It is also not a case where the authority is left with no discretion. The legislation does not provide that adjudication for the purpose of levy of penalty proceeding would be a mere formality or imposition of penalty as also computation of the quantum thereof became a

15 15 foregone conclusion. Ordinarily even such a provision would not be held to providing for mandatory imposition of penalty, if the proceeding is an adjudicatory one or compliance with the principles of natural justice is necessary thereunder. Existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof. The Division Bench of the High Court, therefore, in our opinion, was not wrong in opining that Section 85-B provides for an enabling provision. What, however, cannot be appreciated is that such a construction itself would lead to the conclusion that the High Court is entitled to substitute its view in place of the statutory authority. In our considered view, therefore, the matter should be considered afresh for determination of quantum of damages, etc. in the light of the observation made hereinbefore. It is material to note, in the case before the apex court, soon after termination of legal proceedings, penalty levying damages was passed before any coercive action was initiated. Thus there was no deliberate delay. But in this case facts are different.

16 16 9. With this proposition laid by the apex court, as we examine the facts of the case, we notice that the appellantemployer had questioned the validity of paragraph 80(2)of the Scheme through its writ petition in the year In view of the judgment of the apex court upholding the constitutional validity of paragraph 80(2) of the Scheme by judgment in the case of EXPRESS PUBLICATION (MADURAI) LIMITED (supra), the writ petition becomes infructuous and was dismissed in terms of the order of the Hon ble Supreme Court. Thus with effect from the ground urged by the appellant to avoid payment of EPF in respect of employees drawing salary of more than Rs.5,000/- p.m. was negated. 10. Therefore, we have to impute appellant with knowledge that in default on its part to pay its contribution in respect of qualified employees even beyond 2004 would amount to contravention of the provisions of the Act and Scheme made thereunder. In fact, the appellant has not voluntarily paid its contribution but waited till issuance of

17 17 notice by the 2 nd respondent invoking Section 7-A of the EPF and MP Act, It has paid its contribution only after it was determined by the 2 nd respondent on , virtually a year after its attempt to avoid legal liability was judiciously negated. 11. The second circumstance is, even after its defeat in legal pursuit questioning the validity of paragraph 80(2) of the Scheme, appellant has not voluntarily paid its contribution. Only after compulsive action by the 2 nd respondent, it has discharged its liability. It is also material to note it has paid the contribution which was due as early as Therefore appellant by conduct has shown it defaulted in payment of its contribution when it became due in 2001 and even after it lost its legal battle in 2004, again delayed payment in From the conduct of the appellant, its intention is manifest: to avoid payment and in terms of the judgment of the apex court, mens rea or actus reus to commit default is evident. Therefore, appellant cannot take refuge to contend

18 18 due to legal pursuit, it did not pay the amount. Such defense would have been valid had the appellant paid its contribution soon after dismissal of the writ petition in The very fact of delay in payment of its contribution for one year spells out inaction on its part which could hardly be termed as bona fide. 13. The learned single Judge has approached this subject from a different viewpoint, but the ultimate conclusion upholding the order of the Appellate Tribunal confirming the order of the 2 nd respondent is just and proper in law which hardly calls for any interference. 14. In the result, we find no merit in the appeal. The appeal is dismissed, confirming the order of the learned single Judge. However, we refrain ourselves from imposing cost which otherwise should have been imposed on the appellant. SD/- JUDGE vgh* SD/- JUDGE