(Prayer: Petition filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorarified Mandamus,calling for the records from the file of the 1st Respondent herein ATA No.1019 (13) 2002 and to quash the order dated 25-02-2010 passed therein.)
1. The petitioner is a spinning mill. It was closed on 08.10.1976. In December 1977, the Government of India took over the petitioner mill under the Industries (Development Regulations) Act, 1951 and the mill was operated. However, as on 31.03.1986, there was an accumulated loss of the mill to the tune of Rs.95 lakhs. In view of the accumulated loss, the mill was at the verge of the closure. To avoid the said closure, the Government of Tamil Nadu intervened and took over the same under Somasundaram Super Spinning Mills (Acquisition and Transfer) Act, 81 of 1986 and vested in the petitioner corporation namely, Tamil Nadu Textile Corporation.
2. The original owner of the mill filed W.P.No.1979 of 1988 before this Court challenging the aforesaid acquisition by the Tamil Nadu Government during the year 1988. When the writ petition was pending, the petitioner filed reference before the Board for Industrial and Financial Reconstruction (BIFR) for relief to revive the mill. The BIFR rejected the application during 1994 stating that the ownership was questioned in W.P.No.1979 of 1988.
3. Whileso, the Government of Tamil Nadu issued G.O.Ms.No.287, Handlooms, Handicrafts, Textiles and Khadi Department, dated 14.10.1993 regarding the handing over of the mill back to the original owner namely, the Somasundaram Corporation Private Limited.
4. The aforesaid G.O.Ms.No.287 was questioned by trade unions of workmen by filing W.P.No.13510 of 1994, W.P.No.20925 of 1994 and W.P.No.4455 of 1996.
5. Whileso, the mill was closed from 18.07.1994 and thereafter, it is not opened till date.
6. This Court disposed of W.P.No.1979 of 1988 preferred by the original owner questioning the Acquisition Act and also other writ petitions referred to above preferred by the trade unions questioning the Government order 287, on 30.01.1999 by a common order. In the common order, this Court quashed the Government Order in G.O.Ms.No.287 and restrained the Government of Tamil Nadu from handing over the mill to the original owner.
7. At that juncture, the accumulated loss of the mill as on 31.03.1999 was 4.73 crores.
8. Though the petitioner mill was declared as Relief undertaking under the Relief Undertaking (Special Provisions) Act, 1969 through the orders dated 06.1.2000, 04.01.2002, 06.01.2004 and 05.01.2005 by the Government of Tamil Nadu, the mill was not revived and all the workmen settled and received their benefits pursuant to the closure in July 1994.
9. In these circumstances, according to the petitioner, the Recovery Officer (Assistant Provident Fund Commissioner) Madurai, without hearing the petitioner, passed an order dated 29.02.2000 for recovery of damages for belated remittances of the contribution for the period 1991-1992 and for seven security guards for the period 1994-1995.
10. The petitioner filed an appeal in A.T.A.No.276(13) 2000 before the first respondent Tribunal at Delhi during March 2000 questioning the order of recovery referred to above.
11. The first respondent passed an order, dated 15.04.2005 remanding the matter back to the second respondent for giving opportunity to the petitioner mill and to pass a fresh order.
12. In these circumstances, the second respondent issued notice, dated 01.08.2005 under Section 14-B of the E.P.F Act directing the petitioner to explain as to why the damages for belated remittances for the period 1991-92 and for the seven security guards shall not be levied on them.
13. The petitioner submitted explanation and explained that the delay in remittances of the Provident Fund contribution was for a very few days in every month during 1991-1992. It was further explained by the petitioner that after the closure of the mill, seven security guards were employed to protect the assets of the mill and the remittances relating to those seven security guards were also delayed as the mill was closed.
14. The petitioner has submitted that there was no basis for claiming damages to the tune of Rs.20,95,487/- in the aforesaid circumstances.
15. However, the second respondent passed an order, dated 23.11.2005 under Section 14-B of the E.P.F. Act directing the petitioner to pay the damages to the tune of Rs.20,95,487/-.
16. The petitioner preferred an appeal before the first respondent in A.T.A.No.1019(13)2005 on 15.12.2005 under Section 7-I of the E.P.F. Act. The first respondent rejected the appeal by order dated 25.02.2010 in A.T.A.No.1019(13)2005.
17. The petitioner filed the present writ petition to quash the aforesaid order, dated 25.02.2010.
18. The second respondent has filed a counter affidavit seeking to sustain the impugned order and for dismissal of the writ petition.
19. Heard the learned counsel on either side.
20. Learned counsel for the petitioner submits that the order of the second respondent is a cryptic one without containing any reasons. The impugned order is assailed on the ground that the aforesaid facts are not taken note of in deciding about the payment of damages under Section 14-B. It is submitted that the petitioner mill paid contributions under the E.P.F.Act and also interest thereon for the belated remittances. The damages are in the nature of penalty and the same shall not be awarded in a routine manner without taking note of the peculiar facts of the case. Learned counsel vehemently submits that the aforesaid facts would speak for itself that awarding of damages is not called for.
21. Learned counsel has taken me through the earlier order of the Tribunal, dated 15.04.20005 in A.T.A.No.276(13)2000 and the present impugned order. According to him, the reasons that weighed with the Tribunal on the earlier occasion, is sufficient enough to quash this order.
22. Learned counsel submits that the judgments referred to by the first respondent has nothing to do with the issue involved in the appeal.
23. Learned counsel for the second respondent has argued with equal vehemence that there is no illegality in the order of the first respondent and the petitioner shall not be shown any leniency taking into account the fact that the E.P.F Act is a welfare legislation in favour of the workmen.
24. I have considered the submissions made on either side and perused the materials available on record.
25. As rightly contended by the learned counsel for the petitioner, the aforesaid facts relating to the closure of the mill in 1976 and the ultimate closure in July 1994 would make it clear that the mill underwent lot of problems and the Government of India as well as the Government of Tamil Nadu intervened on so many occasions but the mill was not able to be revived. I am not repeating these facts since these facts were narrated above. In fact as rightly contended by the learned counsel for the petitioner, the earlier Tribunal took note of these facts while passing the order, dated 15.04.2005 in A.T.A.No.276(13)2000 questioning the order, dated 29.02.2000 of the second respondent to recover the amount of damages.
26. The first respondent, taking into account the peculiar circumstances of the case, though the appeal against the recovery certificate is not maintainable, entertained the appeal and quashed the recovery certificate and remanded the matter for fresh consideration. The approach of the Tribunal is appreciable. Paragraph 1 of the order of the Tribunal is usefully extracted hereunder:
"This appeal has been filed against the recovery certificate issued by APFC, Madurai to the recovery Officer for recovery of damages imposed under Section 14B of Employees' Provident Fund and Miscellaneous Act, 1952 (for short the 'Act'), for the period 1991-1992 to 1997-1998. Under Section 7-I of the Act, no appeal is maintainable against the recovery certificate issued under Section 8 of the Act. Therefore, this appeal would not be maintainable against the recovery certificate dated 29.02.2000 which has been challenged in this appeal. However, in the peculiar facts of this case, the appeal is treated against the order dated 28.04.1999 passed under Section 14-B of the Act against M/s.Somasundaram Super Spinning Mills. The said mill was under closer during 1976-77 and in 1977 Government of Tamil Nadu declared Tamil Nadu Textile Corporation as 'Authorised Person' by invoking Industries (Development & Regulation) Act. Till 1986 the mill was kept on running by way of rotating the credit facility extended by cotton traders. However, financial condition of the mill could not improve. None of the financial institutions came forward to finance the mill. Subsequently, Tamil Nadu Government nationalized the mill by passing Somasundaram Super Spinning Mills (Acquisition and Transfer) Act, 1986. Since then mills was being run by the appellant. Though various litigations took place between the erstwhile owner and union etc., but the fact remains that appellant had been running the mill all throughout after the acquisition Act was passed by the State Government. It appears that criminal prosecution was also initiated by the Employees Provident Fund Organisation (EPFO) in respect of the mill. Appellant had written the authority for withdrawal of the cases on 09.03.1999. There is nothing on record to show that copy of the order dated 28.03.1999 was served on the appellant, nor there is anything on record to show that even show cause notice was served. A categorical statement has been made in the appeal that no order under Section 14B served on the appellant at any stage. Record shows that appellant had demanded a copy of the said order, if it had been passed Letter dated 11.11.1999 was written by the Managing Director of the appellant to the RPFC, Madurai. Even during the proceedings this order was not filed along with the counter-affidavit. A photocopy of the order has been shown only during the hearing of appeal today. Thus, the appeal has to be treated in time as this order has been disclosed and produced in this Tribunal today. Even the photocopy of this order shows that the same has not been served on the management of Tamil Nadu Textile Corporation. If that is so, then this appeal can be treated in time against this order dated 28.04.1999. This order was not even served on the appellant, but was sent to M/s.Somasundaram Super Spinning Mills which was nationalized by the State Government".
27. The first respondent Tribunal took into account the peculiar facts in the aforesaid paragraph and quashed the recovery certificate and the matter was remanded back.
28. After the matter was remanded back, the second respondent should have taken into account the facts that persuaded the first respondent to quash the recovery certificate determining the damages. But unfortunately, the second respondent mechanically passed the order dated 23.11.2005 directing the petitioner to pay the damages to the tune of Rs.20,95,487/-. Though the petitioner explained that the mill went under turbulent conditions and the mill was closed on 1994 and there was only belated remittances for a few days during 1991-1992 and seven security guards were employed to safeguard the properties of the mill after the closure and the delayed remittances were relating to those seven guards during 1994-1995, the second respondent mechanically passed the aforesaid order dated 23.11.2005, without considering those vital and relevant facts.
29. When the matter was taken to the first respondent by way of appeal, the first respondent rejected the appeal in a cryptic manner. Though there are 8 paragraphs in the order, only paragraph 7 is the order of the Tribunal giving reasons for rejecting the appeal. Paragraph 7 of the order is usefully extracted hereunder:
"7.) Mere default is not sufficient to attract the damages and interests if the reason for default was beyond the control of the appellant. In the case in hand, it was alleged that due to change of owner and financial problem, the payment could not be made. Both these grounds are not sufficient to hold that the delay was due to reasoned beyond the control of the appellant. In the case of Bone Mills Pvt Ltd., Vs.RPFC reported in 1968 LAB IC Page 1418, therein Lordship held that "the liability therefore attaches to the factory once there is a factory and process of manufacturing continues, the liability under the statue continues irrespective in change of ownership or management of that factory" and in the case of Hindustan Times Ltd., Vs. Union of India reported in 1998, Vol.II SEC Page 242, therein Lordship held that "the power-cut, financial problem relating to other indebtedness or delay in realisation of amount paid by cheque by draft are not relevant explanation to avoid liability for default. No infirmity is noticed in the order of the authority".
30. In the aforesaid Paragraph 7 of the order of the Tribunal, the Tribunal failed to take into account the mitigating circumstances that could be seen to naked eye without any deep perusal that from 1976 onwards, the mill was closed and suffered heavy accumulated losses and the mill was not able to revive in spite of the efforts taken by the Government of India as well as the Government of Tamil Nadu. Those facts persuaded the earlier Tribunal to quash the recovery certificate. But the Tribunal does not take into account those facts while passing the impugned order imposing the penalty in the form of damages.
31. As rightly submitted by the learned counsel for the petitioner that the judgments referred to in paragraph 7 of the order of the Tribunal namely in Bone Mills Pvt Ltd., Vs.RPFC reported in 1968 LAB IC Page 1418 has no bearing on the issue involved in the case. The issue involved in Bone Mills Pvt Ltd., Vs.RPFC reported in 1968 LAB IC Page 1418 is not related to damages. The issue is relating to payment of contribution. Here, the matter is not relating to payment of contribution. The petitioner paid contribution as well as the interest thereon as per the law. Thus, the judgment has nothing to do with the issue involved in this case. Though the judgment in Hindustan Times Ltd., Vs. Union of India reported in 1998, Vol.II SEC Page 242 is relating to damages under Section 14-B of the E.P.F Act, the judgment cannot be applied to the facts of this case.
32. In fact, learned counsel for the petitioner submits that he relied on the said judgment on the point relating to irretrievable prejudice. But the first respondent Tribunal has referred to the judgment and held that power cut, financial problem relating to the other indebtedness or delay in realisation of the amount paid by cheque or by draft not relevant explanation to avoid liability for default.
33. The petitioner has not pleaded none of these reasons.As stated above, the facts are unique and the Tribunal on earlier occasion took into account the peculiar circumstances of the case and quashed the recovery certificate. In my view, for the very same reasons and also for the reasons given in Paragraph 28 of the judgment in Hindustan Times Ltd., Vs. Union of India reported in 1998, Vol.II SEC Page 242, the impugned order is liable to be quashed. Paragraph 28 of the judgment is usefully extracted hereunder:
"28.) From the aforesaid decisions, the following principles can be summarised. The authority under S.14B has to apply his mind to the facts of the case and the reply to the show-cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard, the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on plea of power-cut, financial problems relating to other indebtedness or the delay in realisation of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no period of limitation prescribed by the Legislature for initiating action for recovery of damages under S.14B. The fact that proceedings are initiated or d
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emand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under S.14B would be taken; mere delay in initiating action under S.14B cannot amount to prejudice inasmuch as the delay on the part of the department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action under S.14B, he has changed his position to recovery is made after a large number of years, the prejudice to him is of an "irretrievable" nature; he might also claim prejudice upon proof of loss of all the relevant records and/or non-availability of the personnel who were, several years back in charge of these payments and provided he further establishes that there is no other way he can reconstruct the record or produce evidence; or there are other similar grounds which could lead to "irretrievable" prejudice, further in such cases of "irretrievable" prejudice, the defaulter must take the necessary pleas in defence in the reply to the show-cause notice and must satisfy the concerned authority with acceptable material; if those pleas are rejected, he cannot raise them in the High Court unless there is a clear pleading in the writ petition to that effect". 34. The impugned judgment makes it very clear that the first respondent has not applied its mind to the facts of the case. It is a clear case of non application of mind. 35. For all the aforesaid reasons, the impugned order is quashed and the writ petition is allowed. No costs. Consequently, connected miscellaneous petition is closed.