TMI Blog1979 (7) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... Because exordiums are opprobriums and socio-economic apercus are anathemas for some judicial psyches; and I should have, for that reason, abandoned my habitual deviance from the orthodox norm idealised by some that a judicial judgment shall be a dry statement of facts, drier presentation of law and logomachy and driest in least communicating to the law abiding community, which is the court s constituency, the glow of life giving principles rooted in social sciences and translated into juristic rules which legitimate our institution functionally. The last consideration, in my humble view, is the elan vital of the justicing process and jettisoning it is judicial self-alienation from the nation. Of course, minds differ as rivers differ and habits die hard The central issues in this civil appeal are whether Sec. 14B of the E.P.F. and M.P. Act is unconstitutional and, if not, what is the semantic-juristic sweep of the expression damages used therein. Other vital but peripheral matters may be side-stepped for the nonce, especially because my learned brother has neatly and rightly dealt with them. The factual setting of the case, without which the legal contentions argued lose their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the injury. Law expands concepts to embrace social needs so as to become functionally effectual. We may read Sec. 14B and Rule 38 to vivify the discussion: 14B. Power to recover damages: Where an employer makes defaults in the payments 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 provision 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. 38 Mode of payment of contribution-(1) The employer shall, before paying the member his wages in respect of any period or part of period for which contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power to affect citizen s rights, especially by way of punitive impost or damages for wrong doing, is quasijudicial in character even if exercised by executive echelons. This Court has underscored the importance of injecting the norms of natural justice when statutory functionaries affect the rights of a person. The most recent of the cases which lay bare the elementals of this branch of jurisprudence are: (1)Siemens Engineering and Manufacturing Co. of India Ltd. v. Union of India(1); (2) Maneka Gandhi v. Union of India(2) and (3) Mohinder Singh Gill Anr. v. The Chief Election Commissioner, New Delhi and Ors.(3) In Siemens case this Court observed: It is now settled law that where an authority makes an order in exercise of a quasi-judicial function it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. That has been laid down by a long line of decisions of this Court ending with N. M. Desai v. The Testeels Ltd. Anr.(4) Fair play in Administration is a finer juristic facet, at once fundamental and inviolable and natural justice is an inalienable functional component of quasi-judicial acts. Here, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given to the affected party. Reasons have to be recorded in the order awarding damages. The writ jurisdiction is ready to review glaring errors. The maximum harm is pecuniary liability limited by the statute. A high official hears and decides. Under such circumstances the needs of the factual situation and the legal milieu are such that the absence of appellate review in no way militates against the justice and reasonableness of the provision. The argument of arbitrariness on this score is untenable. The section is not bad. Maybe, action under the section may be challenged in writ jurisdiction provided infirmities which attract such jurisdiction vitiate the order. The bogie of absence of guidelines in the provision and consequential possibility of the authority running berserk or acting humanistically does not frighten. Of course, the more bereft of explicit guidelines a statutory power is, the more searching must be the judicial invigilation to discover hidden injustice and masked mala fides. Even so, let us examine the ground that, absent detailed guidelines, the law is void. What is not explicit may still be implicit. What is not articulated at length may be spun out from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. The Commissioner cannot award anything more than or unrelated to damages . Nor can he go beyond 100% of the amount defaulted. Such limitations without further guidelines are not uncommon in taxing laws to penalise defaults and suppressions. What do we mean by damages ? The expression damages is neither vague nor over-wide. It has more than one signification but the precise import in a given context is not difficult to discern. A plurality of variants stemming out of a core concept is seen in such words as actual damages, civil damages, compensatory damages, consequential damages, contingent damages, continuing damages, double damages, excessive damages, exemplary damages, general damages, irreparable damages, pecuniary damages, prospective damages, special damages, speculative damages, substantial damages, unliquidated damages. But the essentials are (a) detriment to one by the wrong-doing of another (b) reparation awarded to the injured through legal remedies and (c) its quantum being determined by the dual components of pecuniary compensation for the loss suffered and often, not always, a punitive addition as a deterrent-cum-denunciation by the law. For instance, exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of Human Rights, in the Sunday Times Case, observed : The Court must interpret them in a way that reconciles them as far as possible and is most appropriate in order to realise the aim and achieve the object of the treaty . A policy-oriented interpretation, when a welfare legislation falls for determination, especially in the context of a developing country, is sanctioned by principle and precedent and is implicit in Art. 37 of the Constitution since the judicial branch is, in a sense, part of the State. So it is reasonable to assign to damages a larger, fulfilling meaning. What are the strands which make the fabric of damages under the Article? I have stated earlier that the composite idea of damages includes more than pecuniary compensation. Moreover, the injured party is the Board of Trustees who administer the Fund. That Fund not merely loses the interest consequent on the non-payment but receives a shock in that its scarce resources are further famished by employers default. There is great social injury to the scheme when employers default in numbers. So the lash of the law is delivered when its object is frustrated. What is more denuciatory is the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, although in his separate judgment this aspect has not been expressly considered. I speak for both of us. The damages are levied under the Act. The authority levying penal damages is created by the Act and is responsible for the collection of contributions and damages for the Fund. It is not possible to dichotomise and hold that the contributions go into the Provident Fund but the rest of the damages go into the general revenues. This is not a fine under the criminal law. Nor is it recovery, on behalf of the Government of amounts under a general statute for purposes of revenue. A special statute creating a special fund, empowers special officers to recover specially designated contributions and special damages for default. The entire sum belongs to the Fund except perhaps the administrative charges which are usually (as in this case) separately indicated. In our view, therefore, it is wrong to credit the damages into the general revenues. To that extent it is a breach of the statutory scheme and a deprivation of what belongs to the workers Provident Fund. Indeed, employees are a needy community and if the Fund is replenished by damages the scheme can be improved and the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94,996.80 in all. The Regional Provident Fund Commissioner, Chandigarh, accordingly, issued a show cause notice dated June 7, 1977 requiring the petitioners to show cause why damages should not be levied under s. 14B of the Act. The notice was accompanied by a statement showing a break-up of the various amounts in arrears and the extent of delay in respect of each payment and the details of damages proposed to be imposed on the belated payments. The period of delay in payment of the amounts remitted varied from a few months to a year. It was proposed to levy damages at a uniform rate of hundred per cent on each of the amounts in arrears. In response to the notice, the petitioners tried to explain away the delay by alleging that it was due to difficulties beyond their control and, therefore, the payments could not be made in time viz., the facts that there were disputes between the partners of the firm as a result of which, there was a loss of ₹ 1,40,165.15, there was a power cut of 60% by the Haryana Electricity Board w.e.f. May 6, 1974, which compelled the petitioners to purchase a Generating set to tide over the difficulties and that the establishment had borrowed huge sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership firm etc. did not constitute sufficient cause beyond the control of the petitioners to justify the late deposit of provident fund dues. He, accordingly, concluded that the petitioners had failed to carry out their obligation to contribute to the Employees Provident Fund and Family Pension scheme within the time limit provided therefor; and that no convincing case had been made out to justify the delay in making the deposits. He also on the material on record found, as a fact, that the petitioners, having regard to their past record, were habitual defaulters and had, therefore, to be severely dealt with, and should be visited with the maximum penalty. The petitioners are guilty of suppressio veri and this, by itself, was sufficient to dismiss the writ petition; but, since it involves a point of importance which was argued at length, we will have to deal with the same. There can be no doubt that the petitioners have been habitual defaulters in the matter of making contributions to the Employees Provident Fund, Family Pension Scheme and payment of administrative charges from the very inception. They have deliberately concealed the facts pertaining to the earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of the Act. Before stating the contentions raised by learned counsel for the petitioners, we think it convenient to set out the scheme of the Act and the relevant provisions thereof having a bearing on the question to be determined. It would be relevant to take into account some of the provisions of the Provident Funds Act which have since its inception in 1952, been subjected to various amendments. The Provident Fund Act, 1952 as originally enacted, provides for the institution of compulsory provident funds for employees in factories and other establishments. It applies to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed and to any other establishment employing twenty or more persons or class of such establishments which the Central Government may specify in that behalf by Notification in the Official Gazette. Under s. 4, the Central Government framed the Employees Provident Funds Scheme, 1952 by S.R.O. 1509, dated September 2, 1952. Section 6 of the Act enjoins on every employer to make contribution to the Employees Provident Fund at the rate of 6% of the basic wages, dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , every employee who is a member of the Employees Provident Fund, is given the option to join the Family Pension Scheme. Para 9 created the Family Pension Fund and provides that from and out of the contributions payable by the employer and employees in each month under s. 6 of the Act, a part of the contribution, representing 1-1/6% of the employees pay along with an equivalent amount of 1-1/6% from out of the employer s contribution, shall be remitted by the employer to the Family Pension Fund. In its working, the authorities were faced with certain administrative difficulties. An employer could delay payment of Provident Fund dues without any additional financial liability. Parliament, accordingly, inserted s. 14B for recovery of damages on the amount of arrears. The reason for enacting s. 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. Section 14B, as originally enacted, provided for imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 15 (or subsection (5) of Section 17) or in the payment of any charges payable under any other provision 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. 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 guide-lines provided for fixing the quantum of damages. The power of the Regional Provident Fund Commissioner to impose damages under s. 14B is a quasi-judicial function. It must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Coal Mines Provident Fund, Dhanbad v. J. Lalla Sons.(1) This Court observed, firstly, that the determination of damages is not an in flexible application of a rigid formula , and secondly, the words as it may think fit to impose show that the authority is required to apply its mind to the facts and circumstances of the case. The contention that in the absence of any guide-lines for the quantification of damages, s. 14B is violative of Article 14 of the Constitution, must, therefore, fail. In this connection, it was also urged that the absence of any provision for appeal, leaves the defaulting employer with no remedy. The conferral of arbitrary and uncontrolled powers on the Regional Provident Fund Commissioner to quantify damages, it is said, without a corresponding right of appeal or revision, makes the provision contained in s. 14B per se void and illegal and it is liable to be struck down on that ground. We are afraid, the contention is wholly devoid of substance. 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 guide-lines. The conferral of power to awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section. In support of his submissions, he has referred to certain authorities. It is argued that the damages referred to in s. 14B is different from penalty or fine and is intended to compensate the loss to the beneficiaries of the Scheme. It has only the ordinary legal meaning of the term damages viz. actual loss as in law of Contract or Tort. Thus the award of damages under s. 14B must be, in essence, the pecuniary reparation for loss or injury sustained by one person through the fault or negligence of another. There is a conflict of opinion between different High Courts as to the meaning of the word damages in s. 14B of the Act. According to some of the High Courts, the word damages in s. 14B means actual loss to the beneficiaries. The view is that s. 14B clearly indicates that an employer is liable to pay damages, if he has made defaults in payment of the contribution. Any delay in paying the amount under s. 6 causes loss to the beneficiaries of the Scheme, such as loss of the interest and the like. This is the loss that is sought to be recovered from the defaulting employer for the purpose of indemnifying the beneficiaries of the Scheme, namely, the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be read in isolation, nor can s. 14B be read out of context. The very object of the Legislation would be frustrated if the word damages appearing in s. 14B of the Act was not construed to mean penal damages. The imposition of damages u/s. 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 s. 14B is, in substance, a penalty imposed on the employer for the breach of the statutory obligation. The object of imposition of penalty u/s 14B is not merely to provide compensation for the employees . We are clearly of the opinion that the imposition of damages u/s 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 employers in general not to commit a breach of the statutory requirements of s. 6, but at the same time it is meant to provide compensation or redress to the beneficiaries i.e. to recommence the employees for the loss sustained by them. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the employers has been streadily increasing. In 1959-60, the arrears which amounted to ₹ 3.65 crores, rose to ₹ 5.96 crores as on the 31st March 1967. The arrears stood at ₹ 14.6 crores on 31st March, 1970 and they have been risen to ₹ 20.65 crores as on the 31st March, 1972. 2. The National Commission on Labour has recommended that in order to check the growth of arrears, penalties for defaults in payment of Provident Fund dues should be made more stringent and that the default should be made cognizable. In its 116th Report presented to Parliament in April 1970, the Estimates Committee has endorsed the recommendations made by the National Commission on Labour and has further suggested that Government should consider the feasibility of providing compulsory imprisonment for certain offences under the Act. Accordingly, it is proposed to amend the Act so as to render the penal provisions more stringent and to make defaults cognizable offences. Provision is also being made for compulsory imprisonment in cases of non-payment of contributions and administration or inspection charges. As recommended by the Estimates Committee, a further provision is being m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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