Holding

Delay alone does not invalidate a Section 14‑B damages order unless specific prejudice is pleaded and proved, and damages must be confined to 25% of the total assessed amount.

Summary

Mis. K. Sreetlite Electric Corporation appealed against an order of the Regional Provident Fund Commissioner, Haryana, which imposed damages of Rs 88,731.25 under Section 14‑B of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 for belated contributions for July 1976‑June 1980. The corporation contended that the Commissioner had initiated proceedings 6‑10 years after the default and that the damages were not in line with the Central Government's instructions under Section 20, which prescribe a 25% per annum rate. The Supreme Court held that a delay in initiating proceedings is not a ground to set aside a damages order unless the employer specifically pleads and proves prejudice. It also observed that the Commissioner had applied inconsistent rates and therefore confined the recoverable damages to 25% of the total amount imposed. The appeal was partly allowed and the order was modified accordingly.

Issues considered

Whether a delay of several years in initiating proceedings under Section 14‑B of the EPF Act is a ground for setting aside an order imposing damages.
Whether the Central Government's instructions under Section 20 of the EPF Act are binding on the Provident Fund Commissioner for determining the rate of damages.
Whether the damages imposed can be limited to 25% of the total assessed amount due to inconsistent calculation.

Legislation cited

Employees Provident Funds & Miscellaneous Provisions Act, 1952s. 14-B, s. 20

Subjects

Employees' Provident FundsSection 14-BDamagesBelated depositDelay in proceedingsPrejudiceCentral Government instructionsCalculation of damages

Judgment

• ... MIS. K. S1REETLITE ELEC1RIC CORPORATION
v.
A

REGIONALPROVIDENf FUND COMMISSIONER, HARYANA

APRIL 9, 2001

[S. RAJENDRABABU AND SHIVARAJ V. PATIL, JJ.] B

Employees' Provident Funds & Miscellaneous Provisions Act, 1952-
Sections 14-B and 20-Damages for belated deposit of contribution to
Provident Fund-Delay in initiating proceedings-Calculation of damages-
Held, delay not a ground for setting aside proceedings unless specific plea of c
prejudice raised and established-Damages confined to 25 per cent of the
total damages imposed.

... Respondent-Commissioner issued show canse notice to appellant-
Corporation for levying damages for belated deposit of contributions to
the Fund under Section 14-B of Employees' Provident Funds & Miscella- D
neous Provisions Act, 1952 for the period from July 1976 to June 1980.
The respondent, by an order, imposed damages of Rs. 88, 731.25. The
appellant filed a Writ Petition before High Court challenging the order or
the respondent, it was dismissed.

In appeal to this Court, the appellant contended that the respondent E
has initiated action under the Act for levy of damages belatedly after 6 to
10 years from the period of default; and that the order of the respondent
levying damages is not in accordance with the rates set out in the instruc-
tions issued by the Central Government under Section 20 of the Act.
F
Partly allowing the appeal, the Court

HELD: 1. Delay in initiating proceedings nnder Section 14-B of the
Employees' Provident Funds & Miscellaneous Provisions Act, 1952 will
not he a ground for setting aside an order imposing damages unless spe-
cific plea of prejudice is raised before the Provident Fund Commissioner G
and establishment. [1027-E)

Hindustan Times Ltd. v. Union of India & Ors., [1998] 2 SCC 242,
.A relied on.

2. From the statement of calculation of damages prepared by the re- H
1025
1026 SUPREME COURT REPORTS (2001] 2 S.C.R.
A spondent for delay in payments, it is not possible to discern tbe rationale
adopted in the matter ofimposition of penalty at different rates for different
periods of default. It is appropriate to confine tbe damages leviable on an
over all consideration to tbe extent of 25 per cent of the total damages im-
posed. (1028-E-GJ

B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6498 of 1998.

From the Judgment and Order dated 30.6.98 of the Punjab and Haryana
High Court in C.W.P. No. 3841 of 1987.

A.P. Bhandari and S.C. Patel for the Appellant.
c Anoop George Chaudhary, Ms. B. Sunita Rao, C. Radhakrishna and
Arvind Kumar Sharma for the Respondent.

The Judgment of .the Conrt was delivered by

RAJENDRA BABU, J. A notice dated December 30, 1986 was served
D upon the appellant to show cause why damages under Section 14-B of the
Employees' Provident Funds & Misc. Provisions Act, 1952 [hereinafter
referred to as 'the Act'] for period from July 1976 to June 1980 be imposed
upon the appellant. On March 13, 1987 an order was made by the respondent
imposing damages to the extent of Rs. 88, 731.25 on account of belated
E deposit of the amount towards the provident fund. The appellant claimed that
delay in depositing the amount in certain cases is only for a few days: that
even so the respondent had assessed the damages in most of the cases at 100
per cent and that the actual loss suffered by the respondent is only to the
extent of Rs. 664. Challenging the order dated March 13, 1987 the appellant
filed a writ petition in the High Court contending that the order is not in
F
accordance with the instructions issued on November 3, 1982; that the order
has been passed at a very belated stage inasmuch as for the period ending
in July 1976 the notice has been issued in the year 1987; that para 32(A)
was inserted into the scheme after tbe amendment of the Act as under:

Period of Default Rate of Damages
G
[%age of arrears
per annum]
(a) Less than two months 17
(b) Two months and above but less than
H four months 22
STREE'TUTE ELECTRIC CORPN. v. REGIONAL PROVIDENT F1JND COM MR. [RAJENDRA BABU. J.) 1027

(c) Four months and above but less than six 27 A
months

(d) Six months and above 37

The w1it petition was resisted by the respondent by taking the stand
that the damages have been levied in accordance with law. The Division B
Bench of the High Court dismissed the writ petition filed by the appellant.
Hence this appeal by special leave.

In this appeal, it is contended that :

(i) the action has been initiated very late inasmuch as the proceed- C
ings had been initiated from 10 to 6 years later than the default
stated to have been committed by the appellant; and

(ii) the Central Government had instructed under Section 20 of the
Act that the damages at the rate of 25 per cent per annum can
be levied. D

These two contentions stood rejected by the High Court. Firstly, that
delay in initiating proceedings under Section 14-B of the Act will not be a
ground for setting aside an order imposing damages unless specific plea of
prejudice is raised before the Provident Fund Commissioner and established
and further that the instructions given by the Central Government do not have E
any binding force. The High Court adverted to the decision of this Court in
Hindustan Times Ltd. v. Union of India & Ors., (1998] 2 SCC 242, to reach
this conclusion. In that case, this Court examined the scheme of the provisions
of the Act in relation to delay in passing of the order. It was stated that the
mere fact that the proceedings are initiated or demand for damages is Wtde F
after several years cannot. by itself, be a ground for drawing an inference of
waiver of that the employer was hilled into a belief that no proceedings under
Section 14-B would be taken and mere delay in initiating such action cannot
amount to prejudice inasmuch as such delay would result in allowing the
employer to use the monies for his own purposes or for his business especially
G
when tl1ere is no additional provision for charging interest on such amount.
However; the employer can claim prejudice if there is proof that between the
period of default and the date of initiation of action under Section 14-B he
has altered his position to his detriment to such an extent that if the recovery
is made after a large number of years, the prejudice to him is of an
irretrievable nature, and such prejudice can also be established by stating H
1028 SUPREME COURT REPORTS (2001] 2 S.C.R.
A reason of non-availability of records of the personnel by which evidence it
could be established that there was some basis for delay in making the
payments. Therefore, this Court was of the opinion that such delay, by itself,
would not result in any prejudice. In the present case, the High Court found
that no such prejudice was either pleaded or proved. Hence the first conten-
tion stands r"jected.
B
The second contention need not be examined in the view we propose
to take in the matter. Even if we hold that the Central Government instructions
issued under Section 20 of the Act are not binding on the respondent, still
in assessing the damages it will be necessary for us to take note of the manner
C in which the amounts of damages have been levied and appropriately consider
as to what would be the correct rate of damages to be imposed under Section
14-B of the Act. The statement of calculation prepared by the respondent
regarding delay in payments discloses that the respondent has imposed
damages at different rates, for example, for the month of July 1976 the rate
of damages is 50 per cent whereas the period of default is over month, while
D in case of December 1976 the damages imposed upon the appellant are at
the rate of 20% tl1ough tl1e period of delay is over two months, in the case
of delay for April 1988 damages imposed are at tl1e rate of 30 per cent though
the period of delay is only one month. In ce1tain cases, even for a delay of
below 15 days, like October 1977, damages at the rate of 85 per cent have
E been imposed, while for anotl1er period though the delay is for six months
65 per cent damages have been levied. Therefore, it is not possible to discern
the rationale adopted by the respondent in the matter of imposition of penalty.
In the circumstances, therefore, it would have been appropriate for us to set
aside the order and remit the matter to the respondent, but we do not think
that such an exercise is necessary after such a Jong period. In this case, the
F amount due towards provident fund has already been deposited and this
Court, by order dated December 18, 1998, granted an interim relief to the
extent of 75 per cent of the amount of damages sought to be recovered, while
out of the disputed amount of damages (that is, Rs. 88, 731.25), 25 per cent
had already been directed to be deposited. In that view of the matter, we think,
G it is appropriate to confine the damages Jeviable in this case on an over all

H
consideration to the extent of 25 per cent of the total damages imposed.

The appeal is, therefore, partly allowed and the order made by the
Provident Fund Commissioner is modified accordingly. No costs.

B.S. Appeal partly allowed.
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