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Shyam Glass Works v. State Of Uttar Pradesh And Others
Structured Summary of the Opinion (K.N. Singh, J.)
Factual and Procedural Background
This petition challenges proceedings initiated by the Regional Provident Fund Commissioner (RPFC) for the levy of damages and administrative charges and the recovery of those amounts under S. 14B of the Employees' Provident Funds Act, 1952.
The petitioner (a company) defaulted in timely depositing provident fund contributions for the period April 1962 to September 1967; the dues were deposited but after the prescribed dates. On 18 September 1968 the Accounts Officer, acting for the RPFC, issued a notice proposing damages of Rs. 14,856.85 under S. 14B and administrative charges of Rs. 361.94, and directed the petitioner to show cause within ten days.
The petitioner made a representation to the Central Government on 12 October 1968. The Central Government replied on 30 November 1968, advising the petitioner to approach the State Government. The State Government, by order dated 12 February 1969, sanctioned the levy of damages and administrative charges as proposed by the RPFC. The petitioner's representation was rejected by the State Government on 17 December 1970; the petitioner was not directly informed of that rejection. Instead, the State Government informed the RPFC, who wrote to the petitioner on 18 January 1971 advising that the representation had been rejected and directing deposit of the imposed damages within fifteen days.
The petitioner did not pay. On 14 June 1971 the RPFC issued a certificate to the Collector, Aligarh, for recovery of the damages as arrears of land revenue. The petitioner filed this petition challenging the validity of (a) the levy and assessment of damages, and (b) the recovery proceedings initiated thereafter.
Legal Issues Presented
- Whether a delayed levy of damages under S. 14B (i.e., levy taken years after the defaults) precludes the State Government or the RPFC from recovering damages from the employer.
- Whether the employer (petitioner) was entitled to an opportunity of hearing before the State Government approved the RPFC's proposal to levy damages under S. 14B.
- Whether the RPFC had authority under S. 14B to levy or assess damages, and whether the State Government could validly delegate its functions under S. 14B to the RPFC.
- Whether the State Government's order approving the assessment and levy of damages was vitiated for want of application of mind or absence of reasons.
Arguments of the Parties
Petitioner's Arguments
- The damages were levied after six years rather than immediately after the defaults; the State Government and the RPFC were therefore not entitled to recover them.
- The petitioner was not given any opportunity by the State Government (the competent authority) to be heard before approving the RPFC's proposal to assess and levy damages.
- The RPFC had no authority under S. 14B to levy or assess damages because the State Government could not validly delegate its functions to him.
- The State Government's order approving the levy was made mechanically and without application of mind.
- The State Government's order was vitiated because it did not contain any reasons.
Respondents' Argument
- Counsel for the respondents contended that the notice dated 18 September 1968 (issued by the Accounts Officer on behalf of the RPFC) to show cause against the proposed levy satisfied the requirements of natural justice, and therefore there was no contravention of natural justice by the State Government.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Amin Chand & Sons v. State of Punjab [A.I.R. 1965 Punj. 441] | Held by a single Judge of the Punjab High Court that damages should be levied immediately after the default and that a delayed levy could be arbitrary (employer may conclude Government decided not to exercise discretion). | The court noted this decision but expressly rejected its rule. The Division Bench decision in this court disapproved the view taken in Amin Chand; the present court followed that disapproval and did not accept the immediate-levy requirement. |
| Regional Provident Fund Commissioner v. Allahabad Canning Company [Special Appeal No. 21 of 1976, dated 4 January 1978] | Division Bench holding that S. 14B does not prescribe any limitation period for taking action; absence of a bar of limitation does not prevent the exercise of statutory powers under S. 14B. | The court relied on this Division Bench view and adopted it: S. 14B contains no limitation and delay in action does not, by itself, deprive the State Government or RPFC of their powers under S. 14B. |
| Reliable Watersupply Service of India (Private), Ltd. v. Regional Provident Fund Commissioner, Lucknow [1973-II L.L.N. 120] | Division Bench holding that imposition of damages under S. 14B is a penalty with serious civil consequences (deprives employer of money) and that a duty to follow principles of natural justice is implicit in S. 14B. | The court cited and followed this principle to conclude that the State Government must give an opportunity of hearing before imposing damages under S. 14B; absence of such opportunity renders the imposition null and void. |
Court's Reasoning and Analysis
The court's analysis proceeded in distinct steps, grounded in the statutory text of S. 14B and the nature of the power to impose damages:
- Statutory power and limitation: The court observed that S. 14B confers power on the "appropriate Government" to levy and recover damages for default in depositing provident fund dues. The Act does not prescribe any period of limitation for levy or recovery. The court relied on the Division Bench decision in the Allahabad Canning Company case to hold that absence of limitation does not bar the State Government or RPFC from exercising their powers under S. 14B; consequently, the petitioner's contention that delay alone invalidated the levy was rejected.
- Nature of the power and requirement of natural justice: The court examined the nature and purpose of damages under S. 14B — statutory, punitive, and intended to punish wilful default. Because the section confers discretion on the State Government ("as it may think fit to impose"), the exercise of that discretion requires consideration of the relevant facts and circumstances in each case.
- Duty to give hearing: Relying on the Reliable Watersupply decision, the court held that the imposition of damages (which has serious civil consequences by depriving an employer of money) carries an implicit duty to follow principles of natural justice. Even if S. 14B does not expressly require an opportunity of hearing, the nature of the function demands that the party affected be given such an opportunity. Absent an opportunity of hearing before the authority vested with the ultimate power (the State Government), the imposition of damages would be null and void.
- Adequacy of the notice given: The court addressed the respondents' contention that the show-cause notice dated 18 September 1968 (issued by the Accounts Officer for the RPFC) satisfied natural justice. The court found this contention unsound because the Accounts Officer/RPFC had no authority to impose damages; the imposition was a function vested in the State Government. Opportunity to be heard before an authority that lacked the power to decide the matter was futile; the State Government itself was obliged to give the hearing prior to imposing damages.
- Delegation and role of the RPFC: The court examined delegation history set out in the record: on 5 June 1963 the State Government delegated power to the RPFC to impose damages; this delegation was later modified and then partially cancelled by a government order dated 15 October 1976, which directed that recommendations be made to the State Government in future. In the present case the RPFC had not imposed damages but only made a recommendation to the State Government, which accepted it. The court found no objection to the RPFC making recommendations when the State Government retained the final authority.
- Issue of reasons and application of mind: The court noted the petitioner's contention that the State Government's order lacked reasons and was mechanically made, but declined to decide that contention because it found the order illegal on the separate ground of contravention of natural justice (failure to give an opportunity of hearing).
- Consequence for recovery proceedings: Having concluded that the State Government's order imposing damages was illegal for want of an opportunity of hearing by the State Government itself, the court held that subsequent recovery proceedings taken by the RPFC were also vitiated.
Holding and Implications
Holding:
The petition is allowed; the order of the State Government imposing damages under S. 14B and the related order of the Regional Provident Fund Commissioner are quashed.
The court specifically quashed the orders identified in the opinion (the opinion states that the order of the State Government dated 18 January 1971 and the order of the Regional Provident Fund Commissioner dated 18 September 1968 are quashed). The petitioner was also held entitled to costs.
Implications:
- The direct effect is that the imposition of damages and the recovery proceedings directed against the petitioner were set aside; the recovery certificate issued to the Collector for recovery as arrears of land revenue is thereby vitiated.
- The court did not purport to lay down any novel rule beyond applying established principles: it clarified that delay in levy does not by itself bar action under S. 14B (following the Division Bench in the Allahabad Canning Company case), but it affirmed that the State Government must give the affected employer an opportunity of hearing before imposing damages because S. 14B's punitive nature imports a duty to follow natural justice.
- The opinion did not state any broader or novel precedent-making implication beyond these conclusions; the decision nullified the specific orders under challenge and awarded costs to the petitioner.
Note: This summary is based exclusively on the text of the provided opinion. No information has been added or inferred beyond what the opinion itself contains.
K.N Singh, J.:— This petition is directed against the proceedings taken by the Regional Provident Fund Commissioner for levy of damages and other charges as well as recovery of the same under S. 14B of the Employees' Provident Funds Act, 1952.
2. The petitioner-company committed default in making its contribution towards provident fund dues of its employees during the period April 1962 to September 1967. The petitioner-company had deposited the provident fund dues but the deposit was made after the expiry of the prescribed date. On 18 September 1968, the Accounts Officer acting on behalf of the Regional Provident Fund Commissioner, Uttar Pradesh, Kanpur, issued a notice to the petitioner in respect of levy of damages under S. 14B of the Employees' Provident Funds Act, 1952. The notice stated that as the petitioner had deposited the provident fund dues after the expiry of the prescribed date it was liable to pay a sum of Rs. 14,856.85 as damages under S. 14B of the Act and Rs. 361.94 as administrative charges. The petitioner was directed to show cause within ten days of the receipt of the notice as to why the State Government should not be requested to impose damages up to 25 per cent on the belated payments made by the petitioner. The notice was accompanied by a statement giving details of damages proposed to be imposed. Under some misconception of law the petitioner made a representation to the Central Government on 12 October 1968, against the proposed imposition of damages. The Central Government by its letter, dated 30 November 1968, directed the petitioner to approach the State Government. The petitioner thereupon made a representation to the State Government setting out the details of the circumstances under which it could not remit the provident fund dues in time, but prior to that the State Government by its order, dated 12 February 1969, sanctioned the levy of damages and administrative charges as proposed by the Regional Provident Fund Commissioner. The petitioner's representation was rejected by the State Government on 17 December 1970. Intimation of the same was not given to the petitioner. Instead the State Government informed the Regional Provident Fund Commissioner about the rejection of the petitioner's representation. The Regional Provident Fund Commissioner by his letter, dated 18 January 1971, informed the petitioner that his representation had been rejected by the State Government. The petitioner was directed to deposit the damages as imposed against it within fifteen days. The petitioner failed to deposit the damages. Thereupon the Regional Provident Fund Commissioner issued a certificate to the Collector, Aligarh, on 14 June 1971, for the recovery of the amount of damages as arrears of land revenue from the petitioner. The petitioner thereupon filed this petition challenging the validity of the levy and assessment of damages and the recovery proceedings.
3. Sri G.P Bhargava, learned counsel for the petitioner, challenged the validity of the levy and assessment of the damages and its recovery on the following grounds:
(1) Since the damages were levied after six years and not immediately after the defaults were committed, the State Government and the Regional Provident Fund Commissioner were not entitled to recover the same from the petitioner.
(2) The petitioner was not given any opportunity by the State Government, the competent authority, to assess and levy the damages before the proposal of the Regional Provident Fund Commissioner was approved by it.
(3) The Regional Provident Fund Commissioner had no authority under S. 14B of the Act to levy or assess the damages as the State Government could not validly delegate its functions to him.
(4) The State Government's order approving the assessment and the levy of damages was made mechanically without application of mind.
(5) The order of the State Government is vitiated as it does not contain any reasons.
4. Section 14B of the Act confers power on the appropriate Government to levy and recover damages for committing default in making the deposit of provident fund dues. The Act does not prescribe any period of limitation for the levy or recovery of damages from the defaulter. The petitioner placed reliance on Amin Chand & Sons v. State of Punjab [A.I.R 1965 Punj. 441], where a learned single Judge of the Punjab High Court held that the damages should be levied immediately after the default and if the levy is delayed the employer may legitimately come to the conclusion that the Government had decided not to exercise its discretion to levy damages. To choose a date for levy of damages was held arbitrary. This view was, however, not accepted by our Court in Regional Provident Fund Commissioner v. Allahabad Canning Company [Special Appeal No. 21 of 1976, dated 4 January 1978]. A Division Bench of this Court disapproved the view of the Punjab High Court as taken in Amin Chand & Sons, case (vide supra). The Division Bench held that S. 14B of the Act does not provide any limitation for taking action against the erring employers for not depositing the provident fund dues. In the absence of Bar of limitation there was no principle of law which debarred the Provident Fund Commissioner or the State Government from exercising their statutory powers under S. 14B of the Act. We find no reason to take a different view.
5. In regard to the second ground, we are satisfied that the petitioner was not given any notice of hearing by the State Government before it approved the proposal of the Regional Provident Fund Commissioner for the levy and assessment of the damages against the petitioner. Section 14B lays down that if an employer makes default in making its contribution to the fund or in the transfer of accumulations required to be transferred by him or in the payment of any charges payable under the Act the appropriate Government may recover from the employers such damages not exceeding 25 per cent of the amount of arrears as it may think fit to impose. The section provides for statutory damages against the employers for breach of its duty to deposit the amount within the prescribed period. The purpose is to punish erring employers for their wilful default. The appropriate Government has, however, been conferred a discretion in assessing are recovery of damages from the erring employers. The levy of the damages cannot, however, exceed 25 per cent of the amount of arrears. The section contemplates that the State Government may after considering the relevant facts and circumstances take a decision not to levy any damages or recover the same from a particular employer. This is clear from the expression occurring in the section “as it may think fit to impose.” Since the nature of levy is punitive and as the State Government is required to consider the facts of each case while exercising its discretion under the Act, it would require an enquiry in consonance with the principles of natural justice. The State is under a duty to follow the principles of natural justice in exercising the power of imposing damages. Even if S. 14B does not expressly provide for giving an opportunity of hearing to the employer the State Government is bound to do so having regard to the purpose and nature of the functions it is required to perform. In Reliable Watersupply Service of India (Private), Ltd. v. Regional Provident Fund Commissioner, Lucknow [1973-II L.L.N 120], a Division Bench of this Court held that as S. 14B involves imposition of penalty which has the effect of depriving the employer of his property in the shape of money it involves serious civil consequences. Consequently a duty to follow the principles of natural justice is implicit in the section itself. It is not necessary to decide the question as to whether the State Government is required to act in a quasi-judicial manner as, in our opinion, even if the State Government is performing purely administrative functions under S. 14B it is under a duty to exercise its power consistently with the principles of natural justice which require that the party affected must be given an opportunity of hearing in the absence of any opportunity of hearing being given to the employer the imposition of damages would be rendered null and void.
6. In the instant case there is no dispute that the State Government did not give any notice or opportunity of hearing to the petitioner before it approved the proposal of the Regional Provident Fund Commissioner for the imposition of damages. Learned counsel for the respondents, however, contended that since the Regional Provident Fund Commissioner had given a notice, dated 18 September 1968 (annexure I to the petition), to the petitioner to show cause against the proposed levy of damages there was no contravention of the principles of natural justice. We find no merit in the contention. The notice, dated 18 September 1968, was issued under the signature of the Accounts Officer on behalf of the Regional Provident Fund Commissioner, Uttar Pradesh, Kanpur, directing the petitioner to show cause why the proposal be not forwarded to the Government for levy of damages. The Accounts Officer or the Regional Provident Fund Commissioner had no authority to impose any damages. It is conceded that the State Government was only competent authority to impose the damages and exercise discretion under S. 14B of the Act. Opportunity of showing cause before the authority which had no power to exercise jurisdiction was wholly futile. Since the ultimate power and discretion vested in the State Government it was its bounden duty to have given opportunity to the petitioner before imposing damages. Failure to give such an opportunity rendered the orders of the State Government imposing damages against the petitioner null and void.
7. The petitioners' contention that the Regional Provident Fund Commissioner had no authority to impose damages and the State Government could not delegate its functions under S. 14B to the Regional Provident Fund Commissioner is not sound. On 5 June 1963, the State Government delegated its power to the Regional Provident Fund Commissioner to impose damages against the defaulting employers. Later on the order of delegation was modified but that order was followed by another Government order, dated 15 October 1976, whereby the State Government partially cancelled its previous order and directed the Regional Provident Fund Commissioner that in future when damages were proposed to be levied a recommendation may be made to the State Government in all cases. Thus the State Government retained its power to assess or recover damages and the Provident Fund Commissioner was not empowered to impose the damages. In the instant case, the Regional Provident Fund Commissioner did not impose damages against the petitioner, instead he merely sent his recommendation to the State Government which was accepted under the order of the State Government, dated 12 February 1969. No exception can be taken to the Commissioner's making recommendation to the State Government as the final authority was retained by the State Government.
8. The petitioner's contention that the order of the State Government was vitiated on account of absence of reasons and that it did not apply its mind to the facts and circumstances need not be considered or decided as we have already taken the view that the order of the State Government in imposing the damages was illegal on the ground that the order was passed in contravention of the principles of natural justice.
9. We, therefore, hold that the order of the State Government imposing damages against the petitioner under S. 14B of the Act was illegal. Consequently the subsequent proceeding taken by the Regional Provident Funds Commissioner for the recovery of the amount of damages was also vitiated.
10. In the result the petition succeeds and is accordingly allowed. The order of the State Government, dated 18 January 1971, and the order of the Regional Provident Fund, Commissioner, dated 18 September 1968, are quashed. The petitioner is entitled to his costs.
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