1. The petitioner-company is an establishment coming within the ambit of the Employees' Provident Funds Act, 1952 (hereinafter called the Act), and the scheme framed thereunder. Exhibit P3, dated 13 March, 1969, exhibit P4, dated 31 August, 1970, exhibit P8, dated 27 February, 1971 and exhibit P9, dated 15 June, 1973, relating respectively to the periods February-November 1967, December 1967-December 1969, January-March 1970 and April 1970-March 1971, were issued to the petitioner under S. 14B of the Act. The petitioner was called upon to pay damages at the rate 25 per cent of the amounts of arrears alleged to be due from it. The case of the petitioner is that, at the time of the impugned orders exhibits P3, P4, P8 and P9, no amount was due from it under the provisions of the Act or the scheme, and consequently the respondents have no power to recover damages from the petitioner. The petitioner further states that in any case what is recoverable under S. 14B is only damages in respect of the loss caused by its default in remitting the amount towards provident fund on the due dates.
2. I shall now read the relevant provisions concerning the petitioner's liability towards provident fund. Section 6 reads as follows:
“The contribution which shall be paid by the employer to the fund shall be six and a quarter per cent of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor), and the employee's contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires and if the scheme makes provision therefore, be an amount not exceeding eight and one-third per cent of his basic wages, dearness allowance and retaining allowance (if any):
Section 14(2A) imposes a penalty upon any person who contravenes or makes default in complying with any provision of the Act. It reads as follows:
“Whoever contravenes or makes default in complying with any provision of this Act or of any condition subject to which exemption was granted under S. 17 shall, if no other penalty is elsewhere provided by or under this Act for such contravention or non-compliance, be punishable with imprisonment which may extend to three months, or with fine which may extend to one thousand rupees, or with both.”
3. The impugned orders, as stated earlier, have been issued under S. 14B which reads as under:
“Where an employer makes default in the payment of any contribution to the fund or in the transfer of accumulations required to be transferred by him under Sub-sec. (2) of S. 15 or Sub-sec. (5) of S. 17 or in the payment of any charges payable under any other provision of this Act or of any scheme or under any of the conditions specified under S. 17, the appropriate Government may recover from the employer such damages, not exceeding 25 per cent of the amount of arrears, as it may think fit to impose.”
4. The amounts are due for payment within fifteen days of the close of the month as provided under Para. 38(2) of the scheme. The petitioner having failed to remit the amounts within the stipulated time was called upon to pay a fine under S. 14(2A). This fine was paid by it in full.
5. The question that arises for consideration is whether the petitioner is liable to pay damages under S. 14B if no amount was subsisting on the date of the order passed under the section; and if so, whether it is liable to pay any amount in excess of the actual damages caused by its default?
6. Section 14B clearly indicates that an employer is liable to pay damages if he has made default in payment of the contribution. Merely because the amount had been paid earlier to the order under S. 14B, it cannot be contended that there was no default in payment on the due date if the amount was paid only subsequent to the due date. Any delay in paying the amount under S. 6 causes loss to the beneficiaries of the scheme, such as loss of interest and the like. This is the loss that is sought to be recovered from the defaulter for the purpose of indemnifying the beneficiaries of the scheme — namely, the employees — to the extent of the loss suffered. The defaulter under S. 14B is, therefore, liable to pay damages which represent the loss; but not anything more, as such recovery would amount to penalty, and that is not permitted under the section.
7. This aspect of the question does not seem to have been considered by the respondent, although, upon the petitioner's representation, exhibit P4 was modified by exhibit P7 by reducing the amount from 25 per cent to 10 per cent of the arrears. I would, therefore, quash exhibits P3, P8 and P9, and direct the respondents to compute the actual loss which can be recovered from the petitioner by way of damages within the scope of S. 14B, as indicated above, and pass appropriate orders in respect of the periods covered by exhibits P3, P8 and P9. Subject to what is stated above, the original petition is allowed and the parties are directed to bear their respective costs.