D.K Seth, J.:—
The Background:
1. These two matters have since been referred to this larger Bench on the basis of an order dated 14th November, 2003 passed in WP 16037(W) of 2003. The learned Single Judge differed with the decisions of this Court passed in three other matters by three other learned Single Judges respectively. The learned Fourth Judge, therefore, was of the opinion that a larger Bench should be constituted. On the other hand an appeal was taken against the judgment dated 21st March, 2003 passed by one of the learned Single Judge in CR. No. 11160(W) of 1984. This appeal was being heard by a Division Bench consisting of one of us (D.K Seth, J.) and Hon'ble R.N Sinha, J. On 19 July, 2004 Mr. Bikash Ranjan Bhattacharya, learned Counsel for the respondent, brought to the notice of the said Division Bench that identical point had since been referred to a larger Bench. Therefore by an order dated 19 July, 2004 the matter was released from being heard in part by the said Division Bench directing the matter to be placed along with the other matters before the larger Bench Accordingly these two matters have since been referred to the larger Bench now constituted by the present complements.
The Point:
2. Mr. Sengupta appearing on behalf of the appellant in Dalgaon Agro Industries Ltd. raised a very interesting question with regard to the liability ??? a transferee of an establishment in relation to damages contemplated under section 14B of the Employees' Provident Fund and Miscellaneous Provision Act, 1952 (1952 Act) in respect of defaults committed by the transferor/employees before the date of transfer in view of the expressions used in section 17B of that Act imposing joint liability upon both the transferor and the transferee. In other words Mr. Sengupta wanted us to define the extent of the liability under the fiction created by section 17B.
2.1 In Pratya Nivesh (P) Ltd. similar question was raised namely as ??? whether a transferee would be liable under section 14B in respect of the default committed by the transferor employer prior to the transfer of the establishment to the transferee.
The Facts:
3. In both the cases the respective establishment was transferred pursuan to certain agreement which includes a condition that the transferee shall no be liable for any dues under the 1952 Act in respect of the period prior to the date of transfer arising after the date of transfer not known or determined on the date when the transfer was effected. However all other known dues were either paid by the transferor or the transferee or were so adjusted within the consideration of the transfer. After such transfer, notices under section 14B were since issued upon the transferee.
Submission on behalf of the appellant:
4. Mr. Sengupta contended that on transfer, whether voluntary or non-voluntary under a scheme framed by the Court, the liability of the transferee in confined to the scope envisaged under section 17B. According to him the expression ‘amount due’ mentioned in section 7A does not include damages penalty for default contemplated under section 14B prior to the transfer in view of section 17B, by reason of the fact that the expression used in section 7A has since been bodily lifted to section 17B without reference to the expression in relation to imposition of damages/penalty referred to in section 14B. Inasmuch as, the scope of section 7A is distinct and different from the scope of section 14B. The authority competent or having jurisdiction to determine the question relating to section 7A are different from the authority competent to deal with the question in relation to section 14B which uses expression different from those used in section 7A.
4.1 He next contended that the transferee cannot be asked to explain the default committed by the transferor, the reason whereof the transferee cannot be expected to know. Therefore the purpose of giving hearing under section 14B incorporating the principles of audi alteram partem would be a futile exercise if the transferee is held to be liable and expected to explain the reason for default by the transferor. This is more apparent in view of the proviso to section 17B where the liability is confined only to the extent of the asset received by the transferee on transfer. According to him in case the transferor is given hearing and the damages are imposed, then, whether it would amount to be a ‘sum due’ within the meaning of section 17B recoverable from the transferee. Mr. Sengupta contended that the learned Single Judge did not notice the decision in Regional Provident Fund Commissioner, Mangalore v. Karnataka Forest Plantations Corporation Limited, Bangalore, 2000 (1) LLJ 1134; Eveready Industries (India) Ltd. v. Regional Provident Fund Commissioner, 2003 (2) LLJ 1034 (Cal); Harbans Lal Sahani v. Indian Oil Corporation, 2000 (10) JT (SC) 561 and Organo Chemicals Industries Ltd. v. Union of India, 1979 (2) LLJ 416 : AIR 1979 SC 1803 : 1979 (4) SCC 573. The learned Single Judge also did not consider the impact of the decision in Darjeeling Dooars Plantation Ltd. v. Regional P.F Commissioner W.B, 1995 (1) LLJ 939 : 1995 LLR 939.
4.2 Mr. Sengupta then contended that the initial notice was issued by the Provident Fund Authority on 6 February, 1976, but it was not pursued. If it was pursued and decided, then, in that event the quantum would have been known to the Court and to the transferee and provision would have been made in the scheme. He also relies upon the terms of the scheme where it was stipulated that any other liability found afterwards shall be the absolute liability of the transferor and not of the transferee. Mr. Sengupta also contended that the power relating to imposition of 100% damages was arbitrary and whimsical. He relied on the decision in Shri Angappa Spinning Mills, Madurai v. Regional Commissioner, Employees' Provident Fund, Madras, 1986 Lab IC 458 and Union of India v. Super Processors, 1993 (2) LLJ 2003.
4.3 Relying on the decision in Union of India v. Super Processors, 1993 (2) LLJ 2003, Mr. Sengupta alternatively contended that in case the provisions of the law are amended reducing the damages subsequently in that event the employer would be liable for the lesser one even if at the time of accrual of liability the provision might have been more stringent. In the said decision it was held that in case the liability was enhanced by subsequent amendment in that event the employer would be liable for the lesser liability. Therefore, according to him the respective penalty or damages whichever is lesser would be applicable irrespective of the time when the default was committed. He relied an a circular prescribing 25% of the contribution etc. at a later stage which according to him would prevail in case it is held that irrespective of the fact whether the transferor or the transferee is held liable under section 14B.
4.4 In elaborating his submission Mr. Sengupta pointed out that section 7A employed the expression “determine the amount due from any employer under any provision of this Act.” etc. This expression has been bodily lifted to section 17B where the expression employed the phrase “to pay contribution and other sum due from the employer under any provisions of this Act” etc. Whereas section 14B employed the expressions “may recover from the employer such damages” where the employer makes default in payment of any contribution to the fund etc. Thus there is an apparent distinction between dues and damages. The damages are something, which are not dues, which is in the nature of penalty, which cannot be described as dues. The authority dealing with section 14B is different from the authority empowered under section 7A namely the Central Provident Fund Commissioner or such officer as may be authorized by the Central Government by notification in the Official Gazette in this behalf is the authority competent to recover damages under section 14B; whereas the Central Provident Fund Commissioner, the Deputy Provident Fund Commissioner or the Regional Provident Fund Commissioner by reason of their appointment in the post are competent and empowered to determine under section 7A the ‘amount due from the employer under any of the provisions of the Act’ etc.
4.5 If by notification the authority under section 7A is empowered to determine damages under section 14B even then the characteristics of the ‘amount due’ under section 7A cannot be equated with the characteristic of damages recoverable under section 14B. These two are completely distinct and different from each other. At the same time a proceeding under section 7A is different from that under section 14B and both cannot be taken together. Therefore the expression employed in section 17B does not include damages within the liability to pay “the contribution and other sum due from the employer under any provisions of the Act,” etc. Section 17B is a declaratory provision limiting the liability of the transferee to the value of the assets obtained by such transfer. Whereas section 14B does not prescribe any such limit in order to determine the liability of the employer under section 7A or under section 14B.
4.6 When the legislature has used the expression ‘employer’ in relation to the liability under section 7A and section 14B, it had made a distinction between an employer and a transferee in section 7B by employing the expression “the employer and the person to whom the establishment is so transferred shall jointly and severally be liable”. Therefore the word “person” having been used to denote the transferee, the transferee cannot be put into the shoes of the employer for the period during which he was not the employer. The transferee has been made jointly liable in section 17B. But section 14B does not refer to such person but to the ‘employer’ making default. The liability is related to the default by the employer and the same being penal in nature can be recovered from the person who was liable for the accrual of the liability. The liability accrues on the commission of the default. It is only a question of determination of the liability. Simply because the liability is determined after the date of transfer the liability could not be shifted by reason of the fiction created in section 17B on the transferee not being the employer making the default.
4.7 Even if the transferee is given hearing, by no stretch of imagination he could be able to explain the reason for default committed by the transferor, a knowledge personal to the transferor. The determination of the liability under section 14B only upon hearing the transferee would render the proviso futile and ineffective. Therefore, the transferee cannot be treated at par with the employer in respect of damages contemplated under section 14B. However, Mr. Sengupta in his usual fairness states that the law in relation to the dues determined under section 7A is clear and well-settled in view of the expression used in section 17B saddling the liability both upon the transferor/employer and the transferee. Admittedly in this case the default related to the period prior to the transfer and as such no proceeding under section 14B could be proceeded against the transferee and the transferee would not be liable and the Provident Fund Authority cannot recover any damages from the transferee in respect of the default committed by the transferor employer prior to the date of the transfer. Therefore the judgment of the learned Single Judge should be set aside and a declaration should be issued that the transferee is not liable under section 14B in respect of defaults related to period prior to the date of transfer.
Submission on behalf of the respondent:
5. Mr. Bikash Ranjan Bhattacharya, learned Counsel for the respondent Provident Fund Authorities contended that the use of the expression ‘damages’ in section 14B would not dilute the identity of the dues. According to him from the scheme of the Act it does not appear that any distinction can be made with regard to dues and damages. He drew our attention to various provisions of the Act, particularly to section 2(c) defining contribution and that those in section 6 prescribing percentage of contribution; section 7A(1) prescribing the scope for determination of dues in relation to contribution and such other dues recoverable under any of the provisions of the Act; section 7A(2) laying down the procedure; section 7B providing for review; section 7C dealing with escaped amount; section 7Q providing for charging interest; section 7-1 providing for appeal; section 7-0 prescribing deposit in appeal; section 8 laying down the mode of recovery; section 8B laying down the procedure for recovery through certificate; and section 8F providing for other mode of recovery. According to him whatever amount is recoverable under any of the provisions of the Act including those under section 14B are amount recoverable. The amount recoverable is an amount due from or payable by the employer. By reason of the scheme of the Act in order to arrest avoidance or escapement of liability by transfer or series of transfer, section 17B was enacted.
5.1 Mr. Bhattacharya contended that the provisions of the Act apply to the establishment. It is the liability of the establishment. In order to ensure recovery of the liability of the establishment, which may be a person or a body of persons or a juristic person other than individual, the concept of employer was introduced to fix the liability. This is apparent from the definition of employer in section 2(e), which is an inclusive definition. The expression ‘employer’ as defined and used in the Act was aimed at facilitating recovery and fixing of liability. Inasmuch as in relation to an establishment which is a factory an employer means the owner or occupier of the factory including the agent of such owner or occupier the legal representative of a deceased owner or occupier and where a person has been named as a manager of a factory under section 7(1)(a) of the Factories Act, 1948, Whereas in relation to any other establishment the “employer” means the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent. Thus, section 2(e) has created a fiction in relation to employer for the purpose of fixing liability and facilitating recovery from the establishment in the 1952 Act. The provisions of the 1952 Act do not make it applicable to the employer. On the other hand it applies subject to section 16 to other or any other establishment on the fulfillment of certain conditions contained in sections 1(3) & 1(4). Once the Act becomes applicable the establishment continues to be governed by the Act notwithstanding the fact that subsequently the minimum number of persons employed is reduced. Section 17 provides for exemption of an establishment. Everywhere it is the liability of the establishment, which is recoverable from the employer fixing the liability upon him to ensure the process of recovery from the establishment. Therefore the description of the transferee as a person would not absolve him of the liability accruing under section 14B.
5.2 The liability accrues as soon the default is committed, not on the determination thereof under section 14B. The liability being a statutory liability yet to be quantified was existing on the date of transfer. Such liability might be more or less or reduced or waived but even then subject to determination for quantifying the liability that existed. If such liability existed on the date of transfer in that event the same was definitely covered under section 17B. Simply because the expression “person” has been used to denote a transferee the liability cannot be avoided on the ground that it was the liability of the employer at a point of time when the transferee was a person by reason of the expression so employed in section 17B. The liability continues with the establishment. The change of employer will not affect the liability; or the change of employer would not affect the liability of the establishment by reason of section 17B or in other words section 17B confirms the concept of the liability of the establishment by creating a fiction that the liability was not a liability transferred to the employer but a liability related to the establishment and the employer or the person or transferee is identified for the purpose of facilitating recovery.
5.3 In support of his contention he relied on the decision in Organo Chemical Industries v. Union of India, AIR 1979 SC 1803; Hindustan Times Ltd. v. Union of India, 1998 (2) SCC 242; Swastika Woollens, Ludhiana v. Presiding Officer, Employees' Provident Fund Appellate Tribunal, 2003 (1) LLJ 241; Sayaji Mills Ltd. v. Regional Provident Fund Commissioner ., AIR 1985 SC 323 and Sri Ranganadha Rice Mill v. Regional Provident Fund Commissioner, Hyderabad, 1969 (2) LLJ 612.
The 1952 Act: The liability: The employer: The establishment:
6. After having heard the respective Counsel for the parties it appears that the question is of deciphering the purpose of using the respective expressions the “amount due under any provision of this Act” etc. in section 7A and “other sums due from the employer under any provision of this Act” etc. in section 17B ascertainable from the scheme of the Act itself. In other word it is to be ascertained whether the expression “employer” used in section 14B includes the “person to whom the establishment is transferred” referred to in section 17B. To put it differently whether the expression “other sums due from the employer under any provision of the Act” etc. used in section 17B includes “damages” contemplated in section 14B within the joint and several liability of the “person to whom the establishment is so transferred.”
6.1 Section 17B creates a fiction with regard to the liability of the “employer” in case of transfer of an establishment. Without the transfer the employer is liable. On transfer the employer shall remain liable in relation to contribution and other sums due from the employer under any provision of this Act. This other sum due from employer includes damages contemplated in section 14B in respect of the period up to the date of transfer. This proposition has not been doubted or disputed by Mr. Sengupta, and in our view, rightly. Inasmuch as there is no doubt about the liability of the transferor till the date of transfer.
6.2 In case of the employer (transferor) the expression “other sum due under any provision of the Act” etc. up to the date of transfer in section 17B includes damages contemplated in section 14B. Section 17B creates a fiction in case of transfer, along with the transferor employer, the transferee becomes jointly and severally liable for the contribution and “other sums due from the employer under any provision of the Act” etc. for the period up to the date of transfer.
6.3 Can this liability be different for the transferor employer and the transferee, when both are made liable jointly and severally? If damages are included within the liability of the transferor employer, on transfer can the same liability be excluded from those of the transferee stepping into the shoes of the transferor employer? When all the liabilities have been made joint and several can it be said that one of the liability is exclusive for the transferor? In other words can it be said that in respect of damages the liability is exclusive and severable for the transferor and not joint with the transferee? Can the expression “shall be liable jointly and severally” be used selectively? The answer would simply be in the negative. The transferee becomes the employer on transfer. The liability that accrues to the establishment for which the; employer is made liable continues irrespective of the transfer and the employer past and present continues to be liable. It is the continuation of the liability of the establishment; and the employer past and present are made liable for facilitating recovery. The fiction is created for saving the recovery of the liability from being in any way impaired or frustrated; to plug the loopholes; to prevent escapement of liability; to facilitate easy recovery; to protect the interest of the employees; to caution the transferee.
6.4 Admittedly transfer is an agreement between the transferor and the transferee. It binds neither the employees nor the Provident Fund Authorities, which were not parties to the transfer. Therefore the transferee cannot claim immunity from the liability accrued under any provision of the Act on the date of transfer. It is not dependant on the ascertainment or determination. Once the liability accrues it is only a matter for quantification. Section 17B is a caution to the transferee to include all such liabilities within the consideration for transfer. If he does not do so he does so at his peril.
6.5 A statutory liability cannot be avoided on account of it's not being determined. The issue of notice is immaterial. A statutory liability continues until it becomes irrecoverable in law. It may be a question/dispute between the parties to the transfer not to others. Therefore, the remedy of the transferee if he wants to disown the liability, to recover or seek re-imbursement from the transferor. This is apparent from the mode of recovery prescribed.
6.6 Admittedly the 1952 Act is a welfare legislation to protect the weaker-sections. The employee is employed in the establishment in which the employer may also be employed. The word “employer” is not an abstract idea. The definition had created a fiction to identify the establishment with the employer. The employer has no existence without the establishment. The Act applies to the establishment of which a particular person is an employer as defined in section 2(e). The purpose and object of the scheme is crystal clear in defining “employer” and using the word “dues” used in the various provisions of the Act. The purpose of defining employer is to identify the person upon whom the liability can be fixed and who would be responsible for the purpose of recovery of the dues from the establishment and in case of a transfer limiting the liability of the transferee to the extent of the assets of the establishment received on transfer indicating that the liability goes with the establishment. Section 1, sub-sections (3) and (4) makes it clear that it applies to the establishment and such establishment continues to be governed by the Act once applied notwithstanding its subsequent reduction in the number of employees below the minimum for attracting the application of that Act.
6.7 section 2(e) while defining employer makes a distinction between the establishment, which is a factory and those other than factories. In relation to a factory the owner or occupier of a factory including the agent of such owner or occupier the legal representative of the deceased owner or occupier or a person named as manager of the factory under section 2(e) of the Factories Act, 1948 and in relation to establishment other than factory the persons who or the authority which has the ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager, managing director or managing agent, such manager or managing director or managing agent. In case the legal representative of the deceased owner or occupier could be held to be the employer for the purpose of the Act then reference to the expression employer in section 14B would be equally meaningless as claimed by Mr. Sengupta in respect of the transferee or the legal representative of the deceased owner who were not the employer at the time when the liability accrued or default was committed and would not be knowing the reasons for such default and the proviso providing for giving an opportunity would equally be futile for them. The very scheme of the entire Act is crystal clear that it governs the establishment of which the employer is a part on whom the liability is fixed and who is identified with the establishment on account of the fiction created under the provisions of the 1952 Act. An establishment functions through certain persons. It cannot function all by itself and someone has to be identified for discharging such function. Unless such persons are identified the purpose of the entire proceeding of the Act would have been frustrated and the liability could be shifted to person-to-person making it impossible to give effect to the provisions of the Act. It was for the purpose of implementation and effective compliance of the provisions of the Act the concept of employer has been conceived and the employer did not have any identity other than the establishment and it continues with the establishment.
6.8 In support of the above proposition, we may refer to the decision in Sayaji Mills Ltd. v. Regional P.F Commissioner, AIR 1985 SC 323. In the said decision, it was held that the 1952 Act has to be construed in a manner to advance the object with which it is enacted and any construction facilitating evasion of the provisions of the Act should be avoided and that the Act applies to the establishment irrespective of who the owners from time to time may be. In the language of the Apex Court:—
“……….. the Act has been brought into force in order to promote for the institution of provident funds for the benefit of the employees in factories and establishments……… the Act should be construed so as to advance the object with which it is passed. Any construction which would facilitate evasion of the provisions of the Act should as far as possible be avoided……..
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‘The important point to notice about this provision is that the Act is made applicable to factories and not to the owners thereof, or, in other words, it applies to factories irrespective of who the owners from time to time may be’.”
6.9 The above statement appears to us to have laid down the law clearly. This view had since been reiterated in Bharat Board Mills Ltd. v. Regional Provident Fund Commr., AIR 1957 Cal 702. Vegetable Products Ltd. v. Regional Provident Fund Commr., W. Bengal, AIR 1959 Cal 783. Jamnadas Agarwalla v. Regional Provident Fund Commr., West Bengal, AIR 1963 Cal 513; Robindra Textile Mills v. Secretary, Ministry of Labour, Govt. of India, New Delhi, AIR 1958 Punjab 55, and Hindustan Electric Co. Ltd. v. Regional Provident Fund Commr., Punjab, AIR 1959 Punjab 27 (affirmed in Regional Provident Fund Commr., Punjab v. Lakshmi Ratten Engineering Works Ltd., AIR 1962 Punjab 507). A similar view had been taken by the Madras High Court in R.L Sahni & Co. v. Union of India, AIR 1966 Mad 416, in which it was held that it could not be postulated that each time when there was change of hands a new establishment came into existence. In Kunnath Textiles…* v. The Regional Provident Fund Commissioner…., AIR 1959 Kerala 3 and in New Ahmedabad Bansidar Mills Pvt. Ltd., Ahmedabad v. Union of India, AIR 1968 Guj 71, also the same view had been taken.
Section 14B: The nature and scope of determination and the recovery contemplated:
7. The mode of recovery also indicates that the liability continues with the establishment. By fiction, the employer is identified with the establishment for the purpose of ensuring recovery and imposing liability in case of default under the provisions in relation to escapement of the amount in section 7C, interest in section 7Q and mode of recovery in section 8. Section 8B and section 8F clearly indicates that it is a due payable by the establishment through the employer and the dues recoverable from the establishment through the employer. The mode of recovery clearly indicates that the assets of the establishment are the first charge and a priority by reason of the proviso to section 8B(1) of the 1952 Act.
7.1 The expression employed in section 7A(1)(b) includes within its scope and ambit the determination of the “amount due from any employer under any provisions of” the 1952 Act or the scheme etc. as the case may be. The damages are also amount due from the employer under the provision of the 1952 Act and the scheme. Section 14B provides that such recovery may be made by the Central Provident Commissioner or such other officer authorized by the Central Government. This would not make any difference. The determination of the quantum of the damages determined under section 7A may be recoverable by the officers mentioned in section 14B.
7.2 Section 7(2) empowers the authority with the powers of the Code of Civil Procedure for attendance of any person and examining him on oath or for requiring the discovery and production of documents and receiving evidence-on-affidavit and issuing commissions for the examination of witnesses. Therefore the proviso providing for giving of hearing would ensure the application of section 7(2), which may not prejudice the transferee to defend the pre-transfer defaults. Section 7C empowers the authority to determine escaped amount which would equally be a liability joint and several of the transferee under section 17B. By reason of section 7Q, the interest thereunder would equally be a liability joint and several of the transferee. In case any appeal is pending since before the transfer or is preferred in respect of any pre-transfer default after the transfer the transferee would be liable for the same by reason of section 17B and exercise the right available under section 7-I and he would be equally liable to deposit amount due on filing the appeal in terms of section 7-0.
7.3 Section 8 provides for the mode of recovery of monies due from the employers. Section 8B provides for issue of certificate to the Recovery Officer. Under sub-section (1) therein the Recovery Officer on receipt of such certificate shall proceed to recover the amount specified in the certificate from the establishment or, as the case may be, the employer by one or more of the modes namely (a) attachment and sale of movable and immovable property of the establishment or, as the case may be, the employer; (b) assets of the employer and his detention in prison; (c) appointing a receiver for the moveable and immoveable properties of the establishment or, as the case may be, the employer. It is significant that clause (a) requires sale and attachment of the moveable property of the establishment or the employer, as the case may be; but this is, in case of transfer, subject to section 17B, whereunder the assets of the transferee employer cannot be attached. Inasmuch as, the proviso to section 8B(1) makes it clear that the attachment and sale of any property shall first be effected against the properties of the establishment. In the case of a transfer, the liability of the transferee is limited to the extent of the properties of the establishment which the transferee had received on transfer and not beyond. In case where such attachment and sale of the properties of the establishment appears to be insufficient for recovering the whole amount of arrears specified in the certificate, the Recovery Officer may proceed against the property of the employer for recovery of the whole or in part of such arrears, again subject to section 17B in case of transfer where the balance cannot be recovered either from the properties of the establishment not received on transfer or crated after transfer nor the properties of the transferee employer. Under section 8F the recovery can be effected by the Central Provident Fund Commissioner or any officer authorized by the Central Board from the creditors of the employer. This recovery under section 8 is in respect of any amount due from the employer in relation to an establishment, which includes damages as well. This recovery would not dilute the dues under different sections. The distinction has been made with regard to the liability under section 14 which is a liability personal to the employer namely penalties which cannot be imposed upon the transferee; whereas the damages imposable under section 14B is not a personal liability but a liability of the establishment. A liability under section 14B accrues immediately on default and the subsequent quantification or late-quantification cannot be construed to mean that the liability did not exist even though the default had been committed and the amount being capable of being quantified.
Penal & Fiscal statutes: Principles of construction:
8. Mr. Sengupta had relied upon the decision in Krishi Utpadan Mandi Samiti v. Pilibhit Pantnagar Beej Ltd., 2004 (1) SCC 391. In paragraphs 57 and 58 of the said decision the Apex Court had held that in respect of fiscal statues particularly with those imposing penalty or damages are subject to the rule of strict construction for the purpose of interpretation. It is well settled that in case of doubt in construction of a penal statute the same should be construed in favour of the subject and against the state, as was held in Sri Krishna Coconut Co. v. East Godavari Coconut and Tobacco Market Committee, AIR 1967 SC 973, relying on London and North Eastern. Railway Co. v. Berriman, 1946 AC 278 : (46) 1 All ER 255 (HL), which followed Truck and Sons v. Priester, (1887) 19 QBD 629 : 56 LJ QB 553 (CA), wherein it was held that if there are two reasonable constructions the more lenient one should be adopted while construing penal sections. Fiscal statutes must be construed not only literally but also strictly and it should be clear and unambiguous so as to lead the person to know his legal obligation and liabilities thereunder.
8.1 Mr. Sengupta had relied on the decision in S. Samuel M.D Harrisons Malayalam v. Union of India, 2004 (1) SCC 256. In the said decision in paragraph 13 it has been observed that a word not defined in the Act has to be interpreted according to the dictionary meaning out of the general sense in which a word is understood in common parlance. However it has to be interpreted in the context and the meanings of the words and expressions used in an Act must take their colour from the context in which they appear. Applying this principle we are of the firm view that the expression “person” to whom the establishment is transferred is supposed to draw its colour from the context in which it has been used. This expression has been used to denote that the transferee stepping into the shoes of the transferor employer would be equally liable. Therefore the word “other person” used in section 17B cannot have a meaning other than denoting the transferee stepping into the shoes of the transferor employer. Therefore the other person cannot be treated as anyone other than an employer.
8.2 In Raichurmatham Prabhakar v. Rawatmal Dugar, 2004 (4) SCC 766, relied upon by Mr. Sengupta, it was held in paragraphs 14 and 15 that the headings or titles prefixed to sections or group of sections can be referred to in construing an Act of the legislature. But there is conflict of opinions as to what weight should be attached to the headings or titles. According to one view headings might be treated as preambles of the provisions following, giving the key to opening the mind of the draftsman. According to other view resort to heading can only be taken when the enacting words are ambiguous. They cannot control the meaning of the plain words but they may explain ambiguities. However the Apex Court held that it is permissible to assign the heading or title of a section a limited role to play in the construction of statutes. They may be taken as very broad and general indicators of the nature of the subject-matter dealt with thereunder. In case of a conflict between the plain language of the provisions and the meaning of the heading or title, the heading or title would not control the meaning, which is clearly and plainly discernible from the provision thereunder.
8.3 Having regard to the present case we do not think that section 17B could be capable of two constructions. Neither the scheme of the section is capable of harbouring any doubt. Section 17B is not penal in nature. It was neither fiscal. In any event it creates continuity in the recoverability of the liability. If we put literal and strict meaning, as discussed hereinbefore, we cannot but achieve only one construction and not two. There is no conflict in between the title and the contents of section 17B. The language used in section 17B is clear and unambiguous.
Sections 14B vis-a-vis section 17B: The liability: Whether affected by transfer, voluntary or involuntary:
9. Having regard to above proposition a reference to section 17B does not create any difficulty. The heading discloses the liability in case of transfer of establishment, which in the plain words meant to be joint and several in between the transferor and the transferee both being liable. The object and purpose of the statute is to give benefit to the employees. Therefore it has to be construed in a manner to advance the interest of the employees. The employees are employed in the establishment. They are concerned with the employer of the establishment for the time being. The employees cannot be made to run after the transferor employer. It is whoever would be the employer would be liable particularly when the transfer between the transferor and the transferee neither binds the employee nor the Provident Fund Authority.
9.1 Mr. Sengupta however had pointed out that the transfer was not a voluntary one but non-voluntary under a scheme approved by the Court restricting the liability of the respective parties. But then, even if the scheme might have received the seal of the Court and might have a binding force, it binds only the parties to the transfer to which neither the employees nor the Provident Fund Authority were parties to bind themselves under the scheme or otherwise. In any event the provisions being statutory and primarily running with the establishment the same can never be eclipsed, superseded or affected by any scheme approved by the Court.
9.2 Mr. Sengupta relied upon the decision in Eveready Industries (India) Ltd. v. Regional Provident Fund Commissioner, 2003 (2) LLJ 1034. Having gone through the said decision we do not think that the ratio decided therein can help us in the present context, inasmuch as ultimately it was found in the said decision that until the question of guilt is affirmed the question of payment does not arise. However we do not express any view with regard thereto except as we have held in this decision.
9.3 Mr. Sengupta then relied upon the decision in Darjeeling Dooars Plantation Ltd. v. Regional P.F Commissioner, W.B, 1995 (1) LLJ 939. In the said decision it was held that there is a distinction between transferor and employer and the other person. The other person comes only after the transfer of the establishment. In the said decision the Division Bench had held as follows:
“A plain reading of sections 14B, 15(2), 17(5) clearly indicates that the said sections contemplate a period and/or stage prior to any transfer of the establishment. Section 17B of the Act on the other hand contemplates a stage post transfer. The same will be evident from the use of the expression ‘the employer and the person to whom the establishment is so transferred shall jointly and severally be liable to pay contribution and’ other sums due ‘from the employer’. So that expression ‘the employer and other persons to whom the establishment is transferred’, clearly indicates that the transferee does not come within the meaning of the employer as in section 2(e) of the Act. Under section 17B of the Act the transferee is ‘the other person’. So there is a distinction between ‘employer’ and ‘the other person’. ‘The other person’ comes only after transfer of the establishment either in whole or in part. Transfer of the establishment is contemplated under section 17B of the Act. The sections prior that in the Act does not contemplate, either the transfer of the establishment or ‘the other person’. Section 17B does not contemplate any hearing of ‘the employer’ and ‘the other person’ or either of them. But section 14B contemplates a hearing of ‘the employer’. The absence of the expression ‘the other person’ in section 14B clearly shows that it is a stage prior to the transfer of the establishment. In other words section 14B contemplates in its proviso notice upon ‘the employer’, and not upon ‘the other person’. The three notices dated March 18, 1986 (Annexure ‘B’ to the petition), dated April 10, 1986 (Annexure ‘C’ to the writ petition) and September 3, 1986 (Annexure ‘D’ to the writ petition) are for the period from the month of September, 1968 to November 1968, March, 1972 to January, 1973 and May, 1973 to February, 1974. The said period is prior to the transfer of the establishment to petitioner No. 1. The transfer was effected from January 1, 1975. So in view of our discussion above notice under section 14B for the purpose of hearing of the employer is to be given upon ‘the employer’ and not upon ‘the person to whom the establishment is so transferred’. In the instant case the person as contemplated in section 17B of the Act is the present petitioner 1. So no notice under section 14B can be served on him. The stage of section 17B has not yet arrived. The ‘other sums due’ has not yet been ascertained and quantified. Unless and until such sum due is ascertained and quantified which liability of the transferee shall be limited to the value of the estates obtained by him by such transferee, no demand can be raised on the transferee, in the instant case the petitioner.”
9.4 But this distinction does not seem to have been correctly appreciated by the learned Division Bench. Though the word “employer” and “other person” connote two different identities, yet in the context of section 17B on transfer of the establishment notionally and legally the transferor ceases to be the employer and the transferee steps into the shoes of the employer. But a legal fiction has been created in respect of the liability arising under any provisions of the 1952 Act to continue the liability for the purpose of facilitating recovery even in respect of the dues that had accrued prior to the date of transfer making both the transferor and the transferee liable jointly and severally. The legislature had intended to identify the other person, the transferee as employer liable along with the transferor by creation of a fiction in section 17B. The expression “other person” also connotes the transferee who is stepping into the shoes of the employer. As soon the transferee steps into the shoes of the employer the continuity of liability is not affected by the transfer and both the transferor and transferee, as employer past and present remains liable jointly and severally. Therefore the other person even if connotes a different meaning but in the context in which it has been used it cannot be construed to divide the liability to pre-transfer and post-transfer period being recoverable from one and not from the other. When the legislature creates a joint liability even being other person becomes liable for the dues of the pre-transfer period.
9.5 It is difficult to accept a proposition that the provision of section 17B would not extend to section 14B despite the damages imposable thereunder being other sum due under the provisions of the Act. Inasmuch as, despite being other person and not being an employer when the liability accrued, the other person by fiction is put into the shoes of the employer liable jointly and severally. The distinction sought to be introduced to put the transferor employer and the other person, the transferee on different footing, does not seem to be correct. Such an interpretation seems to be directly opposed to the object and purpose of the creation of the fictions and contrary to the ratio laid down by the Apex Court in Organo Chemical Industries v. Union of India, AIR 1979 SC 1803 and Sayaji Mills Ltd. v. Regional Provident Fund Commissioner ., AIR 1985 SC 323. The scheme of section 17B fastens the liability for the period till the date of transfer, for which the transferor was solely liable until the transfer, upon the transferee, the other person as well on transfer.
9.6 The provision for giving a notice of hearing in the proviso to section 14B upon the employer cannot have a meaning different from the meaning assigned to the expression employer in section 2(e). When a specific liability is created under section 17B the same cannot be frustrated by the provisions contemplated under section 14B. Since the conditions of the transfer would not be binding either on the employee or on the Provident Fund Authority, therefore, the liabilities between transferor and transferee may be a subject-matter of dispute between the two and the transferee may seek reimbursement from the transferor or might have included the same within the consideration of the transfer. The transferee is supposed to appreciate the statutory liability and include the same within the consideration since the liability had accrued as soon the default was committed subject to determination. The determination of the liability after the transfer would not have any impact on the existence of the liability accrued prior to the date of transfer. It might not be quantified but then the liability-existed, however, then quantification is not wholly unascertainable namely the maximum can be quantified and as such it cannot be said that it was an unascertainable liability. We, therefore, do not agree with the said decision in Dooars Planttaion Ltd. (supra) and overrule the same.
The rate at which the “other person” would be liable:
10. Mr. Sengupta alternatively argued that in case the “other person” in section 17B is held to be the employer liable under section 14B for the pretransfer period in that he would be liable for the damages payable at the lesser of the rates prevailing between the date of the accrual and the determination. He relied upon the decision in Union of India v. Super Processors, 1993 (2) LLJ 203 (Bom), in order to contend that if during the pendency of a proceeding the rates are reduced or enhanced whatever might be the case the lesser of the rates of penalty would be the extent of the liability imposable against the employer in relation to the penalty/damages under the provisions of the 1952 Act. In order to appreciate the same we may borrow the expression used in paragraph 22 of the said decision since quoted below:
“This interpretation is in consonance with the general principles of law and Article 20(1) of the Constitution of India; although these may not apply directly to the present case. Where the law defining an offence does not change but the penalty which was provided under the law is changed after the commission of offence but before adjudication, a question arises whether the penalty should be levied under the new law or the previous law which was in force at the time when that offence was committed. Article 20(1) provides a protection to the accused in such a situation by prescribing that a person shall not be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. Therefore, if as a result of the change, the amount of penalty is increased, the offender cannot be subjected to a heavier penalty. On the other hand, if the penalty is reduced pending adjudication, then the benefit of a more favourable penalty law is granted to the accused. The changed penalty provisions at the time of adjudication will apply subject to Article 20(1) of the Constitution.”
10.1 The Bombay High Court in Super Processors (supra) was conscious that the principles enunciated in Article 20(1) of the Constitution of India may not apply directly to a case covered under section 14B of the 1952 Act. Even if we assume that it applies then the application would be confined to section 14 but not to section 14B. There is a distinction between a penalty and damages. Section 14 envisages penalty, which is a personal liability to which the principles of Article 20(1) may be applicable. Whereas section 14B governing damages in default if attempted to be brought within the purview of Article 20(1), it would be an extremely strenuous effort. At the same time, Article 20(1) provides that the penalty is to be imposed on the basis of the law prevailing on the date of commission of the offence. Subsequent enhancement of punishment by change in law would not affect such cases and the offenders would be liable for the punishment provided in law at the time of commission of the offence. It is not necessary for us to answer the question whether subsequent reduction would be applicable in such cases to reduce the quantum of punishment if law is changed at the time of or before adjudication.
10.2 There is a distinction between a penalty and damages. Damages under section 14B are fiscal liabilities, which accrue on default. Section 14B does not leave any option to the authority under the Act to waive or reduce the rate of damages except in cases covered under the second proviso. However, the amendment brought about by the 1988 Amendment Act with effect from 1 of September, 1991 empowers the authority under section 14B to “recover from the employer by way of penalty such damages not exceeding the amount of arrears” as may be specified in the scheme. We may note that the word used is “may” and the maximum extent has been provided not to exceed the amount of arrears and is to be calculated in the manner specified in the scheme. The default related to the period prior to the coming into force of the 1988 Amendment Act. The provision before its substitution under the 1988 Amendment Act provided that the authority under section 14B may recover in case of default “from the employer such damages not exceeding the amount of arrears as it may think fit to impose”. The word “may” read with the phrase “as it may think fit to impose” leaves a discretion, which may be a little too wide, but even then this discretion law with the authority concerned with a ceiling not exceeding the arrears. Therefore, it was open to the authority to determine the quantum according to its discretion.
10.3 The 1988 Amendment did not provide for any repeal or savings and as such the provisions of the amended Act would be applicable to a proceeding pending on the date of coming into force of the 1988 Amendment Act. Therefore, the authority is supposed to determine the amount in accordance with law applicable at the time of adjudication, on account of the fact that the repealed provisions have not been saved for being made applicable to a pending proceeding. On the other hand, the amendment sought to remove the wide discretion which was somewhat uncanalized and remedy the same by way of laying down a scale. Therefore, the legislation seeking to rectify the unbridled and uncanalized discretion would definitely be applicable; and then there is no fundamental difference between the provision sought to be substituted and the provisions substituted therefor, since in both cases the discretion was with the authority to impose such damages and the phrase “as it may think fit” may be more applicable to the amended provision where the discretion has since been canalized, according to the scale specified in the scheme. The other feature that occurs to our mind is the introduction of the phrase “by way of penalty” makes it more stringent to the extent that it has to be imposed by way of damages not exceeding the amount of arrears as specified in the scheme. Therefore, though for different reasons, we agree with the ultimate conclusion of the Bombay High Court in Super Processors (supra) that the principles of the amended provisions would be applicable for the purpose of imposing damages under section 14B even in respect of defaults committed before the 1988 Amendment Act came into force.
Section 17B vis-a-vis 14B: Scope: Pre-transfer liability and the transferee: Opportunity of hearing to transferee for pre-transfer liability: Whether futile: Whether violative of natural justice:
11. By reason of section 17B, a transferee would be liable jointly and severally with the transferor for the pre-transfer liability in respect of contribution and other sums due from the transferor/employer under any of the provisions of the Act or the scheme. We have already held that the other sum due in section 17B includes damages recoverable under section 14B even in respect of default committed by the transferor/employer before transfer. Mr. Sengupta contended that section 14B provides for a reasonable opportunity of being heard to the employer. Since the transferor would not be aware of the reason of default, the opportunity of hearing would be a futile exercise and the imposing of liability for pre-transfer default upon the transferee would be against the principles of natural justice and equity. Inasmuch as the transferee would not be able, even if given opportunity of hearing, to explain the reason for the default.
11.1 The provisions of section 17B were engrafted to protect the employees as was observed in paragraph 3 by the Apex Court in the decision in Organo Chemical Industries v. Union of India, AIR 1979 SC 1803, which we may beneficially quote as hereafter:
“The pragmatics of the situation is that if the stream of contributions were frozen by employers' defaults after due deduction from the wages and diversion for their own purposes, the scheme would be damnified by traumatic starvation of the fund, public frustration from the failure of the project and psychic demoralization of the miserable beneficiaries when they find their wages deducted and the employer get away with it even after default in his own contribution and malversation of the workers' share. ‘Damages’ have a wider socially semantic connotation than pecuniary loss of interest on non-payment when a social welfare scheme suffers may hem on account of the injury. Law expands concepts to embrace social needs so as to become functionally effectual.”
11.2 In this context we may refer to the provisions of section 14B. The reasonable opportunity of being heard has been given to the employer in order to establish that there is no default and he is not liable for damages or that the period of default is such that he is liable to a particular rate of damages or he is entitled to exemption provided thereunder. In case of imposition of damages the question being guided by statutory directions and guidelines which are mathematically calculable and being absolutely objective with mathematical precision, it is only the period of delay which is relevant to be explained but not the reasons. Whatever might be the reasons the damage is leviable. The same can neither be reduced nor waived except in relation to an establishment which is a sick industrial company and in respect of which scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions Act, 1985 and that too by the Central Board under the 1952 Act. Section 14B does not contemplate any power either to the Central Provident Fund Commissioner or such officers authorized by the Central Government by notification, to reduce or waive the damages leviable under section 14B since specified in the scheme. It is expected that the records would be available in the establishment with the employer. Therefore the apprehension that the transferee may not be able to explain the reason for default would not attract the principles of natural justice and cannot be a factor to interpret the provisions of section 17B. The principles of natural justice has no role to play in the sphere of interpretation of statutes. In any event when the language of a particular section is clear and the meaning given to it is compatible with the context in which it has been enacted and the object and purpose for which it has been designed to serve, and is not inconsistent therewith, then we are not supposed to take any external aid for construing or interpreting a particular legislation.
11.3 The contention of Mr. Sengupta does not seem to be sound for the simple reason that section 17B creates a fiction imposing pre-transfer liability on the transferee. This pre-transfer liability cannot be differentiated to exclude the liability under section 14B. Therefore, we may find the answer to the question raised by Mr. Sengupta from the scheme of section 14B itself. Section 14B deals with imposition of damages on account of default on the part of the employer to pay any contribution etc. to the fund. By the 1988 Amendment Act, the expression “such damages” recoverable under section 14B was preceded by a qualification through insertion of a phrase “by way of a penalty”. The present liability having accrued before 1988 Amendment Act, the damages recoverable for such default were not qualified as penalty. The scheme of section 14B leaves a discretion, which was a little too wide before 1988 Amendment as observed earlier. The phrase “may recover such damages not exceeding the amount of arrears” gave a discretion to the recovering authority, which now is to be exercised according to the scales specified in the scheme. But such damages now no more open to be reduced or waived except in cases covered under the second proviso to section 14B.
11.4 The scope of the opportunity of being heard has since been best explained by the Apex Court in Hindustan Times Ltd. v. Union of India, 1998 (2) SCC 242 in paragraphs 29 and 30. The first proviso to section 14B requiring giving of opportunity of hearing to the employer, cast a duty upon the authority under section 14B to apply his mind to the facts of the case and the reply to show-cause notice and to pass a reasoned order after following the principles of natural justice and giving a reasonable opportunity of being heard. The authority is supposed to take into consideration the number of defaults, the period of delay, the frequency of default and the amount involved. In Hindustan Times Ltd. v. Union of India, 1998 (2) SCC 242, the Apex Court held that the default on the part of the employer based on plea of power-cut, financial problems relating to other indebtedness or the delay in realization of amounts paid by the cheques or drafts cannot be justifiable grounds for the employer to escape liability.
11.5 In Swastika Woolens, Ludhiana v. Presiding Officer, Employees' Provident Fund Appellate Tribunal, 2003 (1) LLJ 241 (P & H), following the decision in Hindustan Times Ltd. v. Union of India, AIR 1998 SC 2246 : 1998 (5) SCC 613 : 1998 (1) LLJ 682, it was held that there being no limitation imposed, the delay in determining the damages under section 14B would not be a ground to avoid the liability as was held in the said decisions since followed by the Punjab and Haryana High Court.
11.6 In Organo Chemicals (supra), it was further held that in the absence of any prescription of limitation by the legislature in the Act, such damages could be recovered even after several years. The fact that the demand for damages was made after several years would not afford a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceeding under section 14B would be taken. Mere delay in initiating action does not amount to prejudice. Inasmuch as, delay would enable the employer to use the money for his own purpose or for his business, especially, there is no additional provision for charging interest on damages. In the said decision in Organo Chemical (supra), the Apex Court was alive to the situation and had hastened to add that the employer can claim prejudice if he is able to establish that between the period of default and the date of initiation of action under section 14B, he has changed his position detrimental 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. He may also claim prejudice upon proof of loss of all the relevant records or non-availability of the personnel, who were, several years back, in-charge of the payments and provided he further establishes that there is no other way he can re-construct the record or produce the evidence or there are similar grounds which could lead to irretrievable prejudice. In such cases of irretrievable prejudice, the defaulter must take the necessary pleas in defence in reply to the show-cause notice and must satisfy the authority concerned with acceptable material.
11.7 In Sri Ranganadha Rice Mill v. Regional Provident Fund Commissioner, Hyderabad 1969 (II) LLJ 612 (AP), it was held that in order to impose damages under section 14B it has to be determined as to whether there was default in terms of section 7A which also contemplates under sub-section (3) giving of notice. Only after determining the period of default in relation to the contributions payable under section 7A, the damages can be imposed under section 14B in respect of those defaults.
11.8 Having regard to express language employed in section 14B the imposition of damage on default is mandatory, unless the establishment comes within the exception provided in the second proviso. No other contingency would have any impact in relation to the imposition of damages under section 14B, on the employer as contemplated under section 17B in relation to pre-transfer period upon the transferee who is jointly and severally liable along with the transferor. It is only the period of default, which is to be ascertained and the question is to be determined on the basis of the guidelines issued from time to time. In case the transferee insists upon the implementation of the terms of transfer in that event it is open to him to obtain relief of reimbursement from the transferor. The terms of a transfer cannot be implemented and used as a shield to avoid its liability either against the employees or the Provident Fund Authorities in view of express provision fastening liability under section 17B.
11.9 In fact, it appears that whether the liability was quantified or not as on the date of transfer the liability that accrued continued to exist on the date of transfer and upon transfer becomes joint and several liabilities of both the transferor and the transferee.
11.10 For the reasons forgoing we do not think that we are required to deal with the decisions cited by the learned Counsel appearing for Pratya Nivesh (P) Ltd. adopting the submission of Mr. Sengupta in order to avoid repetition.
11.11 On the other hand, Mr. Sengupta relied upon the decision in Regional Provident Fund Commissioner, Mangalore v. Karnataka Forest Plantations Corporation Limited., Bangalore, 2000 (1) LLJ 1134 (Karnataka) (DB) in order to contend that the imposition of liability for the default committed by the transferor upon the transferee violates natural justice. We are unable to agree with this decision of the Karnataka High Court for the simple reason viz. the creation of a statutory liability cannot be brushed aside on the ground that it is being opposed to the principles of natural justice. In course of interpretation the question of natural justice has no role to play. The principles of interpretations are well-settled. The criminal liability may be personal to the person but the civil liability is the liability of the establishment and is recoverable from the establishment through the established mode of recovery one of which is through the employer. The liability is that of the establishment. The employer is made liable because he controls the establishment. The employer is not personally liable excepting criminal liability, until the assets of the establishment are exhausted. This is made clear in the proviso to section 8B viz. that no recovery would be made from the employer personally until the assets of the establishment are exhausted.
Conclusion:
12. Therefore we answer the questions raised by Mr. Sengupta as follows: (1) that on transfer, whether voluntary or involuntary under a sanctioned scheme framed by the Court, the statutory liabilities remain unaffected; (2) section 17B creates a fiction making the other person, the transferee jointly and severally liable even in respect of other sum due prior to the period of transfer; (3) the expression “contribution” and “other sum due” under any provision of the Act etc. employed in section 17B includes damages for default contemplated under section 14B being other sum due under section 17B of the provisions of the 1952 Act; (4) the limitation of the liability in the proviso to section 17B to the extent of the assets received by the other person, the transferee on transfer is a limitation with regard to the liability of the transferee and it does not indicate the exception to the liability of the transferee for pre-transfer dues becoming the joint and several liability of the transferor and the transferee; (5) the liability is that of the establishment irrespective of who the owners from time to time may be; (6) in case of transfer that the transferee would be liable to the extent of the assets received on transfer by him and by reason thereof he cannot be proceeded against for the balance if any as against his personal assets when it would be the exclusive liability of the past employer, who can be proceeded against for recovery of the balance as regards the assets of the transferor; (7) the transferee can very well be asked to explain a pre-transfer default in relation to the scope of section 14B which is confined only to the determination of the default and the period during which the default continued; (8) save and except the same nothing requires to be explained [Hindusthan Times (supra)] and as such the proviso would not be futile for the transferee who can explain the same from the records of the establishment supposed to be available with him; (9) in case it is not so available in that event even without the transfer the employer would not have noon able to explain, and in such eventuality the principles laid down in the decision in Organo Chemicals (supra) would apply; (10) the damages imposed under section 14B is imposed on the transferor even then it would be a sum flue recoverable from the establishment and can be recovered from the assets of the establishment at the hands of the transferee though not against the assets of the transferee or in other words no recovery could be effected in respect of the pre-transfer liability from any asset other than those of the establishment received on transfer and the liability of the transferee is limited only to that extent and not beyond.
12.1 The argument by Mr. Sengupta that the extent of 100% damages is arbitrary and whimsical and contrary to the principles of audi alterem partem cannot be sustained in view of the decision in Organo Chemicals Industries (supra). We need not elaborate.
12.2 The argument that the liability of the employer is restricted to the known liability as on the date of transfer and all liabilities accruing after transfer in respect of pre-transfer period would be the liability of the transferor seems to be fallacious in view of the fact that the liability is so created under the statute. But then the dues accrued till the date of transfer cannot be said to be unknown even if not quantified on the date of transfer.
12.3 So far as the quantum of damages to be determined is concerned, the lesser of the rates and beneficial to the other person should be applied in the case of the transferee as on the date when the liability is determined whether the rates is decreased or increased in course of the pendency of the proceeding as was held in Union of India v. Super Processors (supra) by the Bombay High Court with the conclusion whereof we are in agreement, though for different reasons.
Order:
13. For all these reasons we answer the question referred to us in the following manner. (1)A transferee would be liable for the damages jointly and severally in respect of defaults committed prior to the date of transfer by reason of section 17B. (2) In terms of the provisions contained in section 17B, the amount recoverable under section 14B is a sum due under the provisions of the 1952 Act. (3) The provisions imposing liability joint and several on the transferee by reason of section 17B cannot be said to offend the principles of natural justice or unconscionable and a factor for construing the effect thereof in relation to pre-transfer default differently.
13.1 This decision shall govern the other appeal in Pratya Nivesh (P) Ltd. v. Regional Provident Fund Commissioner and is also answered accordingly.
13.2 In view of the answer, we have given in this reference, let this appeal and the writ petition being Pratya Nivesh (P) Limited v. Regional Provident Fund Commissioner be placed before the appropriate Court for being decided accordingly.
13.3 There will, however, be no order as to costs.
13.4 Urgent xerox certified copy of this judgment is made available to the parties, if applied for, on usual terms.
Pinaki Chandra Ghose & Soumitra Pal, JJ.: We agree.
Appeal & writ petition placed before appropriate Court for decision.
S.K.P
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