Rajendra Nath Mittal, J.:— Briefly, the case of the petitioner is that he is the sole proprietor of M/s. Havell's Electrical (Sales) Corporation, situated at Faridabad, District Gurgaon. He is liable to contribute to the Provident Fund under the provisions of the Employees' Provident Funds Act 1952 (hereinafter called the Act). There was delay in depositing the Provident Fund and Administrative Charges for the periods from March, 1962 to September, 1962, and from June, 1963 to November, 1966. He was asked, vide letter dated 14th October, 1969, copy annexure ‘A’, by the Regional Provident Fund Commissioner, respondent No. 2, to pay a sum of Rs. 30.937.25 as damages imposed by the State of Haryana, respondent No. 1. On receipt of the letter, he filed a representation dated 10th December, 1969, before respondent No. 1. He was informed by it vide its letter dated 13th February, 1970, that the matter was receiving attention and the final reply would be sent in due course. On 13th March, 1970, Mr. A.D Sethi, Office Superintendent of the petitioner, approached respondent No. 1 to know about the fate of his representation. The Secretary to the Haryana Government informed him that he could not decide the representation as the Government had already taken the decision. The petitioner has challenged the letter dated 14th October, 1969, calling upon him to pay Rs. 30,937.25 as damages inter alia, on the ground that the petitioner was not given a reasonable opportunity to show cause against such determination and that no speaking order was passed by the Government regarding determination of the damages.
2. It is contended by Mr. Sarin that the petitioner was not given a show-cause notice regarding the proceedings in which the damages were assessed by the State Government. He urges that it was incumbent on it to have done so. On the other hand, the learned counsel for the respondents has submitted that various notices were given to the petitioner by the Regional Provident Fund Commissioner but he did not make any representation. Thereafter, the State Government made the assessment on the basis of sliding scales of penalties as laid down by the State Government in its letter dated 25th January, 1963 (copy Annexure R-XII). According to him after the Regional Provident Fund Commissioner had served the notices on the petitioner, no fresh notice was required to be served by the State Government. I have heard the learned counsel at a considerable length and given thoughtful consideration to their arguments, In order to determine the question, it will be relevant to refer to Section 14-B of the Act, as it existed at that time. It reads as follows:—
“14-B. 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-section (2) of Section 15 or subsection (5) of Section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or under any of the conditions specified under Section 17, the appropriate Government may recover from the employer such damages not exceeding twenty-five per cent of the amount of arrears, as it may think fit to impose.”
3. It came u??? for interpretation before a Division Bench of the Mysore High Court in V. Fernandes Bros. Cashew Factory v. State of Mysore(1). It held that no determination under Section 14-B of the Act can be made without affording the defaulter an opportunity to show case against such determination. It further held that although the section does not say so in so many words, it is clear that an adjudication under its provisions without affording that o???portunity to the defaulter, would plainly transgress the rules of natural jurtice. The same view was taken by the Allahabad High Court in Lakshmiji Sugar Mills Co. Ltd. v. Union of India(2), wherein it was laid down that under Section 14-B, the State Government had to make an order assessing the damages after objectively taking into consideration the facts and circumstances of each case. The power conferred upon the State Government under Section 14-B is clearly of a quasi Judicial nature and it must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard and putting forward his case. A similar question arose before the Supreme Court in Commissioner of Coal Mines Provident Fund, Dhanbad v. J.P Lulla and Sons(3). The provisions of Section 10-F of the Coal Mines Provident Fund and Bonus Schemes Act were interpreted by their Lordships whch were in pari materia with Section 14-B ibid. Under Section 10-F of the said Act, the powers to assess damages were conferred on the Central Government. However, under Section 10-C, it could delegate the powers to the Coal Mines Provident Fund Commissioner or any other officer. In pursuance of that power, the Central Government had delegated the powers to the Coal Mines Provident Fund Commissioner. The Central Government had also framed a sliding rate of recovery of damages under Section 10-F, as has been done in the Present case. A.N Ray, C.J, speaking for the Court, observed that the Coal Mines Provident Fund Commissioner is required to hear an employer before making an order directing him to pay damages under Section 10-F. When a body or authority has to determine a matter involving rights judicially, the principle of natural justice is implied if the dccision of that body or authority affects individual rights or interests. It was further held that in such cases, having regard to the particular situation, it would be unfair for the body or authority not to have allowed a reasonable opportunity to be heard. In view of the above observations, it is clear that an opportunity is required to be given under Section 14-B of the Act under the principles of natural justice though it is not so said specifically in the section. It may be mentioned that the above principle has now been incorporated by the legislation in the section by way of proviso by Act No. 40 of 1973. However, in the present case, we are concerned with Section 14-B, as it stood originally.
4. Now, the question to be seen is as to whether a show cause notice was given in the present case before imposition of the damages. The learned counsel for the petitioner has urged that the show-cause notice should have been given by the authority which imposed the damages, namely, the State Government. On the other hand, the learned counsel for the respondents has argued that the notices were issued by the Regional Provident Fund Commissioner from time to time but the petitioner did not submit any reply to them. According to him those notices will be deemed to be proper notices.
5. I have considered the contentions of the learned counsel. The Regional Provident Fund Commissioner does not figure in Section 14-B of the Act. The show-cause notice is not a ministerial act. It is to be given by an authority which is entitled to levy damages after taking into consideration the facts of the case. The Regional Provident Fund Commissioner was not even authorised by the State Government to serve such notices. In the circumstances, if any notice was given by him, that cannot be considered to be a notice on behalf of the State Government. In the aforesaid view, I am fortified by the observations in Lakshmiji Sugar Miffs case. In that case, the State Government did not issue any notice to the petitioner. The order imposing damages was passed by the State Government on the recommendation of the Regional Provident Fund Commissioner. It was observed that the fact that the Regional Provident Fund Commissioner had issued a show cause notice to the petitioner is no substitute for an opportunity to be allowed by the State Government, which is the ultimate authority empowered to impose the damages. He is not a delegate of the State Government and cannot exercise the functions of the State Government which are of judicial nature and, as such, cannot be delegated.
6. The learned counsel for the respondents made a reference to International Electricals v. Regional Provident Fund Commissioner(4). The facts of that case are, however, distinguishable and the present precise point was not before the learned Bench. In my view, the observations in that case are not applicable to the present case.
7. In view of the aforesaid reasons, the impugned order is liable to be quashed on this short ground.
8. The second submission of the learned counsel for the petitioner is that the damages have been imposed by the Government according to the sliding scale for penalties and it did not apply its mind while imposing the damages. He argues that in each case, the authority has to apply its mind on the facts of that case and then to assess the damages. I am convinced with this argument as well. Section 14-B of the Act provides that the damdges shall not exceed 25 per cent of the amount of arrears. The Government prepared the sliding scale of penalties for assessment of the damages. In case the sliding scale framed by the Government is rigidly followed in each and every case, then the application of mind by the authority may not arise. As already stated above, a similar scale had been framed under the Coal Mines Provident Fund and Bonus Schemes Act, which was dealt with by the Supreme Court in Commissioner of Coal Mines Provident Fund, Dhan-bad's case. A contention was raised there that under Section 10-F of that Act the amount of damages is quantified and a personal hearing is not necessary because the employer has said everything in his representation and an order for payment of damages is not one of punishment. A.N Ray, C.J, while speaking for the Court, repelled the contention and observed as follows;
“The provisions in Section 10-F of the Act also indicate that determination of damages is not a mechanical process,—The words of importance in Section 10-F of the Act are such damages not exceeding 25 per cent of the amount of arrears as it may think fit to impose.’. Here, the two important features are these. First the words of importance are ‘damages not exceeding 25 per cent’. These words show that the determination of damages is not an inflexible application of a rigid formula. Second, the words ‘as it may think fit to impose’ in Section 10-F of the Act show that the authorities are required to apply their mind to the facts and circumstances of the case.”
(Emphasis supplied).
9. From the above observations, it is clear that the assessing authority is required to determine the damages in each case by applying its mind. It cannot apply the sliding formula rigidly if the amount of Provident Fund has not been deposited in time.
10. The counsel for the respondents has made a reference to three cases, namely, Atlantic Engineering Services (P.) Ltd. v. Union of India(5), Inter-national Electricals case and T.C.M Woollen Mills v. Regional Provident Fund Commissioner(6), and urged that if there is a breach, the damages are to be assessed in accordance with the formula. In Atlantic Engineering Services case, a Division Bench of the Delhi High Court observed that it was of the view that framing of the table of damages by the Government is a salutary measure for the guidance of the officers of the Government who act under Section 14-B. Under the table the amount of damages is related to the delay in payment of contribution. That method of determining damage is entirely reasonable and that shows that no officer acting under Section 14-B can act arbitrarily, but must follow that reasonable guideline made by the Government. Further, that is only a guideline and not a determination. It further held that the actual decision as to what the damages should be in a particular case is made only after hearing the employer and assessing the particular facts of that case. The last lines of the observations are important, wherein the Bench highlighted that the sliding table constituted only a guideline and the question of damages in each case has to be determined after hearing the employer and assessing the particular facts of the case. From the observations it is evident that the sliding formula is not to be applied rigidly. If that is to be done, then the hearing by the authority becomes meaningless. In my view, the above case rather helps the petitioner. In International Electricals case, the facts are distinguishable. In that case, the petitioner did not appear before the assessing authority in spite of the various notices and the assessment was made on the basis of the sliding formula. The learned Bench upheld the assessment. Thus, it is evident that the petitioner having been given an opportunity to place the relevant material for taking a lenient view did not do so. The authority, therefore, had no other alternative but to assess the damages on the basis of the sliding formula. Thus, the observations in that case were made in a different context. Moreover, the observations of the Supreme Court in Lakshmiji Sugar Mills case were not brought to its notice, In the aforesaid stituation, the learned counsel cannot derive any help from the said case.
11. Similarly, in T.C.M Woolen Mills' case, no reply was filed by the petitioner to the show-cause notice issued to it. In that situation, the learned Division Bench held that unless the objections and the factual matters are pressed before the Commissioner, he cannot imagine the same and adjudicate thereon. Therefore, that case is also distinguishable. It thus follows that the question as to whether the order assessing the damages on the basis of sliding formula is liable to be struck down should be determined on the facts of each case. If in reply to the show-cause notice the employer gives reasons for not depositing the provident fund in time and the assessing authority feels that the reasons are good, it need not apply the sliding scale for penalties and may reduce the damages in its discretion but in case no reasons or insufficient ressons have been given by him the proper course for it will be to determine damages according to the sliding scale. However, it should pass a speaking order when it rejects the explanation given by him. In the present case, this point, in fact, does not arise and is of academic interest only, as the petitioner was not afforded adequate opportunity by the Government for showing cause against the imposition of damages. The question of passing a speaking order would have arisen if the show-cause notice had been given to him. Thus the order is liable to be quashed on the first point.
12. For the aforesaid reasons, I accept the wirt petition and quash the impugned order. The competent authority shall, however, decide the matter afresh after giving the petitioner adequate opportunity to represent its case. No order as to costs.