Indian Process Chemi... v. Regional Provident F...

1. The petitioner, which is a manufacturing company of chemicals and drugs, is aggrieved by the levy of penalty by the Regional Provident Fund Commissioner, Karnataka, in exercise of his powers under S. 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act, read with Para. 38 of the Employees' Provident Funds Scheme, 1952.

2. By an order, dated 6 August 1975, (exhibit A), the respondent made an order fixing the penalty on the petitioner at Rs. 4,574.25 on the ground of the delay on the part of the petitioner in remitting the provident Fund contribution of their employees, including their contribution, in respect of four periods as specified in the order. The contention of the petitioner is that the impugned order is illegal and arbitrary for the reason that though the petitioner remitted the amounts through cheques drawn on the State Bank of India, Bangalore, in respect of the four periods concerned, by registered post, the actual remittance of the amounts was delayed either on account of delay by the postal department or delay by the State Bank of India, and therefore, the petitioner cannot be penalized. The fact that the petitioner did remit the prescribed contribution within the prescribed time in the prescribed manner is not disputed. In fact, Para. 7 of the impugned order itself fully supports the case of the petitioner. It reads as follows:

“7. It is seen from the records produced that the cheques for the period of default in question were forwarded to the bank by registered post before the due dates and the cheques were received by the bank on or before due dates in most of the cases, except for three months where delay seems to be quite abnormal due to postal delays and bank delays.”

3. Therefore, the question for consideration is whether the respondent was right in imposing the penalty against the petitioner in exercise of his powers under S. 14B of the Act. The said section, which confers the power on the respondent to recover damages; reads as follows:

“14B. Power to recover damages.— 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. As can be seen from the said section, it provides that every employer who makes default in the payment of any contribution to the fund as prescribed under the various provisions of the Act and the scheme framed thereunder only can be subject to a penalty which may be to the extent of 25 per cent of the total amount of contribution required to be remitted by the employer on each occasion. The mode of payment is prescribed under the scheme of 1952 referred to above. The said paragraph reads as follows:

“38. Mode of payment of contributions.— (1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages) dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon] for the time being payable to the employees other than an excluded employee, and in respect of which provident fund contributions are payable, as the Central Government may fix, he shall within fifteen days of the close of every month pay the same to the fund by separate bank drafts or cheques on account of contributions and administrative charges:

Provided that if payment is made by a cheque on an outstation bank, (the actual bank collection charges in respect of both the contributions and the administrative charges) shall be included in the amount for which the cheque is drawn in respect of the administrative charge:

Provided further that where there is no branch of the Reserve Bank or the (State) Bank of India at the station where the (factory or other establishment) is situated, the employer shall pay to the fund the amount mentioned above by means of Reserve Bank of India (Governmental drafts at par) separately on account of contribution and administrative charge.”

5. According to the above paragraph, every employer is required to deduct the contribution of the employee concerned, from his wages and it requires to remit the said amount along with his contributions as prescribed under the Act within fifteen days of the close of every month pay to the fund by bank drafts or cheques. In accordance with the provisions contained in the above paragraph the petitioner has remitted the amounts through cheques drawn on the State Bank of India. If there is any delay in the remittance of the amount to the fund on account of delay in delivery of the registered covers in which the cheque is sent, by the postal department, or, if there is any delay in drawing and remitting the amount to the fund by the State Bank of India, the employer concerned who has sent the cheque in time cannot be found fault with.

6. Sri S.A Hakeem, Additional Central Government Standing Counsel, for the respondent, however, submitted that it was the duty of the petitioner to have sent the cheque earlier so that the amount may be remitted to the fund within the prescribed date and, therefore, even if there is delay on the part of the postal department or the State Bank of India, so long as the amount is not actually remitted to the fund within the prescribed time the petitioner can be subjected to penal damages, as prescribed under S. 14B of the Act.

7. I am unable to agree with the contention urged for the respondent. So long as an employer has remitted the amount through cheque, in the manner prescribed under Para. 38 of the scheme, within the time fixed in the said paragraph whatever may be the actual date on which the amount is actually remitted to the fund on account of delay by the State Bank or postal department, no penalty can be imposed on the employer by one department of the Central Government for the fault committed by other organizations of the Central Government.

8. The impugned order made by the respondent levying the penalty on the petitioner is patently illegal and arbitrary.

9. For the reasons stated above rule is made absolute and the impugned order of the respondent, dated 6 August 1975, (exhibit A), is quashed. The petitioner shall be entitled to the costs. Advocate's fee Rs. 100.