Labour Law Reporter

2025 LLR 570
MEGHALAYA HIGH COURT
Hon'ble Mr. I.P. Mukerji, CJ.
Hon'ble Mr. W. Diengdoh, J.
WA No. 52/2024, Dt/– 28-3-2025

Regional Provident Fund Commissioner-II
v.
North Eastern Electric Power Corporation Employees Provident Fund Trust

A. EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 – Sections 14B – Levy of damages – Remission or reduction of – The respondent is an establishment covered under the EPF Act and to remit the contribution along with the administrative charges within 15 days of the close of every month, which it did not from 1st April, 1996 to 31st March, 2014 – The respondent became liable to pay penalty in the form of damages under section 14B and interest under section 7Q of the EPF Act – A show cause notice was issued and hearings were given to the respondent – RPFC-II directed the respondent to pay damages of Rs. 60,57,874/- – The order was challenged by the High Court, which set aside the show cause notices – Hence, the present appeal – Held, The Court has the power to remit a part of the damages or penalty to be imposed under section 14B but it cannot remit the whole of it – The use of the word “may” and “not” in the section plainly suggests that the exercise of jurisdiction to award damages or penalty in the manner specified in the scheme is directory and not mandatory – Powers under section 14B are required to be exercised judiciously and damages or penalty granted within the limit fixed by the statute, taking into consideration factors such as number of defaults, the period of delay, the frequency of default and the amount involved – Right of hearing is given to the employer because in determining the damage or penalty payable, adjudication of the right to get partial remission of the damage or penalty payable under section 14B is involved – In adjudicating the issue of full or partial recovery of damages or penalty, the Regional Provident Fund Commissioner is enjoined with the duty to examine each case fairly and judiciously – If the respondent wants remission, the RPFC shall start a proceedings and give an opportunity to of being heard and pass a reasoned order partial remission of the claim amount for damages or penalty – Impugned judgment and order is set aside – Appeal is partly allowed and disposed of. Paras 22 to 28 and 33 to 36

B. EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 – Section 14B – Inordinate delay in claiming damages – Effect of – Show cause was issued to the respondent for default of damages from 1st April, 1996 to 31st March, 2014 on 21st October, 2021 – Held, Although the Limitation Act, 1963 does not apply to a provident fund claim, any inordinate delay on the part of the provident fund authority to lodge its claim for damages might be presumed to cause irretrievable prejudice to the employer – A statutory authority cannot enjoy greater rights, that too in quasi -judicial proceedings before the provident fund authority than the government which has thirty years' time under Article 112 of the Limitation Act, 1963 to file a suit – A statutory authority, not being government has three years' time to do so, under Article 113 – Therefore, any claim by the provident fund authority, not being government, beyond three years should be presumed to cause irretrievable prejudice to the employer unless this presumption is rebutted by the provident fund authority – The Provident Fund Commissioner in passing the impugned order has not addressed these issues at all – RPFC is directed to ascertain the amount of penalty or damages payable by the respondent for the above period, i.e., three years preceding the issuance of demand with show cause notice dated 21st October, 2021 only on the basis of the above observations. Paras 29 to 33

C. EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 – Section 14B and section 7Q – Difference between – In the computation of interest payable by the employer under section 7Q no right of hearing is given to him – In section 14B a right of hearing is given – This is for the simple reason that under section 7Q, the calculation is mathematical from ascertained figures and hence, there is no scope of any decision being made on hearing, inasmuch as the decision can only be one – This right is given to the employer under section 14B because in determining the damage or penalty payable, adjudication of the right to get partial remission of the damage or penalty payable under section 14B is involved. Para 26

D. CONSTITUTION OF INDIA – Article 226 – Writ petition against order passed under section 14B of EPF Act – Whether maintainable – The power of the court to issue a writ or writs to any authority or person in respect of any cause of action within the jurisdiction of the court, is unlimited – A writ is maintainable inter alia when the petitioner seeks enforcement of a fundamental right or there is violation of the principles of natural justice with the impugned adjudication proceedings or where the proceedings are wholly without jurisdiction or where the vires of an Act is under challenge – The writ court would not refrain from exercising its jurisdiction to correct the error – The complaint against the Regional Provident Fund Commissioner is that he refused to make a detailed enquiry into the facts of the case as well as failed to appreciate the law on the subject which he was required to do – Held, the allegation also is that the Regional Provident Fund Commissioner was very brusque and did not hear the respondent – The RPFC failed to exercise the jurisdiction vested in him as he did not properly consider the law on remission of damages – There is a serious allegation of breach of the principles of natural justice by the adjudicating authority by not giving a fair hearing to the respondent – It would be most unjust on the part of the Court to relegate the respondent-writ petitioner to the alternate remedy – Present writ is maintainable. Paras 12 to 22

I.P. Mukerji, CJ.–1. North Eastern Electric Power Corporation Limited (the respondent) is an establishment covered under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act), the Employees' Provident Funds Scheme, 1952, Employees' Deposit-Linked Insurance Scheme, 1976 and Employees' Pension Scheme, 1995 framed thereunder. The respondent was required to remit the contribution along with the administrative charges within 15 days of the close of every month.

2. Under section 14B of the Act on such default, it became liable to pay penalty in the form of damages not exceeding the arrear at the rates specified in Para 32A of the EPF Scheme, 1952, Para 5 of the EPS, 1995 and 8A of EDLI Scheme, 1976, at the following rates:

Period of delay	Rate upto 25/09/2008	Rate from 26/09/2008
Less than two months	17%	5%
2 months and above and less than 4 months	22%	10%
4 months and above and less than 6 months	27%	15%
6 months and above	37%	25%

3. The respondent was also liable to pay interest under section 7Q of the Act on such delayed payment. There was default on the part of the respondent from 1st April, 1996 to 31st March, 2014.

4. The office of the Regional Provident Fund Commissioner SRO, Shillong made a detailed calculation of such delay, interest and damages. On 21st October, 2021, the Commissioner issued a show cause notice to the respondent. They were asked to appear before the authority on 29th October, 2021.

5. Hearings were given by the appellant to the respondent on or from 29th October, 2021.

6. From what appears in the averments in the writ petition, the respondent pleaded that the deposit of contribution beyond time was unintentional. As the period covered was about 25 years, the records were not available. Then a plea was made before the adjudicating authority that the demand was for a long period of time and that great prejudice would be caused to the respondent if it had to pay the damages computed for this whole period. A reasonable stand be taken by the adjudicating authority, citing judgments of the Supreme Court and High Court.

7. Finally on 6th February, 2023, the Regional Provident Fund Commissioner-II, Shillong by an order directed the respondent to pay damages of ` 60,57,874/-.

8. By the instant writ petition, the respondent challenged this adjudication order.

9. Upon filing of affidavits it came up for consideration before a learned single judge of this Court. By the impugned judgment and order dated 5th August, 2024 he set aside the show cause notice dated 21st October, 2021 and 3rd February, 2023.

10. This appeal involves interpretation and application of section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

11. The questions to be determined are: (i) whether under this section, the adjudicating authority has any power to reduce or remit all together the penalty?

12. First I will deal with the question about the maintainability of this writ application, the contention being that the said Act provides a party aggrieved by a determination under section 14B, a remedy of appeal under section 7-I of the said Act to the Industrial Tribunal constituted under section 7D thereof.

13. If one examines Article 226 of the Constitution, one will find that the power of the court to issue a writ or writs to any authority or person in respect of any cause of action within the jurisdiction of the court, is unlimited. The Supreme Court and High Courts, by various pronouncements, from time to time since the coming into force of the Constitution have limited the exercise of this power by laying down some very salutary principles.

14. A writ is maintainable inter alia when the petitioner seeks enforcement of a fundamental right or there is violation of the principles of natural justice with the impugned adjudication proceedings or where the proceedings are wholly without jurisdiction or where the vires of an Act is under challenge. The landmark case in this area is Whirlpool Corporation v. Registrar of Trade Marks, Mumbai & Ors ., (1998) 8 SCC 1 decided by the Supreme Court on 26th October, 1998.

15. If there is proper exercise of jurisdiction and the adjudicating authority, while exercising its jurisdiction, commits any error of fact or of law, the appellate authority could rectify it. The writ court would refrain from exercising its jurisdiction and leave the aggrieved party to approach the appellate forum. If there is failure to exercise the jurisdiction vested in the authority or exercise of jurisdiction which is not conferred on him or misuse of jurisdiction, it transgress the statute creating it. There is little or no purpose in asking the aggrieved party to prefer an appeal because what has been considered and decided was not within the statute or the jurisdiction of the appellate authority and the appellate authority has only the authority to decide what has been decided within the statute and its jurisdiction.

16. Hence, if the essential or fundamental facts are not considered or the applicable law not applied, there is failure to exercise jurisdiction on the Whirlpool principle.

17. The writ court would not refrain from exercising its jurisdiction to correct the error.

18. If one peruses the writ petition, one finds that the complaint against the Regional Provident Fund Commissioner is that he refused to make a detailed enquiry into the facts of the case as well as failed to appreciate the law on the subject which he was required to do. The allegation also is that the Regional Provident Fund Commissioner was very brusque and did not hear the respondent.

19. In this case, one would notice from the discussion made hereafter on the second issue that the question whether the respondent was entitled to remission of damages on application of the law laid down by the Courts was not properly considered at all by the Regional Provident Fund Commissioner. Therefore, he failed to exercise his jurisdiction which was vested in him.

20. Secondly, there is a serious allegation of breach of the principles of natural justice by the adjudicating authority by not giving a fair hearing to the respondent or considering the submission made by it fairly and judiciously.

21. More importantly, when a writ has been admitted, heard and decided even if the writ was not maintainable for the existence of an alternate remedy, at the appellate stage, it would be most unjust on the part of the Court to relegate the respondent-writ petitioner to the alternate remedy.

22. For all those reasons, I am in complete agreement with the view of the learned single judge that the instant writ is maintainable.

Section 14B has fallen for determination by both the Supreme Court and High Courts over the years.

The Court has the power to remit a part of the damages or penalty to be imposed under section 14B but it cannot remit the whole of it. (See Regional Provident Fund Commissioner v. S.D. College, Hoshiarpur & Ors ., AIR 1997 SC 3645).

24. The use of the word “may” and “not” in the section plainly suggests that the exercise of jurisdiction to award damages or penalty in the manner specified in the scheme is directory and not mandatory. (See Hooghly Mills Co. Ltd. & Anr . v. Regional Provident Fund Commissioner , (2009) 4 CHN 774 and Arambagh Hatcheries Ltd. v. Employees' Provident Fund Organization , (2013) 5 CHN 108).

25. In Organo Chemical Industries & Anr. v. Union of India & Ors., AIR 1979 SC 1803 cited by learned counsel for the appellant, the Supreme Court opined that adjudicatory powers granted to the Regional Provident Fund Commissioner under this section are required to be exercised judiciously and damages or penalty granted within the limit fixed by the statute, taking into consideration factors such as number of defaults, the period of delay, the frequency of default and the amount involved.

26. In the computation of interest payable by the employer under section 7Q no right of hearing is given to him. In section 14B a right of hearing is given. This is for the simple reason that under section 7Q, the calculation is mathematical from ascertained figures and hence, there is no scope of any decision being made on hearing, inasmuch as the decision can only be one. This right is given to the employer under section 14B because in determining the damage or penalty payable, adjudication of the right to get partial remission of the damage or penalty payable under section 14B is involved. (See Tepcon International (I) Ltd. v. Regional Provident Fund Commissioner & Ors. along with connected matters in 2015 SCC Online Cal 6193, cited by learned counsel for the respondent).

27. In adjudicating the issue of full or partial recovery of damages or penalty, the Regional Provident Fund Commissioner is enjoined with the duty to examine each case fairly and judiciously.

28. In Hindustan Times Limited v. Union of India & Ors., AIR 1998 SC 688 cited by learned counsel for the appellant, the Supreme Court took a very conservative view with regard to the claim for damages and penalty.

29. First of all, it ruled that a proceeding under the said section is not a suit and hence three years limitation under Indian Limitation Act, 1963 did not apply. It also refused to rule that arrear damages had to be recovered within reasonable time. It said that when within the stipulated period the money was not deposited by the employer, it may have made good use of it and enjoyed the “boon of delay” which is “so dear”. However, in paragraph 28 of the judgment relied upon by the respondent the defence of irretrievable prejudice caused to the employer on the ground of delay in recovery of damages, was open to him. He had to prove that because of the delay he altered his position to his detriment resulting in irretrievable prejudice.

30. In Assistant Provident Fund Commissioner, EPFO & Anr. v. Management of RSL Textiles India Pvt. Ltd. , (2017) 3 SCC 110, the Supreme Court relying on its earlier decision in Mcleod Russel India Ltd. v. Regional Provident Fund Commissioner Jalpaiguri & Ors. (2014) 15 SCC 263 cited by learned counsel for the respondent opined that “in the absence of a finding relating to mens rea/actus reus on the part of employers, action under section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, cannot be sustained”.

31. Although the Supreme Court has said that the Limitation Act, 1963 does not apply to a provident fund claim, in my opinion, any inordinate delay on the part of the provident fund authority to lodge its claim for damages might be presumed to cause irretrievable prejudice to the employer. A statutory authority cannot enjoy greater rights, that too in quasi -judicial proceedings before the provident fund authority than the government which has thirty years' time under Article 112 of the Limitation Act, 1963 to file a suit. A statutory authority, not being government has three years' time to do so, under Article 113. Therefore, any claim by the provident fund authority, not being government, beyond three years should be presumed to cause irretrievable prejudice to the employer unless this presumption is rebutted by the provident fund authority.

32. The Provident Fund Commissioner in passing the impugned order has not addressed these issues at all.

33. In the circumstances, the Regional Provident Fund Commissioner is directed to ascertain the amount of penalty or damages payable by the respondent for the above period, i.e., three years preceding the issuance of demand with show cause notice dated 21st October, 2021 only on the basis of the above observations.

34. If the respondent is willing to pay the damages or penalty under the said Act for a period of three years preceding the issuance of the demand with show cause notice dated 21st October, 2021 well and good. No hearing is required. Only damages or penalty amount may be computed by the Regional Provident Fund Commissioner. If the respondent wants a remission of that amount on any of the grounds mentioned above, it may write in this behalf to the Regional Provident Fund Commissioner within four weeks of communication of this order. In that event, the Regional Provident Fund Commissioner shall start a proceeding, give the respondent an opportunity to file a written statement of its case with legal submissions and an opportunity of being heard and pass a reasoned order within three months of communication of the respondent's intention to seek partial remission of the claim amount for damages or penalty.

36. The appeal is partly allowed to the above extent and disposed of accordingly. No order as to costs.