1991 ALLMR ONLINE 68

S.M. DAUD, J.

HARISH SAKHARAM SAVARDEKAR Vs. UNION OF INDIA

W. P. No. 2199 of 1985

24th January, 1991

Petitioner Counsel: N. M. Pathak, Miss S. V. Pathak, S. S. Salvi, M/s. Pathak and. Associates.
Respondent Counsel: R. C. Master

Employees' Provident Funds and Miscellaneous Provisions Act (1952),S. 1,S. 14-B Employees' Provident Funds and Miscellaneous Provisions Act (1952),S. 1,S. 14-B

JUDGMENT

JUDGMENT :- This petition under Article 226 of the Constitution takes exception to an order for damages made under section 14B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952- hereinafter referred to as 'the Act'.

2. Petitioner was the proprietor of a concern doing business in the name and style of M/s. Himachem Laboratories at Bhandup, Bombay. On 13/15th April 1978, the petitioner and his employees made an application to the 2nd respondent, hereinafter referred to as 'the Commissioner', for coverage under section 1(4) of the Act. The Commissioner on 13th July 1978 allotted a code number to the petitioner and declared the provisions of the Act and the scheme framed under the said Act to be applicable to the petitioner's establishment as from 1st April 1978. On 20th October 1984, the Commissioner gave a notice with particulars to the petitioner calling upon him to show cause why an order for levy of damages should not be made against him under section 14B of the Act vide the particularised delay in the remittances of contributions. To the notice, the petitioner gave a reply on 10th January 1985 - the stand being that he was a technical man and had appointed one person to look after the office work which included attending to the remittance of contributions under the Act etc., the remittances had been made in due time, that he was engaged in attending to the factory work as also raising of finance from Banks and that had the lapse been brought to his notice earlier, he would have taken steps in proper time. Petitioner also gave an assurance that in future there would be no default in the remittance of contributions. The Commissioner in his order dated 19th April 1985 negatived the defences raised and imposed damages at different rates for different periods covered by the notice - the period ranging from April 1978 to September 1982. The damages imposed upon the petitioner inclusive of administrative charges totalled Rs. 34,707.95 ps. Petitioner was called upon to pay this sum, failing which the same was to be recovered as an arrears of land revenue.

3. In the petition taking exception to the order of the Commissioner, the first ground urged is that the liability to remit the contributions began as from the issue of the Notification dated 2nd December 1980. It is true that in the applications moved by the petitioner and his employees, it was suggested that the coverage be with effect from 1st April 1978. But it is contended that whatever the petitioner and his employees may have said, the Act applied to the petitioner's establishment only from the date of issue of the Notification. Now the Notification itself does mention the date of its operativeness as being 1st April 1978. Petitioner and his employees had in their applications given this date as the date of operativeness of the Act and the Scheme. Learned counsel representing the petitioner contends that issue of a Notification under section 14 was an exercise of legislative power and no such power could be exercised with retrospective effect. Reliance is placed upon the Income Tax Officer, Allappy vs. I. M. C. Ponnoose and others, reported in AIR 1970 SC 385. The question arising in that case was about the validity of a Notification issued by the Government of Kerala empowering certain Revenue Officers including the Taluka Tahasildar, to exercise the powers of a Tax Recovery Officer under the Income Tax Act, 1961. That is not the question arising in the instant case. The point here is as to date from which the obligations cast by the Act upon the employer become enforceable vis-à-vis the business being conducted by the petitioner. Section 1(4) deals with voluntary coverage and the two conditions necessary for the attractability thereof are - (i)it being made appear to the Central Government that the provisions of the Act should be made applicable to an establishment, which conclusionit can reach either upon an application made to it or otherwise that the employer and the majority of the employees in relation to an establishment have agreed that the provisions of the Act may be made applicable to the said establishment; and(ii) the issue of a Notification applying the provisions of the Act to the establishment. The mere making of an application by an employer and the majority of the employees for voluntary coverage is not enough. The said application is the basis whereon the Central Government is enabled to take a decision. That decision has to be promulgated by a Notification in the Official Gazette. It is only when this process is completed that the Act and the Scheme under it, can be said to have become applicable to the institution concerned. No authority is needed for the proposition that the notification would take effect from the date it is published. This of course is subject to the power of the authority concerned to notify with retrospective effect. It was the lack of such a power which led to the amendment to section 1(4) under the Employees' Provident Fund and Miscellaneous Provisions (Amendment) Act, 1988 (Act No. XIII of 1988). The amendment came in on 2nd June 1988 and after the said amendment, section 1(4) reads thus :-

"Notwithstanding anything contained in sub-section (3) of this section or sub-section (1) of section 16, where it appears to the Central Provident Fund Commissioner, whether on an application made to him in this behalf or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment he may, by Notification in the Official Gazette, apply the provisions of this Act to that establishment on and from the date of such agreement or from any subsequent date specified in such agreement."

Prior to the amendment, section 1(4) reads as under :-

"Notwithstanding anything contained in sub-section (3) of this section or sub-section (1) of section 16, where it appears to the Central Government, whether on an application made to it in this behalf or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment, it may by Notification in the Official Gazette, apply the provisions of this Act to that establishment."

The difference between the pre and post amendment positions is clear but Mr. Master representing the Commissioner contends that the amendment has been brought in with a view to clarify the position and by way of an abundant caution. Learned counsel submits that even prior to the amendment the scheme for voluntary coverage envisaged retrospectivity subject of course to an agreement between the employer and the majority of the employees. This contention is not acceptable, for otherwise the amendment would have been unnecessary. The very fact of the Legislature going in for an amendment is evidence of a recognition that the power of giving retrospective effect to the coverage, did not exist in section 1(4) prior to the amendment. Mr. Master argues that the issue of a Notification is a mere ministerial act and that compliance thereof begins as soon as a code number is issued, if not from the date agreed to between the parties. That is not how the statute reads. Section 13 lays down the applicability factor vis-a-vis the operation of the Act. In relation to an establishment covered by clause (a) of sub-section (3) of section I, the Act applies by virtue of the establishment being a factory engaged in any industry specified in schedule I having a work force of 20 or morepersons. In regard to establishments covered by clause (b) of sub-section (3), the Act becomes applicable where the establishment employs 20 persons or more or belonging to a class of establishment which the Central Government may by Notification in the Official Gazette specify in this behalf. The proviso to this sub-section enables the Central Government to apply the provisions of the Act to any establishment employing a work force of less than 20, subject to its giving two months' notice of its intention to do so. In regard to sub-section (4), the applicability becomes final only after the issue of the Notification in the Official Gazette. Therefore, the Notification contemplated by sub-section (4) of section 1 is not a mere ministerial act. In fact that is the event which makes the Act applicable to the establishment, where voluntary coverage is sought. Petitioner's contention that the defaults could not be reckoned for the period prior to the Notification has thus to be sustained.

4. It is next contended that the Commissioner has blindly negatived the defences raised by the petitioner and arbitrarily applied some scale for damages. It is not possible to agree with the submission that the Commissioner was bound to take into consideration various communications said to have been issued in the matter of how the damages were to be assessed. Those communications could not be termed as directions issuable under section 19A of the Act. Insofar as the damages recoverable pursuant to this order are concerned at the rates fixed by the Commissioner, they will amount to 100% for the 12 months of 1981 and only 1% for the four months of 1982. That is not much, having regard to the absence of any acceptable reason advanced by the petitioner. The reasons have been considered by the Commissioner and there is nothing so startling in the reasoning, which would make the order vulnerable. The result of the forgoing discussion is that the petition substantially succeeds. Commissioner's order is modified to read thus :-

Petitioner shall pay damages at rate 100% of the dues for the months of January to December 1981 both inclusive and 2% of the dues for the months of April, May, August and September of 1982. The frequency of each defaults shall be numbered as from January 1981. Rest of the damages imposed upon the petitioner by the Commissioner stand quashed. Rule thus made partially absolute with parties being left to bear their own costs.

Order accordingly.