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CASE NO.: Appeal (civil) 6498  of  1998

PETITIONER: M/S K. STREETLITE ELECTRIC CORPORATION

       Vs.

RESPONDENT: REGIONAL PROVIDENT FUND COMMISSIONER, HARYANA

DATE OF JUDGMENT:       09/04/2001

BENCH: S. Rajendra Babu & Shivaraj V. Patil

JUDGMENT:

J   U   D   G   M   E   N   T RAJENDRA BABU,  J.  : L...I...T.......T.......T.......T.......T.......T.......T..J

   A  notice  dated December 30, 1986 was served  upon  the appellant  to  show cause why damages under Section 14-B  of the Employees Provident Funds & Misc.  Provisions Act, 1952 [hereinafter  referred to as the Act] for period from July 1976  to June 1980 be imposed upon the appellant.  On  March 13,  1987  an  order  was made by  the  respondent  imposing damages  to  the  extent  of Rs.  88,731.25  on  account  of belated  deposit  of the amount towards the provident  fund. The appellant claimed that delay in depositing the amount in certain  cases  is  only for a few days;  that even  so  the respondent  had assessed the damages in most of the cases at 100%  and that the actual loss suffered by the respondent is only  to  the extent of Rs.  664/-.  Challenging  the  order dated  March 13, 1987 the appellant filed a writ petition in the  High  Court  contending  that   the  order  is  not  in accordance with the instructions issued on November 3, 1982; that  the  order  has been passed at a  very  belated  stage inasmuch  as  for the period ending in July 1976 the  notice has  been  issued  in the year 1987;  that  para  32(A)  was inserted  into the scheme after the amendment of the Act  as under:

Period of Default Rate of Damages [%age of arrears per annum]

(a) Less than two months 17 (b) Two months and above but less than four months 22 (c) Four months and above but less than six months 27 (d) Six months and above 37

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   The  writ  petition  was resisted by the  respondent  by taking  the  stand  that  the damages have  been  levied  in accordance  with law.  The Division Bench of the High  Court dismissed  the writ petition filed by the appellant.   Hence this appeal by special leave.

   In this appeal, it is contended that :

   (i)  the action has been initiated very late inasmuch as the  proceedings had been initiated from 10 to 6 years later than  the  default  stated  to have been  committed  by  the appellant;  and

   (ii) the Central Government had instructed under Section 20  of the Act that the damages at the rate of 25% per annum can be levied.

   These  two contentions stood rejected by the High Court. Firstly,  that delay in initiating proceedings under Section 14-B  of  the Act will not be a ground for setting aside  an order  imposing damages unless specific plea of prejudice is raised   before   the  Provident   Fund   Commissioner   and established  and further that the instructions given by  the Central  Government do not have any binding force.  The High Court  adverted  to the decision of this Court in  Hindustan Times  Ltd.  vs.  Union of India & Ors., 1998(2) SCC 242, to reach  this  conclusion.  In that case, this Court  examined the scheme of the provisions of the Act in relation to delay in  passing of the order.  It was stated that the mere  fact that  the proceedings are initiated or demand for damages is made  after several years cannot, by itself, be a ground for drawing  an  inference  of waiver of that the  employer  was lulled  into a belief that no proceedings under Section 14-B would  be  taken  and mere delay in initiating  such  action cannot  amount  to  prejudice inasmuch as such  delay  would result  in  allowing the employer to use the monies for  his own purposes or for his business especially when there is no additional  provision for charging interest on such  amount. However,  the employer can claim prejudice if there is proof that  between  the  period  of   default  and  the  date  of initiation  of action under Section 14-B he has altered  his position  to  his  detriment 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,  and  such prejudice  can  also  be established by  stating  reason  of non-availability  of  records  of  the  personnel  by  which evidence  it could be established that there was some  basis for delay in making the payments.  Therefore, this Court was of  the opinion that such delay, by itself, would not result in any prejudice.  In the present case, the High Court found that  no such prejudice was either pleaded or proved.  Hence the first contention stands rejected.

   The  second contention need not be examined in the  view we  propose to take in the matter.  Even if we hold that the Central  Government instructions issued under Section 20  of the  Act  are  not  binding  on  the  respondent,  still  in assessing  the  damages it will be necessary for us to  take note of the manner in which the amounts of damages have been levied  and  appropriately consider as to what would be  the correct  rate of damages to be imposed under Section 14-B of the  Act.   The  statement of calculation  prepared  by  the respondent  regarding  delay in payments discloses that  the respondent  has  imposed  damages at  different  rates,  for example,  for the month of July 1976 the rate of damages  is

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50%  whereas  the period of default is over month, while  in case of December 1976 the damages imposed upon the appellant are  at  the rate of 20% though the period of delay is  over two  months,  in  the case of delay for April  1988  damages imposed are at the rate of 30% though the period of delay is only one month.  In certain cases, even for a delay of below 15  days, like October 1977, damages at the rate of 85% have been  imposed, while for another period though the delay  is for  six months 65% damages have been levied.  Therefore, it is  not  possible  to discern the rationale adopted  by  the respondent  in the matter of imposition of penalty.  In  the circumstances, therefore, it would have been appropriate for us  to  set  aside  the order and remit the  matter  to  the respondent,  but  we do not think that such an  exercise  is necessary  after  such  a long period.  In  this  case,  the amount due towards provident fund has already been deposited and this Court, by order dated December 18, 1998, granted an interim relief to the extent of 75% of the amount of damages sought  to be recovered, while out of the disputed amount of damages  (that  is,  Rs.  88,731.25), 25% had  already  been directed  to  be deposited.  In that view of the matter,  we think,  it is appropriate to confine the damages leviable in this  case on an over all consideration to the extent of 25% of the total damages imposed.

   The  appeal is, therefore, partly allowed and the  order made   by  the  Provident   Fund  Commissioner  is  modified accordingly.  No costs.