How damages in each case should be determined after hearing the party on the facts of a particular case.

Employees Provident Funds and Miscellaneous Provisions Act, 1952 — Section  14B

Determination of damages is a quasi-judicial function or a judicial function and just as under the law of contract and the law of torts the courts are not guided as to what damages should be fixed under what circumstances by any pre-conceived formula but are left to their discretion to determine the damages on the facts of each case. Similarly, section 14-B gives the same function and the same discretion to the Government. No fault can be found with it. It is only if in actually applying section 14-B the Government acts without considering the facts of the particular case and without attempting to determine the proper quantum of damages that the particular order may be assailed as arbitrary. But section 14-B itself cannot be regarded as contravening Article.

In the The Commissioner of Coal Mines Provident Fund, Dhanbad and Others Vs. J.P. Lalla and Sons, , the Supreme Court was dealing with section 10-F of the Coal Mines Provident Fund and Bonus Schemes Act, 1948, which is in pari materia with section 14-B of the Act before us. The court did not express any doubt as to the validity of the statutory provision before it and laid down the guidelines as to how the schedule of damages also laid down by the administrative authorities in that case should be worked and how damages in each case should be determined after hearing the party on the facts of a particular case.

To the same effect is a Division Bench decision in F. Fernandes and others v. State of Mysore and others, Air 1969 Mys 196. (2) The word “damages” has the same meaning as it has in the law of torts or contract and that no damages can be levied u/s 14-B unless and until it was proved that some loss was caused to the employees’ provident fund. This contention is also unacceptable. We take note of the language of section 14-B in which the following words are important: “Where an employer makes default in the payment of any contribution to the fund………” The cause of action thus is the default made by the employer. It is for this default that damages are to be imposed by the Government. This takes the place of legal injury or damage which may be the cause of action in a case arising under the law of torts or contract.

Further the words that matter are as follows : “the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer such damages, not exceeding the amount of arrears as it may think fit to impose”. The damages cannot exceed the amount of arrears. The ceiling on the quantum is thus 100 per cent. The damages are to be imposed. The word “imposed” is more akin to the imposition of penalty rather than the determination of damages as is done in a case under the contract or torts. The reason is that in section 14-B the default in payment itself is sufficient to enable the Government to recover damages from the employer without proof of loss since such loss to the fund must have been implied by the legislature when this provision was made. That may be the reason why the word “damages” instead of the word “penalty” was used in section 14-B. It is for the legislature to give meaning to the word “damages” as it may think fit. In the context of the scheme of the Act as a whole, the use of the word “damages” in section 14-B cannot be said to be in the same sense in which the word is used in the law of contract or tarts. Even if it is assumed that it was so used section 14-B cannot be given effect to unless some loss is resumed by the mere fact of the delay in making payment which is the default on the part of the employer. The learned counsel relied on two single Beach decisions, namely. The South Indian Flour Mills Pvt. Ltd. V. The Regional Provident Fund Commissioner, 1978 Lab. I.C. 1187 and the Murarka Paint & Varnish Works Ltd. and another v. Union of India and otters, 1976 Lab. I.C. 1453, for the observations made therein that the use of the word “damages” implies that damages are recoverable for loss which is suffered and not otherwise. There may be two answers to this argument. Firstly, that the loss is presumed by the legislature when the employer makes default in payment of contributions.

The quantum of the loss only has to be determined by the Government before damages are levied and recovered. Secondly, the word “damages” need not be given the same meaning as it has in the law of contract and torts and no loss need be proved. In fact, since it is presumed in law and, therefore, no evidence of loss is necessary before the order of levy of damages is passed, the use of the word “impose” would show that damages u/s 14-B are somewhere between the damages in law of torts and contract and a penalty in some of the tax laws such as the Income Tax Act. It is entirely open to the legislature to give a special meaning to the damages as we have observed above.

we are of the view that framing of the table of damages by the Government is a salutory measure for the guidance of the Officers of the Government who act u/s 14-B. Under the table the amount of damages is related to the delay in payment of the contribution. This method of determining damages is entirely reasonable and it shows that no officer acting u/s 14-B can act arbitrarily, but must follow this reasonable guideline made by the Government. Further, this is only a guideline.  It is not a determination. 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 his case. This was done in the present case- The quantum of damages was, Therefore, reduced to 50 per cent of the demand made at the time of the show cause notice. Reasons have been given why the contentions made by employer could not be accepted in full and why a partial relief for those reason should be given namely by reducing the damages by 50 per cent. We express our appreciation for the reasoned order passed by the Regional Provident Fund Commissioner at annexure A, which is as good as any judicial order could have been.

DELHI HC IN ATLANTIC ENGINEERING SERVICES (P) LTD. Vs. UNION OF INDIA AND ANOTHER [(1979) 1 ILR(Delhi) 401 ]