Central Board of Trustees, EPF v. M/S Glade Drugs & Nutraceuticals Pvt Ltd

before amendment of Section 14B, absolute discretion was conferred on the authorised officer either to impose penalty or not to impose at all; in the latter even of which there would be no compensation at all provided to the organisation, which would be mulcted with the liability of interest to the employee from the date of actual dues. It was further held that the liability of payment of interest was not to be left to the discretion of the authorised officer since it does not call for any adjudication and accrual of interest in the employees account is liable to be compensated by the employer who caused the delay. It was held that 7Q is imposed automatically, on any delay, without any reference to mitigating circumstances; but with reference only to the period of delay and the rates specified. Even the previous and subsequent contact of the employer in making proper remittance of contribution will not be relevant in imposition of interest under Section 7Q. In other words, Sections 14 B and 7Q operate in different fields and have different purposes and objects. In that view of the matter, the contention of the learned counsel that the imposition of interest under Section 7Q will depend on the quantum of penal damages levied under Section 14B of the Act has no basis.”

13. Emphasis was also placed on Gaurav Enterprises v Union of India & Ors 2021:DHC:2620, wherein the Coordinate Bench of this Court held that if proceedings under section 14B and Section 7Q were initiated simultaneously and decided simultaneously by different orders, the same will be considered as a composite order for considering the right of appeal. This order in Gaurav Enterprises (supra) was challenged in LPA No. 177/2022, which stayed the Single Judge’s decision by order dated 9th March 2022.

14. The petitioner’s counsel, therefore, stressed, that the order passed under Section 7Q is not a composite order and, therefore, not appealable; but the EPFAT erroneously entertained the appeal and set aside the PF dues determined.

15. As regards the judgment in Roma Henny (supra), which the EPFAT relied upon, the same has already been set aside by the Supreme Court by order dated 27th February 2019 in Civil Appeal no. 6592/2014, and the matter was remitted back to the High Court for reconsideration on certain aspects. Analysis

16. Relevant provisions which require consideration, of the EPF Act, for ease of reference, are extracted as under: “7-Q. Interest payable by the employer - The employer shall be liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment: Provided that higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank. 14-B. Power to recover damages – Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of Section 15 or sub-section (5) of Section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under Section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf] may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme: Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard: Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.”

17. Specific provisions under which appeal to a Tribunal is permitted are provided under Section 7I, which is extracted as under: “7-I. Appeals to Tribunal – (1) Any person aggrieved by a notification issued by the Central Government, or an order passed by the Central Government or any authority, under the proviso to sub-section (3), or sub-section (4), of Section 1, or Section 3, or sub-section (1) of Section 7-A, or Section 7-B [except an order rejecting an application for review referred to in sub-section (5) thereof], or Section 7-C, or Section 14-B, may prefer an appeal to a Tribunal against such notification or order. (2) Every appeal under sub-section (1) shall be filed in such form and manner, within such time and be accompanied by such fees, as may be prescribed.”

18. As evident from the provisions contained in Section 7I, the appeal is only permitted regarding Section 14B; however, mention of appeal qua Section 7Q is conspicuously absent.

19. Section 7Q of the EPF Act empowers a levy of interest on provident fund dues, whereas Section 14B empowers the authority to recover damages by way of penalty.

20. Chronologically, the earliest decision which has been adverted to is Roma Henny (supra). The decision was delivered by a Division Bench of this Court in 2012, in context of a declaration sought that provisions of 7Q were ultra vires. 20.[1] This was in the background of a challenge to interest levied under Section 7Q, on the basis that damages have already been recovered by passing orders under Section 14B, and interest as prescribed under Section 7Q cannot be independently charged since it is in-built in the slab of damages. 20.[2] The EPFAT relied on Roma Henny (supra) in that it held that before 26th September 2008, the assessment included the element of interest, whereas thereafter damages and interest were segregated. Considering that the entire period of assessment was before 26th September 2008, it relied on Roma Henny (supra) to state that these could not be segregated and the Competent Authority was mandated to assess the dues, including the element of interest. Since the Competent Authority had levied separate interest, the order was set aside. 20.[3] In this case two orders were passed on 12th September 2014, one under Section 14B and another under Section 7Q. The order under Section 14B and Section 7Q were delivered separately, though on the same date. 20.[4] Roma Henny (supra) was then set aside by the Supreme Court on 27th February 2019, and the matter was remitted back to the High Court.

21. In 2013, the Supreme Court in Arcot Textiles (supra) dealt with an issue related to demand for interest under Section 7Q on belated remittances by the management. Herein, the Assistant Provident Fund Commissioner issued a demand requiring appellant to deposit a sum towards interest under Section 7Q. The same was challenged before the High Court, which held that the order charging interest on belated payment was appealable. The matter was taken to the Division Bench, which concurred with the view. The Supreme Court then assessed the issue of maintainability of appeal against an order passed under Section 7Q in the following manner:

the Central Government may, by notification in the Official Gazette, specify in this behalf. Subsection (4) of Section 1 provides that where it appears to the Central Provident Fund Commissioner, whether on an application made 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 that agreement. Section 3 confers power on the Central Government to issue notification directing that the provisions of the Act could apply to such other establishment which has a common Provident Fund with other establishments.

12. Section 7-A(1) provides for determination of monies due from employers. Section 7-B deals with review of orders passed under Section 7-A. Section 7-C deals with determination of escaped amount. Section 8 provides for mode of recovery of monies due from the employer. The said provision stipulates that the arrears can be recovered in the manner specified in Sections 8-B to 8-G. Section 8-B provides for issue of certificate by the authorised officer in respect of the amount due to the recovery officer so as to unable him to recover the amount by way of attachment and sale of movable and immovable property of the establishment or the employer or take such coercive measurers as provided therein.

13. Section 11 gives a statutory priority of payment of contributions over other debts. Section 11(2) contains non obstante clause which prescribes for if any amount is due from the employer the said amount shall be deemed to be the first charge on the assets of the establishment. Section 14-B confers power on the competent authority under the Act to recover damages. Section 17 provides for power to exempt.

14. This Court in Maharashtra State Coop. Bank Ltd. v. Provident Fund Commr. [(2009) 10 SCC 123: (2009) 4 SCC (Civ) 78: (2009) 2 SCC (L&S) 743] while interpreting the expression “any amount due from an employer” has opined as follows: (SCC pp. 159-60, para 67)

15. We have referred to the aforesaid decision only for the purpose of the levy of interest under Section 7-Q which is a part of the sum recoverable under Section 11(2) of the Act, and it is an in segregable part of the total amount due from the employer.” 21.[1] Taking into account Section 7I, the Supreme Court observed as under:

from him under this Act from the date on which the amount has become so due till the date of its actual payment: Provided that higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank.”

19. Ms Aparna Bhat, learned counsel for Respondents 1 to 3 would contend that the payment of interest by the employer in case of belated payment is statutorily leviable and a specified rate having been provided, the authority has no discretion and, therefore, it is only a matter of computation and there cannot be any challenge to it. Be it noted, it was canvassed by the said respondents before the High Court that an appeal would lie against an order passed under Section 7-Q.

20. On a scrutiny of Section 7-I, we notice that the language is clear and unambiguous and it does not provide for an appeal against the determination made under Section 7-Q. It is well settled in law that right of appeal is a creature of statute, for the right of appeal inheres in no one and, therefore, for maintainability of an appeal there must be authority of law. This being the position a provision providing for appeal should neither be construed too strictly nor too liberally, for if given either of these extreme interpretations, it is bound to adversely affect the legislative object as well as hamper the proceedings before the appropriate forum. Needless to say, a right of appeal cannot be assumed to exist unless expressly provided for by the statute and a remedy of appeal must be legitimately traceable to the statutory provisions. If the express words employed in a provision do not provide an appeal from a particular order, the court is bound to follow the express words. To put it otherwise, an appeal for its maintainability must have the clear authority of law and that explains why the right of appeal is described as a creature of statute. (See Ganga Bai v. Vijay Kumar [(1974) 2 SCC 393], Gujarat Agro Industries Co. Ltd. v. Municipal Corpn. of the City of Ahmedabad [(1999) 4 SCC 468], State of Haryana v. Maruti Udyog Ltd. [(2000) 7 SCC 348], Super Cassettes Industries Ltd. v. State of U.P. [(2009) 10 SCC 531: (2009) 4 SCC (Civ) 280], Raj Kumar Shivhare v. Directorate of Enforcement [(2010) 4 SCC 772:

Commission of India v. SAIL [(2010) 10 SCC 744].)” 21.[2] Supreme Court then dealt with the issue of Composite Order and separate orders being passed under Section 14B and Section 7Q. The relevant paragraphs are extracted as under:

some adverse consequences no prejudice is caused.

29. It is highlighted by the respondents that once the amount due is determined the levy of interest is automatic. The rate of interest is stipulated at 12% or at a higher rate if so is provided in the scheme. Despite this, there can be errors with regard to the period and the calculation. It is a statutory power which is exercised by the competent authority under the Act. Once the said authority takes recourse to the measure for computation and sends a bald order definitely the affected person can ask for clarification and when the computation sheet is provided to him he can file an objection. Though, the area of delineation would be extremely limited yet the said opportunity cannot be denied to the affected person.”

22. The Division Bench of this Court in Net 4 India (supra) in 2016, also dealt with a similar issue concerning challenge to Section 7Q predicated on the ground that the establishment does not have the right to appeal. The Court, therefore, cited with approval and relied upon the decision of the Supreme Court in Arcot Textile Mills (supra) and noted as under:

under the said sections.” 22.[1] The Division Bench of this Court, therefore, allowed the petition and rejected the challenge to the constitutional validity of Section 7Q.

23. The Single Judge of Kerala High Court in Latheef K.A (supra), in 2020 was also dealing with the orders passed under Section 14B for delayed remittances and as also interest under Section 7Q. 23.[1] The relief sought was yet again that the EPF Act was ultra vires to the extent that it did not provide any remedy to orders passed under Section 7Q of the Act. The Kerela High Court cited the decision of the Supreme Court in Arcot Textile Mills (supra) in paragraph 11 of the judgment and then noted as under: “12. The principles laid above would leave no manner of doubt that the challenge to the constitutionality of the provision on the ground of failure of the legislature to provide for an appeal against an order passed under Section 7Q of the Act cannot be sustained. I have also gone through the decision in Net for India (supra) and have no doubt in my mind that the principles laid down in the said report will apply on all fours in the instant case as well.”

24. In 2021, the Coordinate Bench of this Court in Gaurav Enterprises (supra) took into account all these decisions noted above and stated that there would be multiplicity of proceedings relating to two separate determinations under Section 14B and Section 7Q and held that no independent inquiry shall be conducted in respect of these demands and that it should have done collectively through one common summons. 24.[1] The Court held that if the inquiry is common, the show cause notice is common and the reply is common and that the proceedings are common, passing of two orders would not render the proceedings under Section 7Q and Section 14B independent of each other. 24.[2] The Court, therefore, held that if the demand was through a common notice, then mere passing of two separate orders would not render the order under Section 7Q non-appealable under Section 7I. In the circumstances, since it was a composite order passed under Section 7Q and Section 14B of the EPF Act, it was held as amenable to appeal under Section 7I. 24.[3] This decision was, however, stayed by the Division Bench by order dated 9th March 2022 in LPA 177/2022. The matter is still pending before the Division Bench.

25. Basis this analysis, therefore, it is quite clear that the decision of the Supreme Court in Arcot Textile Mills (supra) holds the ground as applied by the Division Bench of this Court in Net 4 India (supra) and by the Single Judge of the Kerala High Court in Latheef K.A (supra). Though Net 4 India (supra) is under challenge in Civil Appeal NO. 5748/2017, it is noted that there is no stay order in that regard.

26. The contrary view, though, taken in the context of a composite order under Section 7Q and Section 14B in Gaurav Enterprises (supra) by the Single Judge of this Court, stands stayed by the Division Bench.

27. Though in the facts of Gaurav Enterprises (supra), the Competent Authority had chosen to pass separate orders under Section 14B and Section 7Q, the Court had considered them as a composite order.

28. Though the facts in this matter may be similar, in that the order was also passed on the same date, under Section 14B and Section 7Q, considering that judgment in Gaurav Enterprises (supra) has been stayed, the Court is bound by the precedent and, therefore, is persuaded by reliance of petitioner on Arcot Textile Mills (supra). Therefore, any order passed under Section 7Q remains unappealable under Section 7I.

29. To hold otherwise would be to go against the grain of the decision of the Supreme Court as well as the categorical provision of Section 7I, which does not include Section 7Q orders within the purview of an appeal.

30. The Court is not examining the issue of unavailability of natural justice in context of Section 7Q order being unappealable, considering those aspects have been dealt with in detail in Arcot Textile Mills (supra) by the Supreme Court.

31. The writ is, therefore, allowed and the impugned order dated 12th November 2015 is set aside to the extent of the directions by the EPFAT with respect to determination under Section 7Q. The directions passed by the Component Authority under Section 7Q would, therefore, hold ground.

32. Judgment be uploaded on the website of this Court.

JUDGE MAY 19, 2025 /RK/bp