K.A. SUBRAMANIAN Vs. COMMISSIONER, THE REGIONAL PROVIDENT FUND TAMIL NADU AND PONDICHERRY STATES AND ANOTHER

JUDGEMENT

(1.) This writ petition is somewhat similar to writ petition No. 171 of 1975 disposed of by Mohan, J. on October 31, 1977, and would therefore be governed by the Judgment rendered in that case. For belated payments of provident fund contributions the respondent has imposed damages on the petitioner and called upon him to remit the damages within the time given therefor. The petitioner has also been informed by the impugned order that if he failed to remit the amount within the time given, action will be taken against him under Section 8 of the Revenue Recovery Act to recover the damages imposed on him as arrears of land revenue.

(2.) In the impugned order the respondent has, no doubt, adverted to the reasons given by the petitioner for default in payment of the provident fund contributions within the time given by law and has given a finding that the explanations were not acceptable. The respondent has then stated that having regard to the misuse of the provident fund money of the workers by the employer to wit the petitioner, "deterrent rates of damages are necessary to deter the employer from using provident fund contributions of workers in his business and to make him deposit the same in time". It is this portion of the order which cannot be sustained. As has been pointed out by my learned brother, Mohan, J. in Writ Petition No. 171 of 1975 (South Indian Flour Mills Pvt. Ltd. V/s. Additional Provident Fund Commissioner, 1978 LabIC 1187) damages are totally different from penalty. The imposition of penalty is somewhat in the nature of a mechanical process i. e., if a statute enjoins a person to do a particular thing in a particular manner and within a particular time and if he fails to act accordingly, he becomes liable to be penalised for the contravention. On the other hand the imposition of damages is on a different concept altogether. The authority empowered to impose damages has to first of all decide whether the facts of a case warrant the imposition of damages. If his assessment of the situation results in a finding that imposition of damages is called for, then he has to determine the quantum of damages with reference to relevant factors such as the loss suffered by the affected party, the hardship caused to the beneficiaries, the efforts taken by the enforcement machinery to collect the defaulted payments etc. There is, therefore, a clear line of distinction between imposition of penalty which is penal in nature and imposition of damages which is compensatory in nature. Unfortunately in the instant case the respondent, after having come to the conclusion that the circumstances of the case warranted the imposition of damages, has proceeded to impose damages in the nature of a penalty. This is made clear from the statement in the impugned order that deterrent rates of damages necessary to deter the employer from using provident fund contributions of workers in his business. On account of that factor I am of opinion this is a fit case where the impugned order should be quashed and the matter remitted to the respondent for fresh determination of the quantum of damages in the light of the observations contained in this judgment. The writ petition will, therefore, stand allowed. There will be no order as to costs.