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2004 DIGILAW 201 (KER)

K. T. Sajeev v. The Provident Fund Commissioner

2004-05-25

M.RAMACHANDRAN

body2004
Judgment :- Ext.P4 proceedings had been addressed by the respondents-Employees Provident Fund Organization towards the petitioner. Thereby, the petitioner was directed to make a payment of Rs.2,68,739/- being outstanding dues of contribution in respect of M/s. Malabar Chemical Company, Palluruthy. He has subjected this to challenge. According to the petitioner, there was an improper adjudication and he has been asked to shoulder the liability, which is not sustainable legally. 2. Averments in the Writ Petition indicate that the Malabar Chemical Company was a proprietary establishment owned by one Mr. K.H. Patel. He had other business also. Petitioner submits that effective from 1-1-2002, he had been given a power of attorney by Mr. Patel and he was as a friend, helping Mr. Patel in the matter of his affairs. A copy of the power of attorney, which is dated 1-1-2002 is produced as Ext.P1. Mr. Patel had passed away on 17-03-2002. It appears that provident fund contributions were due from the establishment from 1998 onwards. The establishment had been closed down some time in October 2002. Petitioner submits that by the time, at the instance of legal representatives of Mr. Patel, steps had been taken for the running of the business. As could be seen from Ext.P3, a partner had settled the matter with the workmen and had also expressed his intention to shoulder the Provident Fund liabilities to the Full extent. The conciliation agreement is dated 17-10-2002. 3. Thus, according to the petitioner, he had no role in the running of the business concerned and Ext.P4 whereby large amounts were demanded had no legal basis. 4. A statement has been filed by the respondents justifying their stand. It is stated that as could be seen from Ext.P1, petitioner had been given authority to carry on, manage, transact, perform and conduct all business activities and affairs of Mr. Patel. It is further submitted that this was the arrangement that was going on. Referring to the definition of the term ‘employer’ under Section 2(e)(ii), it is stated that the person who or the authority which has ultimate control over the affairs of the establishment, and where the affairs are entrusted to a manager, Managing Director or Managing Agent, such Manager, Managing Director or Managing Agent is to be considered as an employer. Referring to the definition of the term ‘employer’ under Section 2(e)(ii), it is stated that the person who or the authority which has ultimate control over the affairs of the establishment, and where the affairs are entrusted to a manager, Managing Director or Managing Agent, such Manager, Managing Director or Managing Agent is to be considered as an employer. In view of Ext.P1 Power of Attorney, and as coming out of the enquiries that had been held by the Provident Fund authorities and after notice to the petitioner, they had come to a definite conclusion that he was managing the establishment and therefore had legal liability. Although perhaps the owner of the establishment also might have been equally liable, the petitioner could not have withdrawn himself in respect of the liability. Therefore, it is submitted that the demand as per Ext.P4 cannot be faulted. 5. Sri. Devan appearing for the petitioner submits that the Power of Attorney Holder cannot be treated as a Managing Agent. According to him, he is only a person who acts on behalf of the Principal and can have no personal liability in the matter of discharging of his obligations. Normally, this might be the legal position, but the Standing Counsel for the Provident Fund points out that in order to safeguard the interest of the workmen, an artificial definition is there under the Employees Provident fund Act and the petitioner also is to be held responsible since he has been authorized to manage and transact the business and enquiries reveal that he was exercising such rights. He has not explained, he points out why the dues were not remitted, while he was so managing the factory. 6. I have to accept the above said contention. But, as rightly contended by the petitioner, this by itself will not bind the petitioner beyond certain limits. The demand is stated to be for the period from 1998 onwards up to June, 2002. Ext.P1 was executed only on 1-1-2002 and automatically, from the date of death of Mr. Patel, it has become of no consequence. Even if the petitioner was continuing the business thereafter, no legal liability could be fastened on him in respect of the contributions that were payable for such periods. In other words, the petitioner will be liable to pay the provident fund contribution for the period from 1-1-2002 to 17-3-2002. Patel, it has become of no consequence. Even if the petitioner was continuing the business thereafter, no legal liability could be fastened on him in respect of the contributions that were payable for such periods. In other words, the petitioner will be liable to pay the provident fund contribution for the period from 1-1-2002 to 17-3-2002. Ext.P4 therefore cannot be sustained, since large liability has been imposed on the petitioner. It is held accordingly. 7. It will be proper for the Provident Fund authority to confine the liability of the petitioner to the above said period alone. This should be done by necessary adjudication. I make it clear that apart from the petitioner, liability for the above said period as also for the larger period rests with the owner of the establishment, as well as the legal representatives of Mr. Patel who had inherited the properties. Appropriate follow up orders are to be passed by the authority with notice to the affected parties, for effecting recoveries. 8. While on this, I may observe that the Powers of Attorney Act of 1882 indeed requires a through examination, so as to plug the loop holes, and cover areas, where essentially more legislative attention is necessary. Situations have come before courts, when it had been felt that a better statement of rights and liabilities of parties, and areas where the facility could and should not be resorted to are to be concisely defined. 9. Forward a copy of this judgment to the Central Government, for them to take appropriate steps if such action is deemed worthwhile or necessary. The Writ Petition is disposed of with the above observation.