It had been the practice of the Commissioner of Labour to institute action in a Magistrates Court, acting in terms of Section 38 (2) of the Employees Provident Fund Act No.15 of 1958, against directors of companies for the recovery of EPF contributions n the alleged charge of an offence committed under the EPF Act. The Commissioner probably had found an easy, quick and apparently effective method by getting the directors involved in a criminal prosecution to recover arrears of contributions under Section 38(1) of the Act, as amended, without realizing that he was making a procedural error which renders the entire exercise illegal.
The legality of the procedure followed by the Commissioner of Labour for the recovery of EPF contributions was challenged before the Supreme Court in a recent Fundamental Rights Application (Kodagoda Arachchige Dayawathie Vs D.S.Edirisinghe, Commissioner of Labour and four others (Application No. SC(F/R) 241/08 decided on 01.06.2008) and the Court held that the procedure followed by the Commissioner was a violation of the provisions of the Act and therefore such actions had no legal force.
The Court held that it is Section 17(1) that guides and sets out the procedure which is the prime determinant of recovery of EPF contributions through proceedings in a Magistrate’s Court and not under Section 38 which reads as follows:-
“Any monies due to the Fund shall be recoverable, as a debt due to the state, by an action in which proceedings may be taken by way of summary procedure. The provisions of the Civil Procedure Code relating to actions of which the procedure is summary shall apply to an action under this section, and,…………………”
It is very clear that recovery proceedings should be first initiated in the District Court against the employer by the Commissioner by filing a certificate containing details of the sum due and the name and place of residence of the defaulting employer on which certificate the District Court may direct a writ of execution to issue to the Fiscal authorizing and requesting him to seize and sell all the property, movable or immovable, of the defaulting employer, or such part thereof as he may deem necessary for the recovery of the amount due.
What the Commissioner had been doing so far was to resort to a short cut by initiating action in the Magistrate’s Court against directors of the company surpassing the District Court proceedings as required under Section 17 and Section 38 (1).
It appears that the Commissioner has found an easy and quick method to recover arrears of contributions by bringing the Directors before the Magistrates Court at the first instance without resorting to District Court procedure as laid down in the Act, but the Commissioner little realized that he was acting contrary to law.
The directors of a corporate body cannot be brought before a court for an offence committed by the corporate body, without special provisions, unless the company is convicted of the offence first. The Commissioner is now faced with the problem of proceeding with the hundreds of cases filed against directors of companies, now pending before the Magistrate’s Court around the island!
(Writer is the Lecturer and Examiner in Industrial Law at the Sri Lanka Law College) |
E-mail