SC: Default Or Delay In Deposit Of EPF Contribution Will Attract Damages (Horticulture Experiment Station Gonikoppal Coorg V. Regional Provident Fund Organization, (2022) 4 Scc 516) 

Summary   

This case was filed before the Hon’ble Supreme Court of India against the common judgment and order dated October 26th 2009 passed by the Division Bench of the High Court of Karnataka at Bangalore, in which the High Court observed that once the employer has failed to deposit the EPF Contribution or committed default as mandated under the provisions of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (the “EPF Act”), levy of damages under Section 14B of the EPF Act would be sine non qua.  

Judgement  

The Supreme Court (SC) held that any default or delay in the payment of EPF contribution by the employer under the EPF Act is a sine qua non for the imposition of levy of damages. Under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.   

Issue Framed  

Whether breach of civil obligations or liabilities committed by the employer is a sine qua non for the imposition of penalty/damages or the element of mens rea or actus reus is an essential element which need to be examined while passing the order imposing damages under the provisions of the EPF Act?  

Arguments Advanced  

Appellants  

The Appellant contended that the authority did not consider the Appellant’s justification for which the EPF contribution could not have been deposited and that the element of mens rea or actus reus is one of the essential elements that the authority did not consider when imposing damages under Section 14B of the Act. They placed reliance on judgments such as Employees State Insurance Corporation v. HMT Ltd. and Anr., and Mcleod Russell India Ltd. v. Regional Provident Fund Commissioner, Jalpaiguri, and Ors, wherein the question arose as to whether the damages assessed under Section 14B of the Act of 1952 would be receivable jointly or severally against the former as well as present managements.  

Respondent  

The Respondent contended that mens rea is not an essential element for imposing penalties for breach of civil obligations or liabilities, and that mere contravention of the provisions of the EPF Act or failure to comply with the mandate of law as it relates to civil liabilities, mens rea or actus reus is not a legal requirement to be considered when imposing damages, as in the present case.

They placed reliance on the case of Chairman, SEBI v. Shriram Mutual Fund and Anr., which has been relied upon by a three-bench judge judgment in Union of India and Ors. v. Dharmendra Textile Processors and Ors., wherein it was held that any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for the imposition of damages under Section 14B of the Act 1952 and that mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.  

Case Analysis  

• The Court relied on the three-Judge Bench ruling in Union of India v. Dharmendra Textile Processors wherein it was held that, insofar as the penalty imposed under the provisions of the Income Tax Act of 1961 is a civil responsibility, mens rea or actus reus is not required for imposing civil penalties.  
   
• Furthermore, once the violation of the statutory obligation as anticipated by an enactment is proven, the purpose of the parties perpetrating the infringement becomes irrelevant. A violation of a civil duty that carries a penalty in the form of a fine under the provisions of an enactment would result in the levy of a penalty regardless of whether the violation must be made by the defaulter with guilty intent or not. As a result, if the violation is confirmed, the penalty is to follow.  
   
• In this case, the levy of damages under Section 14B of the EPF Act would be an essential condition since there is a default/delay in the payment of EPF contribution by the employer under the statutory obligations of the EPF Act.