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.
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.
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?
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.
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.