The Supreme Court on Wednesday held that any default or delay in the payment of Employees Provident Fund contribution by the employer is the only sine qua non (essential requirement) for imposition of damages under Section 14B of the Employees Provident Fund & Miscellaneous Provisions Act of 1952 [Horticulture Experiment station Gonikoppal, Coorg vs The Regional Provident Fund Organization].
A Bench of Justices Ajay Rastogi and Abhay S Oka reiterated that “mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.”
Mens rea refers to criminal intent while actus reus refers to conduct which is the constituent element of the crime.
By way of background, the appellant had failed to comply with the provisions of 1952 Act from January 1, 1975 to October 31, 1988.
For non-compliance with the mandate of the Act of 1952 regarding payment of employers’ share of EPF contribution, proceedings were initiated under Section 7A and dues towards contribution of EPF for the intervening period amounting to ₹74,288 were assessed by the competent authority and after adjudication, was paid by the appellant to the office of the EPF.
Thereafter, authorities issued a notice under Section 14B of the Act to charge damages for the delayed payment of provident fund amount levied, and called upon the appellants to pay damages of ₹85,548.
When challenged, a Division Bench of the Karnataka High Court, while setting aside a single-judge order, held that once the default in payment of contribution is admitted, the damages are consequential and the employer is under an obligation to pay the damages for delay in payment of contribution of EPF under Section 14B of the Act.
This judgment was challenged before the Supreme Court.
The Supreme Court held that it is “of the considered view that any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for imposition of levy of damages under Section 14B of the Act 1952”.
The top court relied on its three-Judge Bench decision in Union of India vs Dharmendra Textile Processors and others in which it was held that as far as the penalty inflicted under the provisions is a civil liability is concerned, mens rea or actus reus is not an essential element for imposing civil penalties.
The said judgment had overruled the two-Judge Bench judgment in Dilip N Shroff vs Joint Commissioner of Income Tax, Mumbai, which was relied on by the appellants in the present case.
The Court, therefore, dismissed the appeal.
Read Judgment here
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