Default or delay in payment of EPF contribution by employer is sine qua non for imposition of levy of damages u/s 14B of Employees Provident Fund & Miscellaneous Provisions Act, 1952: SC

Read Judgment: Horticulture Experiment Station Gonikoppal, Coorg V. The Regional Provident Fund Organization 

Pankaj Bajpai

New Delhi, February 24, 2022: Observing that ‘mens rea or actus reus’ is not an essential element for imposing penalty or damages for breach of civil obligations and liabilities, the Supreme Court relying on its decision in Union of India and Others v. Dharmendra Textile Processors and others ,(2008) 13 SCC 369, held 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 u/s 14B of the Employees Provident Fund & Miscellaneous Provisions Act, 1952.  

A Division Bench of Justice Ajay Rastogi and Justice Abhay S. Oka observed that for the delayed payment of EPF contribution it was after affording due opportunity of hearing as contemplated, that the order was passed by the competent authority directing the appellant(s) to pay damages as assessed in accordance with Section 14B of the Act, 1952. 

The observation came pursuant to an appeal by Horticulture Experiment Station challenging the judgment, whereby the High Court had upheld the order for recovery of damages in the proceedings initiated u/s 14B of the 1952 Act and observed that once the employer has failed to deposit the contribution of EPF or committed default as mandated under the provisions of 1952 Act, after determination u/s 7A by the competent authority, then levy of damages is a sine qua non. 

After considering the submissions, the Top Court noted that the question for consideration in the instant appeals was the effect and implementation of Section 14B of the Act 1952.

Answering to this issue, the Top Court found that the establishment of the appellant(s) was covered under the provisions of the Act 1952, but still failed to comply with the same and for such non-compliance of the mandate of the Act 1952, initially proceedings were initiated u/s 7A.

Speaking for the Bench, Justice Rastogi noted after adjudication was made in reference to contribution of the EPF which the appellant was under an obligation to pay and for the contravention of the provisions of the Act 1952, the appellant(s) indeed committed a breach of civil obligations/liabilities.

The Division Bench of the Apex Court while answering the question under adjudication, relied on the decision in case of Dharmendra Textiles (Supra) where 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, by overruling the two-Judge Bench decision in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Another, (2007) 6 SCC 329.

Hence, the Apex Court dismissed the appeal.