Mens rea is not required for imposing damages under Section 14B of the Act; damages can be levied based on default in payment of provident fund contributions.

ORDER :

This writ petition has been filed by the petitioner aggrieved by the order dated 19.08.2014, passed by the Employees Provident Fund Appellate Tribunal, New Delhi, in A.T.A.No.574(13)2012, whereby the learned Appellate Tribunal interfered with the proceedings of the Employees' Provident Fund Organisation, Madurai, bearing No.TN/RO/MDU/41592/RO/circle13/PDC/LD/2012, dated 29.05.2012 and reduced the damages imposed on the second respondent under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (in short, “the Act, 1952”) to 25%.

2. A perusal of the impugned order, dated 19.08.2014, would disclose that the learned Appellate Tribunal, having come to the conclusion that the Assistant Provident Fund Commissioner, Madurai, has not applied his mind while imposing damages under Section 14B of the Act, 1952 and also having come to the conclusion that there was no mens rea on the part of the second respondent in delaying the remittance of the provident fund dues, came to the conclusion that the second respondent cannot be made liable for paying damages, but instead made him liable to compensate the loss caused due to the delay in remittance of the provident fund dues and accordingly, reduced the compensation to the tune of 25%.

3. Existence of mens rea is not a condition precedent for imposing damages under Section 14B of the Act, 1952. This aspect of the matter is now well settled and no more res integra. The Honourable Apex Court, in the case of Horticulture Experiment Station vs. Provident Fund Organisation , reported in (2022) 4 SCC 516 , has decided the issue once for all. Paragraph Nos.15 and 19 of the said decision read read as under:

“15.Taking note of the exposition of law on the subject, it is well- settled that mens rea or actus reus is not an essential element for imposing penalty or damages for breach of civil obligations and liabilities.

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19. Taking note of three-Judge Bench judgment of this Court in Union of India v. Dharamendra Textile Processors [ (2008) 13 SCC 369 , which is indeed binding on us, we are 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 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.

4. A Full Bench of this Court also having taken note of the above said decision of the Honourable Apex Court, by a common Judgment dated 03.06.2024, passed in W.P.(MD) Nos.7339, 9688 of 2013, 2765 & 2782 of 2014, laid down certain guidelines in the matter of deciding the liability under Section 14B of the Act, 1952. Paragraph No.39 of the said decision reads as under:

39.Therefore, following the principles reiterated by the Hon'ble Supreme Court and different High Courts including our High Court in similar circumstances, this Court hold that Section 14-B of the Act is an enabling provision and it does not envisage any compulsion to levy damages in all cases, and is inclined to frame the following guidelines:-

(i) Before levying damages in terms of Section 14-B of the Act, every authority is required to follow principles of natural justice. The particulars of the default, period, etc., and every adverse information that may be relied upon for levying damages should be indicated or furnished to the employer and a fair opportunity should be given to the employer to put forth his case in defence to the proposed action.

(ii) The authority, while exercising power under Section 14-B, shall keep in mind that the liability as per the table given in Para 32A of the Scheme, should