IMPORTANT POINT
Imposition of damages – Mens rea or actus reus is not an essential element for imposing penalty or damages for breach of civil obligations and liabilities.

JUDGMENT :

Rastogi, J.

1. The instant appeals are directed against the common judgment and order dated 26th October, 2009 passed by the Division Bench of the High Court of Karnataka at Bangalore.

2. That while setting aside the judgment of the learned Single Judge dated 3rd February, 2009, it was observed that once the employer has failed to deposit the contribution of EPF or committed default as mandated under the provisions of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (hereinafter referred to as the “Act 1952”), having failed to do so after determination under Section 7A by the competent authority, levy of damages is a sine qua non and upheld the order for recovery of damages in the proceedings initiated under Section 14B of the Act 1952.

3. The undisputed facts culled out from the record are that the establishment of the appellant(s) is covered under the provisions of the Act 1952. On 31st December, 1974, under Code no.KN/8573 under scheduled head “Fruit Orchards”, the appellant(s) failed to comply with the provisions of Act 1952 from 1st January, 1975 to 31st October, 1988. For non-compliance of the mandate of Act 1952, proceedings were initiated under Section 7A and dues towards contribution of EPF for the intervening period of 1st January, 1975 to 31st October, 1988 amounting to Rs.74,288/- were assessed by the competent authority and after adjudication, that was paid by the appellant to the office of EPF. Thereafter, the authorities issued a notice under Section 14B of the Act 1952 to charge damages for the delayed payment of provident fund amount which was levied for the period January 1978 to September, 1988 and called upon the appellant(s) to pay damages of Rs.85,548/-. The High Court under the impugned judgment held that once the default in payment of contribution is admitted, the damages as being envisaged under Section 14B of the Act 1952 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 1952, which is the subject matter of challenge in the present appeals.

4. The Act 1952 is a legislation for providing social security to the employees working in any establishment and engaging 20 or more persons on any day and casts an obligation upon the employer to make compulsory deduction for provident fund and to deposit in the workers account in the EPF office. Similar is the provision which is pari materia to recover damages under Section 85B of the Employees State Insurance Act, 1948(hereinafter being referred to as the “Act 1948”) providing insurance and pensionary benefits to the employees.

5. Section 14B of the Act 1952 which is pari materia to Section 85B of the Act, 1948 is reproduced hereunder:

“14B. Power to recover damages. -Where an employer makes default in the payment of any contribution to the Fund , the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under subsection (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme:

Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:

Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Indust