[EPF ACT] S.14 B Does Not Mandate Imposition Of 100 % Damages On Employer As Penalty: Kerala High Court Upholds Order Reducing Penalty To 50%

Justice Gopinath P observed thus:

“In the facts of the present case, the Tribunal has not set aside the damages under Section 14-B of the EPF Act. It has only reduced the quantum of penalty to 50%. This, in my view is permissible even when the requirement of mens rea and/or actus reus is no longer a necessary ingredient for levy of damages under Section 14-B of the EPF Act. It is to be noted that the provisions of Section 14-B of the EPF Act do not prescribe that a penalty at 100% is to be mandatorily imposed.”

The petitioners Central Board of Trustees of the Employees Provident Fund have approached the Court challenging the order of the Tribunal for the reduction of penalty under Section 14 -B of the EPF Act. The Tribunal reduced the penalty from 100% to 50% and aggrieved with this, they have approached the High Court by way of a writ petition.

The Counsel for the petitioners submitted that the Tribunal had without any cause or reason reduced the damages to 50%. It was also argued that the employer has disregarded his obligation to contribute to the fund and has violated the statutory law.

On the other hand, the counsel for the respondents submitted that the Tribunal had found that the organization had disputed its coverage and liability under the EPF Act. Relying upon the Apex Court decisions in Employees' State Insurance Corporation v. HMT Ltd and Another (2008) and Mcleod Russel India Limited v. Regional Provident Fund Commissioner, Jalpaiguri and Others (2014), it was contended that there could not be an automatic imposition of penalty of 100 % unless there was mens rea or actus reus and a conscious and willful disregard of obligations under the EPF Act.

The Court noted that the requirement of proof of mens rea or actus reus was not a necessary condition for the imposition of damages. Referring to the Apex Court decisions in SEBI v. Shriram Mutual Fund (2006) and Union of India v. Dharamendra Textile Processors (2008), the Court found that unless the language of statute expressly provides for proof of mens reas, it was unnecessary to ascertain the intent for the imposition of damages for violation of a statutory provision. Interestingly, the Court also observed thus: “However, the said decision of the Supreme Court does not hold that 100% damages must be invariably imposed.”

The Court held that Section 14 B of the EPF Act does not mandate for imposition of 100% of the amount of damages as a penalty.

Accordingly, the Court dismissed the writ petition on finding that there was no illegality in the order of the Tribunal in reducing the amount of damages from 100% to 50%.

Counsel for the petitioner: Advocate K C Santhoshkumar

Counsel for the respondents: Advocates Athul Babu, Pranoy K Kottaram, Sivaraman P L

Citation: 2024 LiveLaw (Ker) 30

Case title: Central Board Of Trustees v Bake N Joy Hot Bakery

Case number: WP(C) NO. 35163 OF 2019

Click here to read/download the judgment