Mens Rea Not Essential Element For Imposing Penalty On Employer For Default/Delay To Deposit EPF Contribution: Supreme Court

The Supreme Court observed that any default or delay in the payment of EPF contribution by the employer is a sine qua non for imposition of levy of damages under Section 14B of the Employees Provident Fund & Miscellaneous Provisions Act, 1952.

The bench comprising Justices Ajay Rastogi and Abhay S. Oka observed that mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.

In this case, the Karnataka High Court held that once the employer has failed to deposit the contribution of EPF or committed default as mandated under the provisions of thehaving failed to do so after determination under Section 7A by the competent authority, levy of damages is a sine qua non. The High Court upheld the order for recovery of damages in the proceedings initiated under Section 14B of the Act 1952.

Before the Apex Court, the appellant contended that the element of mens rea or actus reus is one of the essential elements which has not been taken note of by the authority while imposing damages under Section 14B of the Act 1952. The respondents, on the other hand, contended that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities

So the issue considered was whether the breach of civil obligations or liabilities committed by the employer is a sine qua non for imposition of penalty/damages or the element of mens rea or actus reus is one of the essential elements has a role to play and the authority is under an obligation to examine the justification, if any, being tendered while passing the order imposing damages under the provisions of the Act 1952.

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, the bench said while referring to various earlier judgments.

The court noted that the three judges bench in Union of India v. Dharmendra Textile Processors and others (2008) 13 SCC 369 while examining the scope and ambit of Section 271(1)(c) of the Income Tax Act, 1961 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 and overruled the two-Judge Bench judgment in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Another (2007) 6 SCC 329.

Therefore, while dismissing the appeal, the bench observed:

"Taking note of three-Judge Bench judgment of this Court in Union of India and Others v. Dharmendra Textile Processors and others (supra), 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"

Head notes

Case:  Horticulture Experiment Station Gonikoppal Coorg Vs Regional Provident Fund Organization | CA 2136 of 2012 | 23 Feb 2022

Citation: 2022 LiveLaw (SC) 202

Coram: Justices Ajay Rastogi and Abhay S. Oka 

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