Indroyal Furniture V. Assistant Provident Fund Employees Provident Fund Organization and Employees Provident Fund Appellate Tribunal

WP(C)/5391/2014

AI Insights

The case involves M/s. Indroyal Furniture, which challenged an order demanding damages for delay in remittance of Employees' Provident Fund contributions under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The initial order (Ext.P1) demanded Rs.1,76,181 as damages for the period from March 2009 to February 2011. The petitioner appealed this order, but the Appellate Tribunal upheld the damages (Ext.P3). The High Court, referencing a Supreme Court decision, noted that mens rea is not required for the imposition of damages under Section 14B but also emphasized that the circumstances leading to the default should be considered when deciding the quantum of damages. The court found that the Tribunal did not consider mitigating circumstances and thus remanded the case for a fresh decision.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 799640 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 05-02-2024
• Assessment Year: misc
• Other Referred Cases: Central Board of Trustees v. Bake 'N' Joy Hot Bakery, Horticulture Experiment Station v. Provident Fund Organization, SEBI v. Shriram Mutual Fund, Union of India v. Dharamendra Textile Processors
• Laws Referred To: Employees' Provident Funds and Miscellaneous Provisions Act, 1952
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T N GIRIJA; NITA
• Assessee Lawyers: P RAMAKRISHNAN
• Keywords: Civil Obligation; Mens Rea; Penalty; Damages for delay in remittance; Employees' Provident Fund contributions
• Section: 14B

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P. MONDAY, THE 5TH DAY OF FEBRUARY 2024 / 16TH MAGHA, 1945 WP(C) NO. 5391 OF 2014 PETITIONER: M/S. INDROYAL FURNITURE T.C.2/2465 (5), ROYAL PLAZA, PATTOM P.O., THIRUVANANTHAPURAM-695 004, REPRESENTED BY ITS MANAGER (HR & A) N SREENIVASAN. BY ADV. SRI.P.RAMAKRISHNAN RESPONDENTS: 1 ASSISTANT PROVIDENT FUND EMPLOYEES PROVIDENT FUND ORGANIZATION, PATTOM, THIRUVANANTHAPURAM-695 004. 2 EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL 4TH FLOOR, CORE 2, SCOPE MINAR, LAXMI NAGAR, NEW DELHI-110 092. BY ADVS. SMT.T.N.GIRIJA, SC,EPF ORGANISATION NITA N.S SMT.T.N.GIRIJA SCEPF ORGANISATION BY ADV. NITA N.S., STANDING COUNSEL, EPFO THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 05.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C.)NO.5391 OF 2014 2 JUDGMENT Dated this the 05th day of February, 2024 The petitioner has approached this Court, challenging Ext.P1 order, through which an amount of Rs.1,76,181/- (Rupees one lakh seventy six thousand one hundred eighty one only) as damages for delay in remittance of Employees’ Provident Fund contributions and other charges for the period from March, 2009 to February, 2011 is demanded from the petitioner, under the provisions of Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The petitioner filed an appeal against Ext.P1 order, which was disposed of by the Appellate T ribunal by Ext.P3 order, refusing to interfere with the levy of damages. 2. This Court, in Central Board of Trustees v. Bake ‘N’ Joy Hot Bakery [2024 (1) KL T 391], W.P.(C.)NO.5391 OF 2014 3 while considering the question as to whether, mens rea is an essential ingredient for the purposes of levy of damages under Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, after noticing the judgment of the Supreme Court in Horticulture Experiment Station v. Provident Fund Organization [2022 (4) SCC 516], held as follows:- “It is no doubt true that in Horticulture Experiment Station (supra), while dealing with the question of damages under the EPF Act, the Supreme Court followed the view in SEBI v. Shriram Mutual Fund (which was decided in the background of penalty provisions in the SEBI Act) that “a breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must be made by the defaulter with guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not.” The above view in respect of penalty provisions in the SEBI Act, in Shriram Mutual Fund (supra) was followed by a three-judge bench of the Supreme W.P.(C.)NO.5391 OF 2014 4 Court in Union of India v. Dharamendra T extile Processors (supra) (which was decided in the background of penalty provisions in the Income T ax Act). However, the said decision of the Supreme Court does not hold that 100% damages must be invariably imposed. The decision is also not authority for the proposition that the circumstances that led to the default cannot be considered while deciding the quantum of damages to be imposed. 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.” 3. A reading of Ext.P1 order does not indicate that the authority had considered the question as to whether, there are any mitigating circumstances, which would justify the imposition of lesser amount of damages than what was levied at 100%. The Appellate Tribunal has also not considered the said question. In that view of the matter, Exts.P1 and P3 W.P.(C.)NO.5391 OF 2014 5 orders are set aside and the matter is remanded to the file of the Assistant Provident Fund Commissioner, Thiruvananthapuram, who shall take a fresh decision in the matter, after taking note of the judgment of this Court in Central Board of Trustees (Supra) referred to above and after affording an opportunity of hearing to the petitioner. The Writ Petition is disposed of accordingly. Sd/- GOPINATH P . JUDGE NB/5-2 W.P.(C.)NO.5391 OF 2014 6 APPENDIX OF WP(C) 5391/2014 PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF PROCEEDINGS DATED 19.8.2013 OF THE IST RESPONDENT. EXHIBIT P2 TRUE COPY OF THE MEMORANDUM OF APPEAL AND STAY PETITION FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P3 TRUE COPY OF ORDER DATED 4.4.2013 PASSED BY THE 2ND RESPONDENT. RESPONDENTS EXHIBITS: NIL TRUE COPY P.A. TO JUDGE "