Default in EPF by employer liable to imposition of penalty: SC

New Delhi, Feb 24 (IANS) The Supreme Court said any default in the payment of Employees Provident Fund (EPF) contribution by the employer is liable to imposition of penalty by authorities concerned.

A bench of Justices Ajay Rastogi and Abhay S Oka said: "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 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities."

It noted that that "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 top court was hearing appeals against the common judgment and the order passed by the division bench of the Karnataka High Court in October 2009.

The high court had 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, and 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.

The top court dismissed the appeals of the company challenging the high court order. The company challenged imposition of damages of Rs 85,548 in addition to Rs 74,288 which it had not contributed towards EPF.

The company did not comply with the provisions of Act from January 1, 1975 to October 31, 1988 and proceedings were initiated and dues towards contribution of EPF for this period was assessed at Rs 74,288 by the competent authority, which was paid by the company. Later, the authorities issued a notice under Section 14B for delayed payment of provident fund amount and directed the company to pay damages of Rs 85,548.

The top court noted that the high court held that once the default in payment of contribution is admitted, the damages as being envisaged under Section 14B are consequential and the employer is under an obligation to pay the damages for delay in payment of contribution of EPF under Section 14B.

The Regional Provident Fund Organisation counsel submitted that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities and mere contravention of the provisions of the Act or default in making compliance of the mandate of law as regards the civil liabilities are concerned, mens rea or actus reus is not the requirement of law to be considered, while imposing damages like, in the instant case, under Section 14B.