High Court of KeralaSingle Judge2019-01-25Dismissed

Employees Provident Fund Organisation Sub Regional Office, Bhavishya Nidhi Bhavan, P.B.No. 1806, Eranhipalam P.O., Kozhikode - 673 006 v Bhagawati Textiles Ltd and The Employees Provident Fund Appellate Tribunal

Case / Petition Number:WP(C).No.2937 of 2015

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: N. Nagareesh
Judgment Date: 2019-01-25
Court Decision / Holding: This writ petition lacks merit and accordingly, it is dismissed.
Final Disposition: Dismissed

Parties to the Case

Appellants / Petitioners

Employees Provident Fund Organisation Sub Regional Office, Bhavishya Nidhi Bhavan, Eranhipalam P.O., Kozhikode - 673 006, represented by its Assistant Provident Fund Commissioner (Compliance Division)

Respondents

Bhagawati Textiles Ltd
The Employees Provident Fund Appellate Tribunal

Legal Representation & Advocates

Counsels for Petitioners

• Sri. Thomas Mathew Nellimoottil, SC, P.F.

Counsels for Respondents

• Sri K. Anand (Sr.)
• Smt. Latha Anand

Case Synopsis & Summary

The petition challenges an order dated 03.11.2014 in ATA 643(7)/2013 of the Employees Provident Fund Appellate Tribunal, New Delhi, which set aside damages under Section 14B of the EPF Act for delay in remittance of provident fund contributions from February 2001 to December 2004 by Bhagawati Textiles Ltd. The Tribunal held that since the establishment was not a wilful defaulter, damages could not be levied. The petitioner contends that para 32A of the Scheme mandates damages whenever delay is detected, and that mens rea is not relevant to the imposition of damages; therefore, the Tribunal’s reasoning reflects a lack of application of mind. The respondents, on the contrary, contend that authorities have discretion to consider the employer’s history and the circumstances surrounding the delay, including financial difficulties, and rely on Supreme Court precedents permitting a non-rigid approach to damages under Section 14B. The High Court notes that recent Supreme Court authority recognizes discretion in imposing damages and in evaluating mens rea, but also emphasizes that the statutory scheme allows consideration of context. Ultimately, the court upholds the Tribunal’s order and dismisses the petition, affirming no interference with the damages-discretion framework.

Provisions of Law Cited

Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952Para 32A of the Scheme

Legal Doctrines & Maxims

Mens rea (mental element) and Actus reus (physical element) as determinants in imposing damages under Section 14B
Application of mind by decision-makers; discretion in imposition of damages

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners submit that once delay in remittance is established, damages under Section 14B must be determined strictly according to the schedule in para 32A of the Scheme. They argue there is no discretion to depart from the schedule, and that mens rea is not a prerequisite for damages. They contend the Commissioner failed to record adequate reasons and did not consider the organization’s long remittance history, along with the economy’s downturn from 1997–2000 and continuing through 2008, which plausibly caused delays. They assert that the Tribunal did not properly apply mind and that the order should be set aside so damages are computed as per the Scheme, not by a mechanical approach. They rely on Supreme Court authority recognizing discretion in imposing damages, even while emphasizing adherence to statutory guidelines.

Contentions of Respondents

The respondents argue that the authorities possess discretion to weigh the employer’s history, circumstances, and the context of delays, including financial stress. They rely on Supreme Court precedents acknowledging discretion in the quantum and imposition of damages under Section 14B, and the relevance of mens rea and actus reus in determining liability. They contend the Tribunal’s decision to nullify damages was correct because the Commissioner did not adequately consider the employer’s finances and prior remittance pattern. They maintain that the delay was not a willful default and that the tribunal’s intervention aligns with judicial prudence in applying mind and considering the broader context.

Cited Precedents (3)

Case Name	Citation	Treatment	Explanation
Assistant Provident Fund Commissioner, EPFO and another v The Management of RSL Textiles India Pvt. Ltd	Civil Appeal Nos. 96-97 of 2017	Positive	Quoted to support discretionary considerations in imposing damages under Section 14B and to acknowledge that mens rea can influence the extent of damages.
Regional Provident Fund Commissioner, Employees Provident Fund Organisation, Kottayam v. M/s. Harrisons Malayalam Ltd, Cochin	2013 (3) KLT 790	Positive	Cited to establish that discretion exists in awarding damages and must be contextual to the employer’s history and circumstances.
MCLEOD RUSSEL INDIA LIMITED v. Reg. Provident Fund Commissioner, Jalpaiguri and Others	2014 (15) SCC 263	Positive	Cited to support a non-rigid, discretionary approach to damages under Section 14B as endorsed by Supreme Court.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE N.NAGARESH** **FRIDAY ,THE 25TH DAY OF JANUARY 2019 / 5TH MAGHA, 1940 WP(C).No.2937 of 2015** ## **PETITIONER/S:** **EMPLOYEES PROVIDENT FUND ORGANIZATION SUB REGIONAL OFFICE, BHAVISHYA NIDHI BHAVAN, P.B.NO. 1806, ERANHIPALAM P.O., KOZHIKODE - 673 006, REPRESENTED BY ITS ASSISTANT PROVIDENT FUND COMMISSIONER (COMPLIANCE DIVISION). BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL,SC, P.F.** ## **RESPONDENTS:** |**1**|**BHAGAWATI TEXTILES LTD**| |---|---| ||**VANNAMADAL ROAD, CHITTUR,**| ||**PALAKKAD, PIN - 678 101.**| |**2**|**THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL**| ||**SCOPE MINAR, 4TH FLOOR, CORE - 2,**| ||**LAXMI NAGAR, DELHI - 110 092.**| ||**BY ADVS.**| ||**SRI.K.ANAND (SR.)**| ||**SMT.LATHA ANAND**| ||**SRI.K.ANAND (SR.)**| **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25.01.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.2937 of 2015** 2 ## **JUDGMENT** This writ petition has been filed by the Employees of Provident Fund Organization aggrieved by the order dated 03.11.2014 in ATA 643(7)/2013 of the Employees Provident Fund Appellate Tribunal, New Delhi. 2. The fist respondent is an establishment covered under the Employees Provident Fund and Miscellaneous Provisions Act 1952 (for short 'the Act'). The petitioner contends that the first respondent defaulted in remittance of Provident Fund contributions for the period from February, 2001 to December, 2004. The authorities initiated proceedings against the first respondent under Section 14B of the Act. Ultimately an amount of Rs.48,82,215/- was imposed as damages. 3. Challenging the order imposing damages the first respondent filed appeal before the second respondent-Employees Provident Fund Appellate Tribunal. According to the petitioner, the **WP(C).No.2937 of 2015** 3 Tribunal without properly appreciating the legal contentions urged by the petitioner, held that since the first respondent establishment is not a wilful defaulter no damages can be levied under Section 14B of the Act. Consequently, the second respondent Tribunal set aside the orders imposing the damages. 4. The first respondent entered appearance and opposed the writ petition filing a counter affidavit. The respondent stated that their textile mill is functioning in a rurally backward area in Palakkad District from 1967 onwards. The first respondent voluntarily covered the unit under the Act. The first respondent has been promptly making remittance to the Provident Fund all along without failure. In 1996, expansion of Mill was carried out borrowing capital from various financial institutions. However, due to the slowed down economy, the first respondent run into loss. The first respondent states that more than 75% textile mills in and around Coimbatore and Palakkad were closed down. Due to the financial struggling, the first respondent could not even pay wages **WP(C).No.2937 of 2015** 4 to its workers promptly during the years from 1997 to 2000 and even after that up to the year 2008. The first respondent has been consistently incurring losses. Due to the fall in economy and financial difficulties faced by the first respondent, delay occurred in payment of P.F. dues. The Assessing Authority did not look into any of these aspects, did not consider whether there was deliberate delay on the part of the fist respondent, did not advert to the element absence of mens rea and mechanically imposed heavy damages. The Tribunal rightly found that the impugned order of the Commissioner lacks application of mind in the matter of imposing of damages. Ext.P1 is legal and proper and is not liable to be interfered. 5. I have heard learned counsel for the petitioner and the learned Standing Counsel representing the first respondent. 6. Learned counsel for the petitioner strongly urged that the authorities have taken into account the delay in payment of P.F. dues on the part of the first respondent. In view of para 32A of the **WP(C).No.2937 of 2015** 5 Scheme, which provides a schedule for imposing damages, the petitioner has no discretion in the matter and once delay in payment is found the petitioner is bound to follow the schedule attached to the Scheme. Therefore, finding of the Tribunal is unsustainable. Learned counsel for the petitioner also urged that intention on the part of the employer is not a relevant criteria; Petitioner is not expected to arrive at a finding of mens rea before awarding damages. The finding of the Tribunal that the impugned order in appeal are bad for non application of mind is totally unjustifiable. The Commissioner had given sufficient reasons to arrive the figures of damages. The order of the Tribunal therefore cannot stand the scrutiny of law and therefore it is liable to be set aside, contended learned counsel for the petitioner. 7. Learned Counsel for the first respondent on the other hand argued that the authorities while imposing damages under the Act, definitely have discretion in the matter. The Authorities are expected to consider the previous history of the Organization in **WP(C).No.2937 of 2015** 6 making remittance. The authorities are also bound to consider the circumstances under which the failure/delay in payment of P.F. Contribution occurred. This question is no more doubtful as the Hon'ble Supreme Court has, in judgment in Assistant Provident Fund Commissioner, EPFO and another v The Management of RSL Textiles India Pvt. Ltd THR (Civil Appeal No.96-97/2017) dated 3.1.2017, relying on the judgment in Regional Provident Fund Commissioner Employees Provident Fund Organisation, Kottayam v. M/s. Harrisons Malayalam Ltd, Cochin (2013 3 KLT 790) held that the presence or absence of mens rea and/or actus reus could be determinative factor in imposing damages under Section 14B, as also the quantum thereof since it is not inflexible. Therefore the contention of the petitioner as to lack of discretion is unsustainable. Learned counsel for the first respondent also relied on the judgment reported in MCLEOD RUSSEL INDIA LIMITED v. Reg. Provident Fund Commissioner, Jalpaiguri and Others (2014 15 SCC 263) and the judgment in Regional Provident Fund Commissioner, Employees **WP(C).No.2937 of 2015** 7 Provident Fund Organisation, Kottayam v. M/s. Harrisons Malayalam Ltd, Cochin [2013(3) KLT 790] to urge the contentions. 8. I have considered the pleadings in the matter and heard the arguments of the counsel on either side. 9. In view of the judgment of the Hon'ble Supreme Court the Assessing Authorities cannot say that they have no discretion in the matter of award of damages. The orders imposing damages do not show that the authorities have considered the previous history of the first respondent company in the matter of payment of P.F. dues. The Authorities have not considered the circumstances under which the first respondent could not remit the dues promptly during the period in question. 10. The learned Tribunal therefore rightly found that the Commissioner has not applied his mind to the issue of quantum of damages. The Tribunal further held that the Commissioner has to ensure that there was wilful and deliberate delay on the part of the Authority while dealing the remittance of P.F. Fund. **WP(C).No.2937 of 2015** 8 11. In the facts and circumstances of the case, I do not find any reason to interfere with the impugned order of the Employees Provident Fund Appellate Tribunal, New Delhi, impugned in this writ petition. This writ petition lacks of merit and accordingly, it is dismissed. **Sd/-** **N.NAGARESH** **JUDGE** dlk/28.01.19 **WP(C).No.2937 of 2015** 9 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 A TRUE COPY OF THE ORDER DATED 03/11/2014 IN ATA NO. 643 (7)/2013 OF THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, NEW DELHI. EXHIBIT P2 A TRUE COPY OF THE APPEAL ATA 643 (7) 2013. EXHIBIT P3 A TRUE COPY OF THE COUNTER AFFIDAVIT FILED ON BEHALF OF THE EPFO IN APPEAL ATA 643 (7) 2013.**