Kerala State Civil Supplies Corporation Ltd. v. Assistant Provident Fund Commissioner, Employees Provident Fund Organisation

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **TUESDAY, THE 31[ST] DAY OF JANUARY 2023 / 11TH MAGHA, 1944** **WP(C) NO. 2084 OF 2012** ## **PETITIONER/S:** 1 KERALA STATE CIVIL SUPPLIES CORPORATION REPRESENTED BY ITS MANAGING DIRECTOR, MAVELI BHAVAN, GANDHI NAGAR, COCHIN-682020. 2 REGIONAL MANAGER REGIONAL OFFICE, THIRUVANANTHAPURAM. BY ADV SMT.MOLLY JACOB,SC,SUPPLYCO ## **RESPONDENT/S:** ASSISTANT PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, REGIONAL OFFICE, KERALA BHAVISHYANIDHI BHAVAN, PATTOM, THIRUVANANTHAPURAM-695 004. BY ADVS. SRI.N.N. SUGUNAPALAN, SC, P.F. SMT.T.N.GIRIJA SCEPF ORGANISATION THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 31.01.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **WP(C) NO. 2084 OF 2012** **2** ## **JUDGMENT** Order of the Assistant Provident Commissioner, Thiruvananthapuram assessing the damages under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act 1952 in respect of the petitioner establishment dated 2.8.2011, Ext.P5 is under challenge. 2. The petitioner Kerala State Civil Supplies Corporation Ltd, a company incorporated under the Companies Act deals with the distribution of essential commodities through various outlets such as supermarkets, Maveli stores etc. It has branches all over the country and from time to time had been complying with the provisions of the 1952 Act. Despite periodical inspection, the company was never found to be in remise. 3. Respondent issued a notice dated 24.9.2004 by exercising the powers conferred under Section 7Q and 14B of the EPF and MP Act on account of belated payment of provident fund contribution and employees family pension fund contribution, deposit linked insurance fund contribution, administrative charges, inspection charges for the period from 3/97 to 2/03 ie., Rs.1,21,366/- as interest and Rs.3,50,736/- as damages, total of Rs.4,72,102/- **WP(C) NO. 2084 OF 2012** **3** 4. Objections were filed before the respondent along with the statement of remittances and challan. In fact there were certain errors in the note of remittance, duplication and overlapping which was brought to the notice of the respondents. On deliberation of the issue, the total amount due was reduced to Rs.2,58,159/- ie., 68,536 under 7Q and Rs.1,89,623/- under Section 14B. Against the order Ext.P3 dated 16.12.2004, moved an appeal before the Provident Fund Appellate Tribunal, New Delhi, as per ATA 75 (7)/2005. However the respondent initiated action under Section 8F (3) of the EPF and MP Act, 1952. 5. Petitioner approached this Court vide WP(C) No. 871/05. This Court vide judgment dated 10.1.2005 directed to deposit the interest portion within a week and directed the Tribunal to dispose of the appeal within 3 months. In compliance with the direction, amount of Rs.68,538/-, ie., the entire interest portion was deposited. The appellate Tribunal vide order dated 31.12.2005 dismissed the appeal which was assailed in this Court vide W.P.(C) No.19336/05. This Court vide judgment Ext.P4 dated 16.2.2011 set aside the order and remanded the case back to the Commissioner. Pursuant to the judgment of this Court, personal hearing was conducted on 2.8.2011 but the Commissioner passed the order dated 2.6.2011, Ext.P5. It is thus contended that the order under challenge is not **WP(C) NO. 2084 OF 2012** **4** sustainable in the eyes of law on the ground that the words 'may recover' occurring in Section 14B would clearly show that the authority under the Act is vested with the discretion to decide whether damages are liable to be recovered or whether there was bonafide error. In other words, there was no malafide action on behalf of the petitioner in not depositing the contribution and therefore the damages as prescribed under Section 14B in total could not have been imposed. 6. On the other hand, learned counsel appearing on behalf of the respondent raised the objection qua maintainability of the present writ petition on the ground that the order Ext.P5 under Section 14B is appealable but the remedy has not been availed. Even otherwise, the controversy with regard to the inevitable action under Section 14B and 7Q on account of the delayed payment of contribution has been put to rest by the judgment of the Supreme Court in **Horticulture Experiment Station Gonikoppal, Coorg v. The Regional Provident Fund Organization (2022 Livelaw** **(SC) 202)** and urge this Court for dismissal of the writ petition. 7. I have heard the learned counsel for the parties and appraised the paperbook. Though while dealing with the matters pertaining to imposition of damages, prior to the judgments of the Supreme Court, ibid had been reducing the amount by considering **WP(C) NO. 2084 OF 2012** **5** the facts and circumstances, but in view of the ratio of decidendi culled out in the relevant paragraphs extracted herein below, it is settled that the inevitable action under Section 7Q and 14B cannot be equated with a bonafide mistake. 12. The three-Judge Bench of this Court in Union of India v. Dharmendra Textile Processors and others (supra) 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 reusis 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 and approved the view expressed by a twoJudge Bench of this Court in Chairman, SEBI (supra) and held in paras 18 and 20 as under: “18. The Explanations appended to Section 271(1)(c) of the IT Act entirely indicates the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The judgment in Dilip N. Shroff case [(2007) 6 SCC 329] has not considered the effect and relevance of Section 276-C of the IT Act. Object behind enactment of Section 271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276-C of the IT Act. 20. Above being the position, the plea that Rules 96-ZQ and 96-ZO have a concept of discretion in built cannot be sustained. Dilip Shroff case [(2007) 6 SCC 329] was not correctly decided but SEBI case [(2006) 5 SCC 361] has analysed the legal position in the correct perspectives. The reference is answered. The matter shall now be placed before the Division Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to vires of Rule 967-Q(5) are concerned. In all other cases the orders of the High Court or the Tribunal, as the case may be, are quashed and the matter remitted to it for disposal in the light of present judgments. Appeals except Civil Appeals Nos. 3397 & 3398-99 of 2003, 4096 of 2004, 3388 & 5277 of 2006, 4316, 4317, 675 and 1420 of 2007 and appeal relating to SLP (C) No. 21751 of 2007 are allowed and the excepted appeals shall now be placed before the Division Bench for disposal.” **WP(C) NO. 2084 OF 2012** **6** 13. Taking note of the exposition of law on the subject, it is wellsettled that mens rea or actus reus is not an essential element for imposing penalty or damages for breach of civil obligations and liabilities. 14. The judgment on which the learned counsel for the appellant(s) has placed reliance i.e. Employees State Insurance Corporation(supra),the Division Bench in ignorance of the settled judicial binding precedent of which adetailed reference has been made, while examining the scope and ambit of Section 85B of the Employees State Insurance Corporation Act, 1948 which is pari materia to Section14B of the Act 1952 placing reliance on the judgment of Division Bench of this Court in Dilip N. Shroff (supra) held that for the breach of civil obligations/liabilities, existence of mens rea or actus reus to be a necessary ingredient for levy of damages and/or the quantum thereof. 15. It may be noticed that Dilip N. Shroff(supra) on which reliance was placed has been overruled by this Court in Union of India and Others v. Dharmendra Textile Processors and others (supra). For the aforesaid reasons, the view expressed by this Court in Employees State Insurance Corporation (supra) may not be of binding precedent on the subject and of no assistance to the appellant(s). 16. Learned counsel for the appellant(s) further placed reliance on the judgment of this Court in Mcleod Russell India Ltd. (supra),wherein the question emerged for consideration was as to whether the damages which has been charged under Section 14B of the Act 1952 would be recoverable jointly or severally from the erstwhile as well as the current managements. At the same time, the judgment relied upon in Assistant Provident Fund Commissioner, EPFO and Another (supra) was decided placing reliance on the judgment of this Court in Mcleod Russell India Ltd. (supra), which may not be of any assistance to the appellant(s). 17. 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. **WP(C) NO. 2084 OF 2012** **7** I am of the view that it would be farcical exercise for this Court to relegate the petitioner in a matter of 2012 to avail the remedy of appeal in view of the findings extracted above. Writ petition sans merit. Accordingly, dismissed. SD/- sab **AMIT RAWAL JUDGE** **WP(C) NO. 2084 OF 2012** **8** PETITIONER'S EXHIBITS: P1: TRUE COPY OF THE NOTICE NO.KR/TVM/CIRCLE : 11/DAMAGE/KR/16227/CA/ dtd. 24.9.2004 ISSUED BY THE RESPONDENT P2: TRUE COPY OF THE NOTICE NO.KR/TVM/CIRCLE : 11/DAMAGE/KR/16227/CA/ dtd. 6.7.2004 ISSUED BY THE RESPONDENT P3: TRUE COPY OF THE PROCEEDINGS NO.KR/16227/RO/TVM/PD/B/NS/03 dtd. 16.12.2004 ISSUED BY THE RESPONDENT P4: TRUE COPY OF THE JUDGMENT DTD. 16.2.2011 IN W.P.(C) NO.19336/05 OF THE HON'BLE HIGH COURT OF KERALA P5: TRUE COPY OF THE ORDER NO.KR/16227/RO/TVM/PD/NS/2011 dtd 2.8.2011 ISSUED BY THE RESPONDENT