Imposition Of 100% Penalty Not Mandatory U/S 14B Of EPF Act: Kerala High Court

The Kerala High Court held that per Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (Act) imposition of a 100% penalty is not mandatory.

The Court dismissed the Central Board of Trustees' appeal against the Tribunal's decision to reduce damages to 50% of the originally levied amount.

The Court noted that the Tribunal had only reduced the penalty to 50%, which is permissible despite the absence of mens rea or actus reus being necessary for the levy of damages under Section 14-B of the EPF Act.

The Bench of Justice Gopinath P. observed, “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”.

Advocate K. C. Santhoshkumar appeared for the Petitioners and Advocate Athul Babu appeared for the Respondent.

The Central Board of Trustees of the Employees Provident Fund filed a writ petition through the Regional Provident Fund Commissioner challenging an order passed by the Central Government Industrial Tribunal-Cum-Labour Court (Tribunal). This appeal was filed by the First Respondent challenging the levy of damages under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (Act). The Tribunal had reduced the amount of damages to 50% of the amount levied for reasons stated in the order.

The Court observed that the reasons compelling the Tribunal to reduce the damages to 50% were clearly outlined in its order. The Bench emphasized that the necessity of proving mens rea and/or actus reus was no longer essential for imposing penalties or damages for breach of civil obligations and liabilities. The Court, referring to the case of SEBI v. Shriram Mutual Fund [(2006) 5 SCC 361] and Union of India v. Dharamendra Textile Processors [(2008) 13 SCC 369], noted that the imposition of penalties irrespective of the presence of guilty intention. The Court noted that these decisions do not mandate the imposition of 100% damages in all cases.

In this case, the Bench noted, “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”. The provisions of Section 14-B of the Act were noted not to mandate a mandatory penalty of 100%.

Therefore, the Court noted that the Tribunal has committed no illegality in reducing the damages from 100% to 50%.

Accordingly, the Court dismissed the Appeal.

Cause Title: Central Board Of Trustees v Bake ‘n’ Joy Hot Bakery (2024/KER/1330)

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