- The Hon’ble Supreme Court, in Horticulture Experiment Station Gonikkopal, Coorg vs. Regional Provident Fund Organisation has observed that the element of mens rea, which is otherwise necessary for fastening criminal liability, is not essential for imposing penalty in cases of breach of civil obligations.
- In the instant case, the Karnataka HC had held that once an employer has failed to deposit the EPF contributions or committed default under the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, the levy of damages is a sine qua non. The order of recovery of damages under section 14B of the Act was upheld.
- In the instant appeal before the SC, the appellant contended that the element of actus reus or mens rea is an essential ingredient for fastening liability and the same has not been kept in mind when the damages were awarded under section 14B of the Act.
- On the other hand, the respondents argued that the element of mens rea is not an essential ingredient for imposing civil liability.
- Thus, the question before the Apex Court was whether the breach of civil liabilities by the employer is a ground for the imposition of liability under the Act or is mens rea or actus reus an essential element which the authority is obligated to keep into account while passing an order for damages.
- At the outset, the Court observed that the validity of section 14B of the Act had been upheld in the case of Organo Chemicals Industries and anr. vs. Union of India and ors. (1979) SCC.
- The Court observed that in the case of the Chairman, SEBI vs. Shriram Mutual Fund and anr. (2006)SCC, the Apex Court had held that mens rea is not an essential element for imposing penalty for the breach of civil liability or obligation. The same view was also taken by the Apex Court in the case of Union of India vs. Dharmendra Textile Processors and ors. (2008) SCC and the view taken in Dilip N. Shroff vs. Joint Commissioner of Income Tax, Mumbai and anr. (2007) SCC was overruled.
- Finally, the Court observed that taking note of the decision of the three-judge bench in Dharmendra textile case, a case that is binding on the Court, the Court was of the view that any default or delay in the payment of EPF contributions by the employer is a sine qua non in the imposition of the liability and damages under section 14B of the aforementioned Act, and mens rea is not an essential element for imposing damages under the Act.
- Thus, the appeal was dismissed.
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