The Madras High Court bench here has ruled that the Employees Provident Fund Organization (EPFO) cannot claim damages from employers for delayed payment of their contribution “if there is no intention to commit a prohibited act or actus reus” (action or conduct that is a constituent element of a crime) behind the delay.
The ruling was gien by Justices R Banumathi and S Nagamuthu while dismissing a writ appeal filed by Regional Provident Fund Commissioner-II, EPFO, yesterday against a chit fund company, which paid its contribution belatedly owing to an interim stay granted by the court.
The damages sought by the EPFO under Section 14-B of EPF and Miscellaneous Provisions Act were to penalize the employer as well as compensate the loss sustained by employees on account of default in remittance of the money. “But,in this case, the employer could not pay the contribution because of the act of the employees approached the High Court and got the order of interim stay. Thus, the loss, if any, sustained by the employees, is attributable to their own act and they are not entitled to damages,” the bench said.
“It has been repeatedly held by Supreme Court that simply because the statutory provision enables an authority to impose penalty, it does not mean that such penalty should be imposed in a mechanical manner without looking into the attending circumstances and the facts as to whether there as any intention or actus reus on the part of the employer,” the bench said.
Justice Nagamuthu, who wrote the judgement, pointed out that contributions made by the firm were initially governed by Family Pension Scheme (FPS)1971, which was superseded by the Employees Pension Scheme(EPS) in November 1995. Under the new scheme, the contribution of the employer as well as the employees was enhanced.
Such enhancement was challenged by as many as 444 employees of the firm through a writ petition filed in Madras High Court in Chennai during the same year. The employees also obtained an interim stay against payment of the PF amount by their employer under the new scheme till the disposal of the writ petition. However,the writ petition was dismissed in December 1996 and the firm began paying the enhanced contribution from January 1997 on wards.
Subsequently, the Regional Provident Commissioner called upon the chit fund firm to deposit the balance amount, which was liable to be paid for the period when the interim stay of the court was in operation. The company initially resisted the demand and later deposited it in December 2004.
The Commissioner issued another demand notice to the company in January 2006 calling upon it to pay Rs 3.69 lakh towards damages for belated remittance of the contributions. Allowing a writ petition filed by the company, a single judge had quashed the notice in October 2007.