‘Mechanical Process’ Not Permitted Without Reasoned Findings, EPFO Must Justify Damages Under Section 14B EPF Act: Calcutta High Court
Safiya Malik
The Calcutta High Court has upheld the decision of the Central Government Industrial Tribunal, Kolkata, setting aside an order imposing damages and interest under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The case was adjudicated by Justice Shampa Dutt (Paul), who dismissed the writ petition filed by the Central Board of Trustees, through the Regional Provident Fund Commissioner, Howrah, challenging the tribunal’s order. The High Court recorded that the tribunal’s decision was in accordance with the law and required no interference.
The case arose from an order dated April 28, 2016, passed by the Assistant Provident Fund Commissioner (Damage Cell), directing the employer, Rishra Vani Sharati, to remit damages and interest within ten days, failing which proceedings under Sections 8B to 8G of the EPF Act would be initiated. The total dues were assessed at ₹9,17,552. The employer challenged the order before the Central Government Industrial Tribunal, which set it aside, holding that the imposition of damages lacked proper reasoning and justification.
The employer was an exempted establishment under Section 17 of the EPF Act from March 1, 2005, to March 31, 2011. The exemption was withdrawn on April 1, 2011. The tribunal held that penal provisions must be strictly construed, and damages cannot be imposed in a mechanical manner. The tribunal observed: "Penalty is not to be levied in all situations of all delayed remittance of P.F. dues. The word damages in section 14-B is related to the word 'default' in payment of contribution which is need to be made by 15th of the following month and if there is a failure to perform such duty then section 14-B comes into the picture."
It was further observed that interest on delayed payments under Section 7Q of the EPF Act was mandatory, but the imposition of damages under Section 14B was discretionary and must be based on an assessment of aggravating and mitigating circumstances. The tribunal noted: "The EPFO authority which exercise discretionary power u/s 14-B is bound to take into account aggravating and mitigating circumstances which has prevented the Appellant to make deposit in time and to see whether there is wilful and deliberate delay on the part of the employer."
The tribunal concluded that the impugned order suffered from illegality and was without basis. It held: "EPF Appeal no. 19 of 2016 is hereby allowed and impugned order u/s 14-B of the EPF Act dt. 28-04-2016 is hereby set aside."
The Central Board of Trustees challenged this order before the Calcutta High Court. The respondent relied on multiple Supreme Court judgments, including Cable Corporation of India Ltd. & Anr. vs Union of India & Anr., Employees’ State Insurance Corporation vs HMT Ltd. & Anr., Hindustan Times Ltd. vs Union of India & Ors., and Organo Chemicals Industries and Anr. vs Union of India & Ors.
In Organo Chemicals Industries, the Supreme Court held: "The word 'damages' under s. 14B has a wealth of implications and limitations, sufficient to serve as guideline in fixing the impost. The conceptual limitations of 'damages' serve as guideline and barricade the exercise. The Commissioner cannot award anything more than or unrelated to 'damages'. Nor can he go beyond 100% of the amount defaulted."
The Supreme Court in Horticulture Experiment Station Gonikoppal, Coorg vs The Regional Provident Fund Organisation held that mens rea or actus reus is not an essential element for imposing penalty or damages for breach of civil obligations. It was further held in M/s. Hindustan Times Limited vs Union of India & Ors. that an order under Section 14B must be a speaking order, containing proper reasoning and consideration of relevant circumstances.
The High Court examined the order of the Assistant Provident Fund Commissioner and found that it did not contain any details justifying the imposition of damages. It recorded that the employer had voluntarily withdrawn from exemption, and the matter was before the authority for transfer of funds in 2014. The court observed: "The order challenged before the tribunal shows that after the voluntary withdrawal from exemption, the matter was before the authority regarding the transfer of funds in 2014."
The High Court further noted that the damages assessed under Section 14B of the EPF Act, along with interest, were arbitrary and imposed without proper reasons. It recorded: "The order passed by the authority does not speak as to how the delay was assessed. Sufficient explanation has been placed by the representative of the school, but no proper order has been passed by the authority."
The court upheld the tribunal’s decision, stating that it was in accordance with the law and did not require interference. It held: "The learned tribunal’s finding thus being in accordance with law requires no interference and is thus affirmed."
The writ petition was dismissed. All connected applications, if any, were disposed of, and any interim orders stood vacated. The court directed that urgent certified copies of the judgment be supplied to the parties upon compliance with legal formalities.
Advocates Representing the Parties
For the Petitioner: Mr. Shiv Chandra Prasad, Advocate
For the Respondent: Mr. Arnab Dutt, Advocate
Case Title: Central Board of Trustees, through R P F C- 1, Regional Office Howrah v. The Registrar, Central Government Industrial Tribunal, Kolkata & Anr.
Case Number: WPA 1945 of 2025
Bench: Justice Shampa Dutt (Paul)
[Read/Download order]
