“Mens Rea Key to Section 14B Damages: Madras High Court Backs Tribunal’s Discretion, Says ‘Circumstance Behind Delay Must Be Considered’ and Imposes Costs for ‘Unclean Hands’”
Isabella Mariam
In a recent decision, the Madras High Court recorded that “mens rea or actus reus being a necessary ingredient for levy of damage and / quantum thereof,” must be taken into account when determining damages under Section 14B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The Court further stated that "the Respondent was obliged to consider the circumstance under which delay occurred in remittance of the statutory contribution." This observation was made by the Single Bench comprising Justice A.D. Maria Clete while deciding a batch of writ petitions challenging the partial reliefs granted by the Employees Provident Fund Appellate Tribunal.
The Bench, while dismissing four writ petitions—three due to lack of service on the respondents and one on grounds of delay and laches—addressed the remaining twelve writ petitions on merits. The petitions originated from officers of the Employees Provident Fund Organisation, challenging the Tribunal’s orders which reduced the damages payable under Section 14B of the Act and permitted installment-based payments in certain cases. The Court upheld most of the Tribunal's orders, agreeing that mitigating factors such as financial difficulties warranted a deviation from the formula prescribed under Paragraph 32A of the EPF Scheme.
The directives issued by the Court include a cost order against the Regional Provident Fund Commissioner, Coimbatore, for approaching the Court after an inordinate delay, with Justice A.D. Maria Clete stating, “this clearly reflects an attempt to approach this Court with unclean hands.” The cost of Rs.10,000 was directed to be paid to the respondent’s counsel.
The series of writ petitions stemmed from decisions of the Employees Provident Fund Appellate Tribunal, which had partially allowed appeals filed by various establishments. The Tribunal orders involved challenges to assessments made by officers of the EPFO under Sections 7Q and 14B of the Act, which relate to interest and damages levied for delayed remittance of provident fund dues.
The petitioners, including the Central Board of Trustees of the Employees Provident Fund Organisation represented by the Assistant and Regional Provident Fund Commissioners, sought writs of certiorari to quash the Tribunal’s orders. They contended that the Tribunal had wrongly interfered with the damages assessed under Section 14B, by reducing them significantly, contrary to statutory requirements.
The contesting respondents, primarily comprising private entities such as Teknoturf Info Services Pvt. Ltd., Mirth Garments Pvt. Ltd., Vangal Amman Health Service Ltd., and others, argued financial hardship and other business challenges as mitigating circumstances for the delays in remitting provident fund dues. In response, the Tribunal, in most cases, allowed partial relief by reducing damages and providing staggered payment plans, while directing full payment of interest under Section 7Q.
For example, in the case of Teknoturf Info Services Pvt. Ltd., the Tribunal directed the respondent to pay the entire interest under Section 7Q in two installments and allowed the damages under Section 14B to be paid over a period of three months. Similarly, in the case concerning M/s. Vangal Amman Health Service Ltd., the Tribunal allowed the respondent to pay 45% of the assessed damages.
The Tribunal, in its orders, referred to judicial precedents, including the Supreme Court’s decision in Hindustan Times Ltd. v. Union of India, where it was held that financial distress cannot entirely absolve the employer from liability under Section 14B, but may be relevant to the quantum of damages imposed.
The respondents also cited judgments such as Regional Provident Fund Commissioner v. Harrisons Malayalam Ltd. and Terrace Estates v. APFC, Coimbatore, where it was recorded that Paragraph 32A of the EPF Scheme serves as a guideline rather than a rigid formula and that authorities may exercise discretion depending on specific case circumstances.
Justice A.D. Maria Clete recorded that the Tribunal, while reducing the damages under Section 14B, had appropriately considered mitigating factors, including the respondents’ financial hardships and the absence of intentional default. The Court observed, “The Tribunal was justified in considering the explanation provided by the respondents and arriving at a conclusion that warranted a deviation from the strict application of Paragraph 32A.”
The Bench further noted, referring to the Tribunal’s reasoning, “The Adjudicating Authority while assessing such damage could have imposed lesser amount to what has been prescribed under 32A taking into consideration the facts submitted relating to delayed remittance by the Appellant.”
While upholding the Tribunal’s approach in most cases, the Court declined to interfere with its discretion, stating that it found “no manifest illegality” in the orders under challenge. The Court also recorded that “default on the part of the employer based on pleas of power cut, financial problems or the delay in realisations of amounts paid by the cheques or drafts, cannot be justifiable grounds to escape liability, but may have relevance to the quantum of damages.”
In dismissing W.P. No. 16302 of 2020 on the ground of laches, the Court observed, “The affidavit does not explain how the petitioner came into possession of the order. This clearly reflects an attempt to approach this Court with unclean hands, which is particularly concerning given that the petitioner is a statutory authority.”
The High Court dismissed the writ petitions that lacked proper service on respondents and the one delayed by over six years. For the remaining twelve writ petitions, the Court upheld the Tribunal's discretion in reducing damages and allowing staggered payments.
Justice A.D. Maria Clete concluded by directing the Regional Provident Fund Commissioner, Coimbatore, to pay Rs.10,000 as costs to the counsel for the respondent in W.P. No. 16302 of 2020. The Court refrained from interfering with the Tribunal’s reduction of damages under Section 14B, recognizing the Tribunal’s discretion to grant relief in light of mitigating circumstances.
Advocates Representing the Parties
For Petitioners: Mr. C. Kulanthaivel, Ms. R. Meenakshi, M/s. P. Thangaraj and C. Karthikeyan
For Respondents: Mr. P. Thangaraj, M/s. Meenakshi, V. Mohanapriya & Sukanya, Mr. J. Sivananda Raj for M/s. Kaushik Ramasamy and Advaith Raj
Case Title: The Central Board of Trustees, Employees Provident Fund and Ors. v. Teknoturf Info Services Pvt. Ltd. & Ors.
Neutral Citation: 2025/MHC/0325
Case Number: W.P. Nos. 1239, 2343, 2359, 2362, 2364, 2366, 3503, 3978, 4589, 4615, 4944, 10934, 10946, 10948, 16302, 18099 of 2020
Bench: Justice A.D. Maria Clete
[Read/Download order]
