Intention of employer is irrelevant if he fails to deposit the PF. He is liable to pay the penalty

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Shubham Budhiraja

(LLB, ACS, BCOM (H))

Shubhambudhiraja02@gmail.com



Company A defaulted in depositing PF of its employee. The labour officer inspected and imposed penalty of Company A. The Company A contended that it had no bad intention for not depositing the same and thus in absence of mensrea, the penalty being a criminal consequence cannot be imposed. The Supreme Court held that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities[1].

 

(I)                 A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.

 

(II)               J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers (1996) 6 SCC 665:  The offences under the Act are not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability without proof of any mens rea. The offences are strict statutory offences for which establishment of mens rea is not an essential ingredient. The omission or commission of the statutory breach is itself the offence. Similar type of offences based on the principle of strict liability, which means liability without fault or mens rea, exist in many statutes relating to economic crimes as well as in laws concerning the industry, food adulteration, prevention of pollution, etc. in India and abroad. ‘Absolute offences’ are not criminal offences in any real sense but acts which are prohibited in the interest of welfare of the public and the prohibition is backed by sanction of penalty.

 

(III)             SEBI v. Cabot International Capital Corpn. (2005) 123 Comp Cas 841 (Bom):  Thus, the following extracted principles are summarised:

(A)   Mens rea is an essential or sine qua non for criminal offence.

(B)   A straitjacket formula of mens rea cannot be blindly followed in each and every case. The scheme of a particular statute may be diluted in a given case.

(C)   If, from the scheme, object and words used in the statute, it appears that the proceedings for imposition of the penalty are adjudicatory in nature, in contradistinction to criminal or quasi-criminal proceedings, the determination is of the breach of the civil obligation by the offender. The word ‘penalty’ by itself will not be determinative to conclude the nature of proceedings being criminal or quasi-criminal. The relevant considerations being the nature of the functions being discharged by the authority and the determination of the liability of the contravenor and the delinquency.

(D)   Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities.

(E)    There can be two distinct liabilities, civil and criminal, under the same Act.

 

(IV)             A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must be made by the defaulter with guilty intention or not.


[1] CIVIL APPEAL NO(S). 2136 OF 2012

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