TMI Blog2022 (3) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to contribution of the EPF which the appellant was under an obligation to pay and for the contravention of the provisions of the Act 1952, the appellant(s) indeed committed a breach of civil obligations/liabilities and after compliance of the procedure prescribed under the Act 1952 and for the delayed payment of EPF contribution for the period January 1975 to October 1988, after affording due opportunity of hearing as contemplated, order was passed by the competent authority directing the appellant(s) to pay damages as assessed in accordance with Section 14B of the Act 1952. A two-Judge Bench of this Court in Chairman, SEBI [ 2006 (5) TMI 191 - SUPREME COURT ], while examining the scope and ambit of Section 15-D of SEBI (Mutual Funds) Regulations, 1996 regarding imposition of penalty for certain defaults in case of mutual funds, examined the question as to whether mens rea is an essential element for imposing penalty for breach of civil obligations and taking note of the binding precedent of this Court held that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities - The three-Judge Bench of this Court in Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued a notice under Section 14B of the Act 1952 to charge damages for the delayed payment of provident fund amount which was levied for the period January 1978 to September, 1988 and called upon the appellant(s) to pay damages of ₹ 85,548/-. The High Court under the impugned judgment held that once the default in payment of contribution is admitted, the damages as being envisaged under Section 14B of the Act 1952 are consequential and the employer is under an obligation to pay the damages for delay in payment of contribution of EPF under Section 14B of the Act 1952, which is the subject matter of challenge in the present appeals. 4. The Act 1952 is a legislation for providing social security to the employees working in any establishment and engaging 20 or more persons on any day and casts an obligation upon the employer to make compulsory deduction for provident fund and to deposit in the workers account in the EPF office. Similar is the provision which is pari materia to recover damages under Section 85B of the Employees State Insurance Act, 1948(hereinafter being referred to as the Act 1948 ) providing insurance and pensionary benefits to the employees. 5. Section 14B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Provident Fund Commissioner, EPFO and another v. The Management of RSL Textiles India Private Limited through its Director (2017) 3 SCC 110 . 8. Per contra, learned counsel for the respondent(s) in support of submissions, submitted that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities and mere contravention of the provisions of the Act or default in making compliance of the mandate of law as regards the civil liabilities are concerned, mens rea or actus reus is not the requirement of law to be considered, while imposing damages like, in the instant case, under Section 14B of the Act 1952. In support of submissions, learned counsel has placed reliance on a two-Judge Bench judgment in Chairman, SEBI v. Shriram Mutual Fund and Another (2006) 5 SCC 361 which has been relied upon by a three-Judge Bench judgment of this Court in Union of India and Others v. Dharmendra Textile Processors and others (2008) 13 SCC 369 . 9. The question that emerges for our consideration in the instant appeals is that what will be the effect and implementation of Section 14B of the Act 1952 and as to whether the breach of civil obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion was made by the defaulter with any guilty intention or not. Therefore, unlike in a criminal case, where it is essential for the prosecution to establish that the accused had the necessary guilty intention or in other words the requisite mens rea to commit the alleged offence with which he is charged before recording his conviction, the obligation on the part of the Directorate of Enforcement, in cases of contravention of the provisions of Section 10 of FERA, would be discharged where it is shown that the blameworthy conduct of the delinquent had been established by wilful contravention by him of the provisions of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his blameworthy conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947 without any further proof of the existence of mens rea . Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law, . *** 12. In Corpus Juris Secundum, Vol. 85, at p. 580, para 1023, it is stated thus: A penalty imposed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .S. Joshi v. Ajit Mills Ltd. (1977) 4 SCC 98 Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea. The classical view that no mens rea, no crime has long ago been eroded and several laws in India and abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where the offences have been defined to exclude mens rea. Therefore, the contention that Section 37(1) fastens a heavy liability regardless of fault has no force in depriving the forfeiture of the character of penalty. (d) Gujarat Travancore Agency v. CIT (1989) 3 SCC 52 It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276-C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. *** 52. The SEBI Act and the Regulations, are intended to regulate the securities market and the related aspects, the imposition of penalty, in the given facts and circumstances of the case, cannot be tested on the ground of no mens rea, no penalty . For breaches of provisions of the SEBI Act and Regulations, according to us, which are civil in nature, mens rea is not essential. On particular facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile filing return. The judgment in Dilip N. Shroff case [(2007) 6 SCC 329] has not considered the effect and relevance of Section 276-C of the IT Act. Object behind enactment of Section 271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276-C of the IT Act. 20. Above being the position, the plea that Rules 96-ZQ and 96-ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff case [(2007) 6 SCC 329] was not correctly decided but SEBI case [(2006) 5 SCC 361] has analysed the legal position in the correct perspectives. The reference is answered. The matter shall now be placed before the Division Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to vires of Rule 967-Q(5) are concerned. In all other cases the orders of the High Court or the Tribunal, as the case may be, are quashed and the matter remitted to it for disposal in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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