- 1 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF JUNE, 2025 BEFORE THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE WRIT PETITION NO. 59988 OF 2014 (L-PF) BETWEEN: CENTRAL BOARD OF TRUSTEES EPF, THROUGH REGIONAL PROVIDENT FUND COMMISSIONER, OFFICE OF THE REGIONAL PF COMMISSIONER, REGIONAL OFFICE, S(1)F, I STAGE, PEENYA, BANGALORE - 560 058. …PETITIONER (BY SMT M R SHALAMALA, ADVOCATE) AND: M/S KONEGA INTERNATIONAL (P) LIMITED, NO.73/1C AND 73/ID, BYREGOWDA INDUSTRIAL ESTATE, SRIGANDANAGAR, HEGGANAHALLI, BANGALORE-560 091, REP. BY ITS DIRECTOR. …RESPONDENT (BY SRI. J PRADEEP KUMAR, ADVOCATE A/W MRS. K SRIBHOOMI YESASWINI, FOR M/S KASTURI ASSOCIATES) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 24.4.2014 VIDE ANN-A PASSED BY THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL. THIS PETITION, COMING ON FOR HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: Digitally signed by C HONNUR SAB Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 CORAM: HON'BLE MR JUSTICE ANANT RAMANATH HEGDE ORAL ORDER 1. This petition is filed assailing the order dated 24.04.2014 passed by the Appellate Tribunal under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short 'Act of 1952'). 2. The respondent was in arrears of employer's contribution to the Provident Fund and despite notice issued by the competent authority did not make payment. Thereafter, the competent authority under the Act of 1952 initiated action for recovery of dues from the respondent. After sale of property, amount of Rs.70.00 lakhs was recovered on 20.10.2010 and later on 28.12.2010, the competent authority also issued notice intimating the respondent that Rs.96,69,540/- is still unpaid towards the Provident Fund contribution. 3. The proceedings were initiated under Section 14B of Act of 1952 and the competent authority levied damages of Rs.1,09,06,826/- for the period commencing - 3 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 from December, 2005 to October, 2009 and interest of Rs.42,30,621/- is levied for the same period, acting under Section 7Q Act of 1952. 4. Aggrieved by the said order imposing damages and interest, the respondent filed an appeal before the Employees Provident Fund Appellate Tribunal, New Delhi. In terms of the impugned order at Annexure-A, the Appellate Tribunal has set-aside the order passed by the Commissioner on the premise that there existed no mens rea on the part of respondent in not making Provident Fund contribution. Aggrieved by the said order, the petitioner is before this Court. 5. Learned counsel appearing for the petitioner would submit that the respondent was a wilful defaulter and did not respond to the notice issued by the competent authority and has not placed any materials or not provided acceptable reasons for not making Provident Fund contribution in time and considering this aspect, the competent authority has rightly invoked Section 14B of Act - 4 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 of 1952 and awarded damages of Rs.1,09,06,826/- by following Rule 32A of the Employees Provident Fund Scheme, 1952 (for short, 'Scheme 1952'). 6. It is also urged that the finding of the Tribunal that there existed mens rea on the part of the respondent in not making payment in time is erroneous finding and under Section 14B, damages is sine qua non in case the payment is not made in time and mens rea is not a criterion. 7. Learned counsel for the petitioner would also refer to the judgment of the Hon'ble Apex Court in Horticulture Experiment Station Gonikoppal, Coorg vs The Regional Provident Fund Organisation1 and would submit that the Hon'ble Apex Court has held that in case the employer defaults or deals in making payment of Provident Fund, then the damages has to be awarded and there is no discretion left to the competent officer to waive or reduce the damages. It is also further submitted that 1 Civil Appeal No.2136/2012 - 5 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 the quantification of the damages is in accordance with the relevant provision of the Scheme, 1952 and First Appellate Authority without there being any material placed by the respondent could not have set-aside the order awarding damages. 8. Learned counsel appearing for the respondent on the other hand would submit that the Tribunal had a discretion to waive the damages as the respondent's case squarely fell under proviso to Section 14B of Act of 1952. It is his submission that the respondent establishment was a sick establishment and it had applied for rehabilitation and the rehabilitation scheme was sanctioned by the Board for Industrial and Financial Reconstruction. He would refer to Annexure-A9, the order passed by the Board for Industrial and Financial Reconstruction in proceeding No.74/2007 wherein, the direction was issued to prepare the rehabilitation scheme for the company keeping in mind the provisions of Section 18 of Sick Industrial Companies (Special Provisions) Act, 1985. He - 6 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 would further submit that this direction is issued in the year 2010. In terms of the said direction, the Board has also held the cut off date for finalising the scheme is 31.03.2010. The order awarding damages is passed on 11.11.2011. The impugned order is passed on 24.04.2014. The Appellate Authority has passed the order after the Board passed the order on 24.04.2014 for framing the scheme for rehabilitation. 9. This Court has considered the contentions raised at the bar and perused the records. 10. Section 14B of Act of 1952 deals with the damages in case of delayed contribution to Provident Fund or default in making the contribution. 11. Relevant portion of Section 14B of Act of 1952 and its second proviso reads as under:- "14B. Power to recover damages.— Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section 92) of section 15 or subsection (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of - 7 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 any Scheme of Insurance Scheme or under Commissioner or such other officer as may be authorised by the Central Government, by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme: xxxx "Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985, subject to such terms and conditions as may be specified in the Scheme.]" 12. On a reading of the aforementioned provision, it is noticed that the power is vested with the authority to award damages not exceeding the amount in arrears. The power to award damages is the discretionary power. Under the second proviso, it is noticed that the Central Board has the discretion either to reduce or waive the damages levied under Section 14B, if the establishment is a sick industry and a scheme for rehabilitation has been sanctioned by the Board for Sick Industrial for Financial - 8 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 Corporation. Though the order impugned does not refer to rehabilitation scheme, it is not in dispute that the rehabilitation scheme is sanctioned as per Annexure-A9. The petitioner has produced the order approving rehabilitation scheme. 13. The learned counsel for the petitioner submits that the reason assigned by the Board is that there existed no mens rea on the part of the respondent in delaying the contribution and said reason is unacceptable. Though, mens rea may not be the criterion to decide on the damages, what is required to be noticed is there was a valid ground enumerated in second proviso to Section 14B referred to above to waive off the damages awarded. Under second proviso to Section 14B, the power to waive off the damages is vested with the Central Board. However, what is noticed here is the Central Board itself is the petitioner. 14. As can be seen from the grounds urged in the petition, the Central Board appears to be aggrieved by the - 9 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 order of the Appellate Authority which says that there was no mens rea on the part of the respondent in not making the contribution in time. Though mens rea is not the criterion, the Central Board is required to consider whether the respondent has made out a case for reduction of damages or waiver as said power is conferred under Second proviso to Section 14B of the Act of 1952. Since the Central Board approached this Court in the form of Writ Petition, the respondent did not have the opportunity of placing the material, (before the Board) sanctioning the rehabilitation scheme in favour of the respondent. 15. Learned counsel for the respondent has relied on the judgment of the Division Bench of this Court in REGIONAL PROVIDENT FUND COMMISSIONER AND ANOTHER vs M/s. HMT LIMITED2. 16. This Court has referred to the said judgment. 17. It is noticed from the facts of the said case that the Court has taken a view that damages cannot be 2 WA NO.587/2016 - 10 - HC-KAR NC: 2025:KHC:19494 WP No. 59988 of 2014 awarded unless it is established that the employer was a wilful defaulter despite the Company running in profit. As can be noticed here, it is not the case of the petitioner that the respondent was running under loss. It is not in dispute that the rehabilitation scheme is sanctioned on account of loss suffered by the Company. It is also noticed that the assets of the Company have been auctioned and amount is recovered. Under these circumstances, First Appellate Authority is justified in waiving the damages though this Court does not agree with the reasons assigned by First Appellate Authority. The reasons are substituted by this Court's order and consequently, the waiver is upheld because of the benefit available to the respondent under second proviso to Section 14B of the Act of 1952. 18. Accordingly, writ petition is dismissed. Sd/- (ANANT RAMANATH HEGDE) JUDGE CHS,BRN List No.: 1 Sl No.: 55