MCLEOD RUSSEL INDIA LIMITEDversusREG. PROVIDENT FUND COMMISSIONER, JALPAIGURI

                        [2014] 9 S.C.R. 162


A                MCLEOD RUSSEL INDIA LIMITED
                                  v.
    REG. PROVIDENT FUND COMMISSIONER, JALPAIGURI
                          & ORS.
              (Civil Appeal No. 5927 of 2014)
B
                           JULY 02, 2014.
           [T.S. THAKUR AND VIKRAMAJIT SEN, JJ.]

     EMPLOYEES'    PROVIDENT      FUND                        AND
C MISCELLANEOUS PROVISIONS ACT, 1952:
       ss. 14-8, 178 rlw ss. 7A and 2(e) - Default by employer
  in payment of contribution - Damages - Liability in case of
  transfer of establishment - Held: The Act is a beneficent
D legislation and any interpretation facilitating the evasion of its
  provisions should be abjured - Imposition of punitive
  damages can be resorted to even in civil proceedings to deter
  wilful wrongdoing by making an admonished example of the
  wrongdoer - This is the essential purpose of s. 148, and an
E imposition within its confines does not assume criminal
  prosecution so as to stand proscribed insofar as transfer of
  establishment from one management/employer to its
  successor is concerned.

       ss.14-8, 17-8, 7-A(2}, 7-Q - Default by employer in
F payment of contribution - Damages - Liability of transferee
  establishment - Held: Where the Authority is of the opinion
  that damages u/s 148 need to be imposed, the computations
  would come within the purview of s. 148 and it would be
  recoverable jointly and severally from the erstwhile as well as
G the current management - Further, once damages have been
  levied, the same could be recovered from the party which has
  assumed the management of the establishment - s. 7A(2)
  would also be available to proceedings uls 148 - The
  applicability of Civil Procedure Code to proceedings u/s 148
H                                162
     MCLEOD RUSSEL INDIA LTD. v. REG. P. F.                163
          COMMISSIONER, JALPAIGURI
has not specifically been barred by the statute - s.148 is A
complete in itself so far as the computation of damages is
concerned - It is conceivable that money due from an
employer would have to be calculated uls 7A, and in the event
the default or neglect of employer is contumacious and
contains requisite mens rea and actus reus yet another B
exercise of computation has to be undertaken u/s 148 - Order
of RPF Commisioner that failure on part of employers to
make remittances of accumulations and contributions
undermines the objectives and purposes of the statute is also
approved - It is to be emphasised that the liability of the Fund · c
to pay. interest to subscribers regardless of whether employers
have paid their dues, runs relentlessly -Appel/ant-petitioner
has, in the circumstances of the case, been also rightly
burdened with the payment of interest u/s 70. ·

     Notices were issued to a tea company, namely M/S D
'MTE' to show cause against the imposition of 'damages'
u/s 148 of the Employees' Provident Fund and
Miscellaneous Provisions Act, 1952 (the EPF Act), as it
had defaulted in remitting the contributions and
accumulations payable under the EPF Act. Meanwhile the E
management of M/S 'MTE' was taken over by the
appellant Company which discharged the liability of the
entire principal sum of Provident Fund dues to the tune
of Rs.75,76,000/- pertaining to the period prior to the
takeover. The appellant contended before the RPF F
Commissioner that proceedings u/s 148 9f the EPF Act
against it were unjustified as it was not the "employer"
defined u/s 2(e) of the EPF Act, which defaulted in paying
the contributions. The RPF Commissioner held that on a
conjoint reading of ss. 148 and 178 of the EPF Act it was G
clear that damages u/s 148, which were assessed at
Rs.70,37,950/- were recoverable jointly and severally from
the transferor as well as the transferee. He further
directed that failure to deposit penal damages within the
stipulated period would attract the provisions of s. 7Q of H
    164        SUPREME COURT REPORTS                      [2014] 9 S.C.R.


A  the EPF Act, thereby enhancing the liability to include
   simple interest at the rate of 12% per annum on the
   damages. The single Judge of the High Court, -relying
   upon the decision in the Karnataka Forest Plantations
   Corporation Ltd1• set aside the Commissioner's orders
B. and directed the said Authority to reconsider the issues.
   However, the Division Bench of the High Court, relying
   on Dalgaon Agro Industries Ltd. 2, reversed the judgment
   of the single Judge.

          Dismissing the appeal, the Court
c
       HELD: 1.1. In Sayaji Mills Ltd.*, this Court has
  observed that the Employees' Provident Fund and
  Miscellaneous Provisions Act, 1952 is a beneficent
  legislation and any interpretation facilitating the evasion
D of its provisions should be abjured, as employers would
  "spare no -ingenuity in s.eeking to deprive the employees
  of all the benefits conferred upon them"; that the-old
  establishment should virtually have come to an end for
  the EPF Act to apply afresh; and most significantly, that
E the said Act is made applicable to the factory in
  contradistinction to its owner. [para 6] [175-C-E] )

         *Sayaji Mills Ltd. vs. Regional Provident Fund
    Commissioner, 1985 SCR 516 =1984 (Supp) SCC 610 -
F   relied on.

      1.2. In the instant case, the inter se covenants
  between the appellant- transferee company and the
  erstwhile owners, namely, the transferor, would not
  insulate the former from the rigours of damages imposed
G by the EPF Act. Damages must be calculated and be
  recovered by the Authority in the most efficacious and

    1.   Regional Provident Fund Commissioner, Mangalore vs. Kamataka Forest
         Plantations CorporationUd., Bangalore, 2000 (1) LU 1134.
H   2.   Dalgon Agro Industries Ltd. vs. Union of India (2006) 1 CALLT 32 (HG);
      MCLEOD RUSSEL INDIA LTD. v. REG. P. F.             165
           COMMISSIONER, JALPAIGURI
   convenient manner. The decision in Sayaji Mills Ltd. was     A
   not brought to the notice of the Division Bench of the
   Karnataka High Court in Karnataka Forest Plantations
   Corporation Limited**. The reasoning of the Karnataka
   decision is evidently flawed and runs counter to the
   intendment of the EPF Act, as is crystal clear: from a       B
   perusal of its Preamble; and manifests the ingenuity that
   employers may devise to circumvent liability. Once these
   damages have been levied, the same could be recovered
 J from the party which has assumed the management of
1
   the establishment. [para 6 and 8) [175-F-H; 176-A; !178-B]   c
    Dalgaon Agro Industries Ltd. vs Union of India, (2006) 1
 CALLT 32 (HC) - approved.

     **Regional Provident Fund Commissioner, Mangalore vs
 Kamataka Forest Plantations Corporation Ltd., Bangalore,       D
 2000 (1) LLJ 1134 -stood reversed.

     Employees' State Insurance Corporation vs HMT Ltd.
 2008 (1) SCR 646 = (2008) 3 SCC 35 - held inapplicable.

     Organo Chemical Industries vs Union of India 1980 (1)      E
          =
 SCR 61 (1979) 4 SCC 573; Babubhai & Co. vs. State of
 Gujarat 1985 (3) SCR 614 = (1985) 2 SCC 732 - referred
 to.

      1.3. Section 148 contemplates the power to "recover       F ·
  from the employer. by way of penalty such damages, not
  exceeding the amount of arrears, as may be specified in
  the Scheme". Modern jurisprudence recognizes that the
  imposition of punitive damages, quintessentially quasi-
  criminal in character, can be re·sorted to even in civil      G
  proceedings to deter wilful wrongdoing by making an
  admonished example of the wrongdoer. This is the
  essential purpose of s. 148 of the i:PF Act, and an
1 imposition within its confines does 'not assume criminal
  prosecution so as to stand proscribed insofar as transfer     H
    166      SUPREME COURT REPORTS           . [2014) 9 S.C.R.


A of establishment from one management/employer to its
  successor is concerned. [para 10) [179-E-G]

         1.4. Section 178 specifically speaks of "the
    contributions and other sums due from the employer
    under any provision of this Act or the Scheme". It cannot
8
    be said that damages u/s 148 are not jointly and
    separately recoverable from the erstwhile and the current
    managements u/s 178 as s. 148 moves in its own and
    independent orbit. Section 148 is complete in itself so far
    as the computation of damages is concerned. It is
C   conceivable that the money due from an employer would
    have to be calculated u/s 7A, and in the event the default
    or neglect of the employer is contumacious and contains
    the requisite mens rea and actus reus yet another
    exercise of computation has to be undertaken u/s 148.
D   Where the Authority is of the opinion that damages u/s
    148 need to be imposed, the computations would come
    within the purview of s.148 and it would be recoverable
    jointly and severally from the erstwhile as well as the
    current managements. Section 7A{2) would also be
E   available to proceedings u/s 148 of the Act. The
    applicability of Civil Procedure Code, 1908 to
    proceedings u/s 148 has not specifically been barred by
    the statute. [para 11-12) [180-8-H; 181-A-8]

F      1.6. In the considered opinion of this Court, the
  impugned Judgment deserves to be upheld. The pithy
  observations of the ,RP.F ·Commissioner in the subject
  order that failure on the part of the employers to make
  remittances of accumulations and contributions
G undermines the objectives and purposes of the statute
  is also approved. It is to be emphasised that the liability
  of the Fund to pay interest to subscribers regardless of
  whether employers have paid their dues, runs
  relentlessly. The Commissioner has specifically recorded
  ttrat he has taken a lenient view in the matter and has
H
     MCLEOD RUSSEL INDIA LTD. v. REG. P. F.              167
          COMMISSIONER, JALPAIGURI
eschewed imposition of damages to the extent of 100 per          A
cent. of the arre~rs even though this is envisaged by~ the
EPF Act. Th~ appellant-petitioner has, in the
circumstances of the case, been also rightly burdened
with the payment of interest uls 7Q of the EPF Act. [para
13] [181-D-F]                                                    B

    Darjeeling Dooars Plantation Ltd. vs Regional Provident
Fund Commissioner, 1995 ILLJ 939 Cal. - cited.

                     Case Law Reference:
  1995 ILLJ 939 Cal            cited               para 2
                                                                 c
  (2006) 1 CALLT 32 (HC)       approved            para 2
  2000 (1) LLJ 1134            stood reversed      Para 3
  19sSSCR 516                  relied on           para 6 .     . D

  2008 (1) SCR 646             held inapplicable para 7
  1980 (1) SCR 61              referred to         para 9
  1985 (3) SCR 614             referred to         para 9
                                                                 E
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5927 of 2014.

    From the Judgment and Order dated 03.03.2008 of the
High Court at Calcutta in FMA No. 494 of 2007.
                                                                 F
     -
    Jayant Bhushan, Ajay Bhargava, Vanita Bhargava, Nitin
Mishra (for Khaitan & Co.) for the Appellant.

     Santosh Paul, Arti Singh, Arvind Gupta, Pooja Singh for
the Respondents.                                                 G

    The Judgment of the Court was delivered by

    VIKRAMAJIT SEN,J. ·1. Leave granted.

    2. This Appeal assails the judgment of the Division Bench    H
    168      SUPREME COURT REPORTS               [2014] 9 S.C.R.


A   of the High Court at Calcutta which had allowed the Appeal
    preferred against the judgment of the learned Single Judge,
    who in turn had applied and implemented the opinion of the
    Division Bench as expressed in Darjeeling Dooars Plantation
    Ltd. vs Regional Provident Fund Commissioner, 1995 ILLJ 939
B Cal. In the impugned Order, the present Division Bench had the
    advantage of perusing the view taken by a Special Bench of
    three learned Judges of the Calcutta High Court in Dalgaon
    Agro Industries Ltd. vs Union of India, (2006) 1 CALLT 32 ·
    (HC), which was decided on 24.06.2005. The Special Bench
c . was constituted in view of a reference submitted by a Single
    Judge in Writ Petition No. 16037(W), who had entertained an
    opinion whicti differed with three earlier decisions rendered by
    Single Judges in three separate matters. Along with the
    aforestated writ petition, an appeal pending before a Division
D Bench against one of those Single Judge decisions was also
    taken up by the Special Bench. In this Appeal, therefore, we
    have primarily to consider whether the exposition of law by the
    Special Bench in Dalgaon Agro Industries Ltd. is the logical
    and acceptable view.

E      3. The factual matrix     obt~ining  in the case at hand,
  succinctly stated, is that M/s. Mat~ura Tea Estate, P.O. Mathura
  Bagan, District Jalpaiguri, West Bengal, owned by Saroda Tea
  Company Ltd., indubitably an establishment covered by the
  Employees' Provident Funds and Miscellaneous Provisions
F Act, 1952 ('the EPF Act' for brevity), had defaulted in remitting
  the contributions and accumulations payable under the EPF Act
  ~nd the sundry Schemes formulated under that statute. It was
  in those circumstances that the Regional Provident Fund
  Commissioner ('RPF Commissioner' for brevity), Jalpaiguri,
G West Bengal, had issued notices to M/s. Mathura Tea Estate
  enabling it to show cause against the imposition of 'damages'
  as envisaged under Section 14B of the EPF Act. M/s. Mathura
  Tea Estate requested for a waiver of damages, which request
  came to be rejected on the predication that the said
H establishment was neither a sick unit nor the subject of any
     MCLEOD RUSSEL INDIA LTD. v. REG. P. F.     169
  COMMISSIONER, JALPAIGURI [VIKRAMAJIT SEN, J.]
  scheme for rehabilitation sanctioned by the Board for Industrial       A
  and Financial Reconstruction. In the duration of those
  proceedings, the management of M/s. Mathura Tea Estate
  under the erstwhile ownership of Saroda Tea Company Ltd.
  was taken over by Eveready Industries (India) Ltd, which
  thereafter discharged the liability of entire principal sum of         B
  Provident Fund dues to the tune of Rs.75,76,000/- pertaining
  to the period prior to the takeover in consonance with the
  Memorandum of Understanding entered into between it and
  Saroda Tea Company Ltd. Significantly, the said Memorandum
  of Understanding also included a clause to the effect that any         c
  damages payable for the failure to deposit the dues and
  accumulations under the EPF Act would be the exclusive liability
  of Saroda Tea Company Ltd making it palpably evident that the
  appellant was fully alive to this liability. It is in these premises
  that Eveready Industries (India) Ltd. undauntedly contended            D
  before the RPF Commissioner, Jalpaiguri, in the event in futility,
  that proceedings under Section 148 of the EPF Act against it
  were unjustified as it was not the "employer" defined under
. Section 2(e) of the EPF Act, which defaulted in paying
  contributions. The RPF Commissioner has recorded that Mis.
                                                                         E
  Mathura Tea Estate had defaulted in payment of dues for the
  period from March, 1989 to February, 1998, which assertion
  of fact is not_ in dispute. It held that on a conjoint reading of
  Sections 148 and 178 of the EPF Act it was clear that
  damages under Section 148 were recoverable jointly and
  severally from Saroda Tea Company Ltd. as well as Eveready             F
  Industries (India) Ltd. After tabulating the rates of damages, i.e.
  percentage of arrears per annum depending on the period of
  default, damages were assessed at Rs.70,37,950; and it was
  further directed that failure to deposit penal damages within the
  stipulated period would attract the provisions of Section 7Q of        G
  the EPF Act, thereby enhancing the liability to include simple
   interest at the rate of 12 per cent per annum on the damages.
  It was this Order of the RPF Commissioner that failed to find
 .favour with the learned Single Judge of the High Court at
   Calcutta, who set aside the Commissioner's Orders and                 H
    170       SUPREME COURT REPORTS                 [2014) 9 S.C.R.


A directed the said Authority to reconsider the issues within a
  period of three months. The learned Single Judge had drawn
  reliance from the ruling reported as The Regional Provident
  Fund Commissioner, Mangalore vs Karnataka Forest
  PJantations Corporation Ltd., Bangalore, 2000 (1) LLJ 1134,
B which had ruled that on an interpretation of Section 17B the
  transferee employer would be liable to pay all outstanding
  contributions even for the period preceding the transfer, but it
  could not be fastened with punitive liability for acts of omission
  or commission of the previous employer for the period anterior
c to the transfer. It will bear reiteration that in terms of the
  judgment of the Division Bench impugned before us, the
  decision of the learned Single Judge in its own turn was
  reversed on the application of the dictum of the Special Three-
  Judge Bench in Dalgaon Agro Industries Ltd.
D         4. The Special Bench of the High Court of Calcutta in
    Dalgaon Agro Industries Ltd. has rendered a detailed
    judgment on the conundrum before us. Succinctly stated, the
    Special Bench has opined that (a) the transferor and the
    transferee managements remain jointly and severally liable
E   under Sections 14B and 17B of the Act for all sums due
    including damages; (b) the fransferor's indebtedness comes to
    a halt on the date of the transfer but includes the sums computed
    under both these Sections till the date of transfer; (c) the transfer
    does not bind either the e!11ployees or the Fund; (d) the
F   transferee stands cautioned by virtue of Sections 1(3) and 17B
    that the erstwhile as well as the current employer remain
    responsible for liabilities under both the Sections as a
    consequence of liability being that of the establishment in
    question of which employers are merely fictional representatives
G   to facilitate recovery of dues; (e) recovery of any amount due
     is protected under Section 11 (2) of the Act, which grants priority
    to the amount so due over all other debts under any other
     statute as being· the first charge on the assets of the ·
    establishment; (f) the Act has innovated radical and effective
H    modes of recovery as evident from Sections 8B and 8F, which
   MCLEOD RUSSEL INDIA LTD. v. REG. P. F.     171
COMMISSIONER, JALPAIGURI [VIKRAMAJIT SEN, J.]
further reinforces the fact that liability to pay dues is of the     A
establishment recoverable through the employer; (g) liability
under Section 148 admits no waiver except as provided; (h)
damages could be recovered regardless of any reasonable
period of prescription; (i) the covenants in the Transfer Deed
are irrelevant for determination and recovery of dues and            B
damages; and 0) criminal liability would be attracted only in the
event the outstandings are not completely recovered.

   5. For facility of reference, the relevant provisions of the
EPF Act are reproduced:-
                                                                     c
    An Act to provide for the institution of provident funds,
    pension fund and deposit-linked insurance fund for
    employees in factories and other establishments.

     Section 1(3) Subject to the provisions contained in section     D
     16, it applies -

     (a) to every establishment which is a factory engaged in
     any industry specified in Schedule I and in which twenty
     or more persons are employed, and
                                                                     E
     (b) to any other establishment employing twenty or more
     persons or class of such establishments which the Central
     Government may, by notification in the Official Gazette,
     specify in this behalf:
                                                                     F
     Provided that the Central Government may, after giving not
     less than two months' notice of its intention so to do, by
     notification in the Official Gazette, apply the provisions of
     this Act to any establishment employing such number of
     persons less than twenty as may be specified in the             G
     notification.

     Section 2(e) "employer'' means -

     (i) in relation to an establishment which js a factory, the
     owner or occupier of the factory, including the agent of such   H
    172       SUPREME COURT REPORTS                [2014) 9 S.C.R.


A         owner or occupier, the legal representative of a deceased
          owner or occupier and, where a person has been named
          as a manager of the factory under clause (f) of sub-section
          (1) of section 7 of the Factories Act, 1948 (63 of 1948),
          the person so named; and
B
          (ii) in relation to any other establishment, the person who,
          or the authority whic~, has the ultimate control over the
          affairs of the establishment, and where the said affairs are
          entrusted to a manager, managing director or managing
          agent, such manager, managing director or managing
c         agent;

          Section 7A. Determination of moneys due from
          employers. - (1) The Central Provident Fund
          Commissioner, any Additional Central Provident Fund
D         Commissioner, any Deputy Provident Fund
          Commissioner, any Regional Provident Fund
          Commissioner or any Assistant Provident Fund
          Commissioner may, by order, -

E         (a) in a case where a dispute arises regardihg the
          applicability of this Act to an establishment, decide such
          dispute; and

          (b) determine the amount due from any employer under any
          provision of this Act, the Scheme or the [Pension] Scheme·
F         or the rnsurance Scheme, as the case may be,

          and for any of the aforesaid purposes may conduct such
          inquiry a$ he may deem necessary.

          Section 7Q. Interest payable by the employer - The
G
          employer shall be liable to pay simple interest at the rate
          of twelve per cent per annum or at such higher rate as may
          be specified in the Scheme on any amount due from him
          under this Act from the date on which the amount has
          become so due till the date of its actual payment:
H
   MCLEOD RUSSEL INDIA LTD. v. REG. P. F.      173
COMMISSION.ER, JALPAIGURI [VIKRAMAJIT SEN, J.]
   Provided that higher rate of interest specified in the          A
   Scheme shall not exceed the lending rale of interest
   charged by any scheduled bank.

   Section 8. Mode of recovery of moneys due from
   employers- Any amount due -                                     8
   (a) from the employer in relation to an establishment to
   which any Scheme or the Insurance Scheme applies in
   resp~ct of any

   contribution payable to the Fund or, as the case may be,        C
   the Insurance Fund damages recoverable under section
   148, accumulations required to be transferred under sub-
   section (2) of section 15 or under sub-section (5) of section
   17, or any charges payable by him under any other
   provision of this Act or of any provision of the Scheme or      D
   the Insurance Scheme; or

   (b) from the employer in relation to an exempted
   establishment in respect of any damages recoverable
   under section 148 or any charges payable by him to the
   appropriate Government under any provision of this Act or       E
   under any of the conditions specified under section 17 or
   in respect of the contribution payable by him towards the
   Pension Scheme under the said section 17,

   may, if the amount is in arrear, be recovered in the manner     F
   specified in sections 88 to BG.

   Section 11 (2) Without prejudice to the provisions of sub-
   section (1 ), if any amount is due from an employer whether
   in respect of the employee's contribution deducted from         G
   the wages of the employee or the employer's contribution,
   the amount SQ due shall be deemed to be the first charge
   on the assets of the establishment, and shall,
   notwithstanding anything contained in any other law for the
   time being force, be paid in priority to all other debts.
                                                                   H
    174        SUPREME COURT REPORTS                [2014] 9 S.C.R.


A         Section 148. Powel' 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-sei::tion (2) of section 15 or sub-section (5)
B         of section 17 or in the payment of any charges payable
          under any other provision of this Act or of any Scheme or
          Insurance Scheme or under any of the conditions specified
          under section 17, the Central Provident Fund
          Commissioner or such other officer as may be authorised
c         by the Central Government, by notification in the Official
          Gazette, in this behalf may recover from the employer by
          way of penalty such damages, not exceeding the amount
          of arrears, as may be specified in the Scheme.

          Provided that before levying and recovering such damages,
D         the employer shall be given a reasonable opportunity of
          being heard.                                  ·

          Provided further that the Central Board may reduce or
          waive the damages levied under this section in relation to
E         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 (1 of
F         1986), subject to such terms and conditions as may be
          specified in the Scheme.

          Section 178. Liability in case of transfer of
          establishment - Where an employer, in relation to an
          establishment, transfers that establishment in whole or in
G         part, by sale, gift, lease or licence or in any other manner
          whatsoever, the employer and the person to whom the
          establishment is so transferred shall jointly and severally
          be liable to pay the contribution and other sums due from
          the employer under any provision of this Act or the Scheme
H         or the Pension Scheme or the Insurance Scheme, as the
   MCLEOD RUSSEL INDIA LTD. v. REG. P. F.     175
COMMISSIONER, JALPAIGURI [VIKRAMAJIT SEN, J.]
    case may be, in respeet of the period up to the date of          A
    such transfer:

    Provided that the liability of the transferee shall be limited
    to the value of the assets obtained by him by such
    transfer."                                                       B
      6. We shall briefly discuss a decision of this Court namely,
Sayaji Mills Ltd. vs. Regional Provident Fund Commissioner,
1984 (Supp) SCC 610, even though the questions before this
Court are disparate in quotient. The management/owners of the
Sayaji Mills had contended that since the factory had been C
purchased in 1955 in certain liquidation proceedings and the
period of three years had not elapsed from the date of its
establishment, the EPF Act would have no applicability to it
under unamended Section 16(1)(b) of the Act. This Court
observed that the statute is a beneficent legislation and any D
interpretation facilitating the evasion of its provisions should be
abjured, as employers would "spare no ingenuity in seeking fo
deprive the employees of all the benefits conferred upon them";
that the old establishment should virtually have come to an end
for the EPF Act to apply afresh; and most significantly, that the E
said Act is made applicable to the factory in contradistinction
to its owner. Once this rationale is applied to the present
conundrum, it becomes apparent that the inter se covenants
between the Eveready Industries (India) Ltd. and the erstwhile
owners viz. Saroda Tea Company Ltd. would not insulate the F
former from the rigours of damages imposed by the EPF Act.
Damages must be calculated, it is plain, and be recovered by
the Authority in the most efficacious and convenient manner.
This decision, Sayaji Mills Ltd., was not brought to the notice
of the .Division Bench -of the Karnataka High Court in Karnataka G
Forest Plantations Corporation Limited, otherwise it would
not have endeavoured to explore which party/employer was
'guilty' of the infraction of the statutory provisions. The reasoning
of the Karnataka decision is evidently flawed and runs counter
to the intendment of the EPF Act as is crystal clear frofll a
                                                                      H
    176       SUPREME COURT REPORTS               [2014] 9 S.C.R.


A   perusal of its Preamble (supra); and manifests the ingenuity.that
    employers may devise to circumvent liability.

        7. Mr. Jayant Bhushan, learned Senior Counsel for the
  Appellant has sought sustainment for his submissions from
  Employees' State Insurance Corporation vs HMT Ltd. (2008)
8
  3 sec 35, but in our consideration, in vain. In that case, the
  ESIC raised a claim for deposit of interest on outstanding
  contributions of the management under the ESIC Act and the
  concerned Regulations, and in addition thereto levied damages
C in terms of Section 858 of the Employees' State Insurance Act,
  1948 ('ESIC Act' for brevity). Section 858 of the ESIC Act is
  essentially para materia Section 148 of the EPF Act, and
  therefore this decision assumes great importance. The
  submission of the HMT Management was that damages ought
  not to be levied, since $ection 858 was an enabling provision
D and did not intend to m'ake levy of damages mandatory. We
  shall reproduce for facility of reference and comparison, the
  statutory provision of ESIC Act, 1948 to spotlight the legal
  nodus with which we are presently engrossed -

E         858. Power to recover damages. - (1) Where an
          employer fails to pay the amount due in respect of any
          contribution or any other amount payable under this Act,
          the Corporation may recover from the employer by way of
          penalty such damages not exceeding the amount of
F         arrears as may be specified in the regulations:

          Provided that before recovering such damages, the
          employer shall be given a reasonable opportunity of being
          heard:

G         Provided further that the Corporation may reduce or waive
          the damages recoverable under this section in relation to
          an establishment which is a sick industrial company in
          respect of which a scheme of rehabilitation has been
          sanctioned by t~e Board for Industrial and Financial
H         Reconstruction established under section 4 of the Sick
    MCLEOD RUSSEL INDIA LTD. v. REG. P. F.     177
 COMMISSIONER, JALPAIGURI [VIKRAMAJIT SEN, J.]
     Industrial Companies (Special Provisions) Act, 1985 (1 of    A
     1986), subject to such terms and conditions as may be
     specified in regulations.

     (2) Any damages recoverable under sub-section (1) may
     be recovered as an arrear of land revenue·or under section   B
     45C to section 45-1.

       8. In HMT Ltd., this Court noted the beneficial nature of
  the ESIC Act; that subordinate legislation must conform to the
  provisions of the parent Act. Despite giving due regard to the
  use of the words "may recover damages by way of penalty", C
  and mindful that mens rea and actus reus to contravene a
  statutory provision are necessary ingredients for levy of
  damages, this Court set aside the interference of the High Court
  vis-a-vis the imposition of damages and further held that
  imposition of damages by way of penalty was not mandated D
  in each and every case. The dispute was remitted back to the
  High Court for fresh consideration, i.e. to proceed on the
  premise that the levy of penalty under the Act was not a mere
  formality, a foregone conclusion or an inexorable imposition;
  and that the circumstances surrounding the failure to deposit E
  the contribution of the employees concerned would also have
  to be cogitated upon. This decision does not prescribe that
  damages or penalties cannot or ought not to be imposed.
  Further, the presence or absence of men.s rea and/or actus
; reus would be a determinative factor in imposing damages F
· under Section 148, as also the quantum thereof since it is not
  inflexible that 100 per cent of the arrears has to be imposed in
  all the cases. Alternatively stated, if damages have been
  imposed under Section 148 it will be only logical that mens rea
  and/or actus reus was prevailing at the relevant time. We may G
  also note that this Court had yet again reiterated the well-known
' but oft ignored principle that High Courts or any Appellate
  Authority created by a statute should not substitute their
  perspective of discretion on that of the lower Adjudicatory
  Authority if the impugned Order does not otherwise manifest H
    178       SUPREME COURT REPORTS                [2014] 9 S.C.R.


A perversity in the process of decision taking. HMT Ltd. does
  not proscribe imposition of damages; that would negate the
  intent of the legislature. The submission of the petitioner before
  us is that the liability was of the erstwhile management and
  since the petitioner was not the "employer'' at the relevant time,
B default much less deliberate and wilful default on the part of the
  petitioner was absent. However, it seems to us that once these
  damages have been levied, the quantification and imposition
  could be recovered from the party which has assumed the
  management of the concerned establishment.
c         9. The Two-Judge Bench decision in Organo Chemical
    Industries vs Union of India (1979) 4 SCC 573, makes
    compelling reading not only because of the contrasting styles
    of two of our illustrious predecessors; A.P. Sen J for his erudite,
    efficient and precise exposition of the law and V.R. Krishna Iyer
D   J for his elegance of expression and verve impregnated with
    humanism and compassion. Organo involved a petition under
    Article 32 of the Constitution challenging the Constitutional vires
    of Section 148 of the EPF Act. The contention was that the
    default of the employer/establishment was not wilful, rendering
E   inappropriate the imposition of damages of a penal nature; and
    since the computation of damages was left totally unguided and
    untrammelled, violation of Article 14 was plainly and expectedly
    obvious. The Court. while upholding the Constitutional validity·
    of Section 14B held that the raison d'etre for the introduction
F   of Section 148 (by Act 40 of 1973) was to deter and thwart
    employers from defaulting in forwarding contributions to the
    Funds, most often with the ulterior motive of misutilizing not only
    their own but also the employees' contributions. Section 148
    originally restricted damages to 25 per cent of the withheld
G   amounts which, having been found to be ineffectual for the
    attainment to the objectives of the Act, was increased to a sum
    "not exceeding the amount of arrears''. This Court also interred
    the division or dichotomy of opinions flowing from differing
    decisions of different High Courts by clarifying that the word
H   'damages' has been employed in this dispensation to mean
   MCLEOD RUSSEL INDIA LTD. v. REG. P. F.     179
COMMISSIONER, JALPAIGURI [VIKRAMAJIT SEN, J.]
penalty on recalcitrant employers as well as reparation for loss   A
caused to the Fund. The Coyrt stoutly repelled tl.1e contention
that damages were merely compensatory in nature and,
therefore, should not exceed the interest that would have
accrued in favour of the Funds had the contributions been
diligently dispatched to the Funds. Organo has been favourably     B
followed in Babubhai & Co. vs. State of Gujarat (1985) 2 SCC
732.
      10. There is no gainsaying that criminal liability remains
steadfastly fastened to the actual perpetrator and cannot be C
transferred by any compact between persons or even by statute.
But this incontrovertible le~al principle does not support or
validate the contention of Mr. Jayant Bhushan, Learned Senior
Advocate for the Appellants, that damages levied in terms of
Section 148 of the EPF Act cannot be foisted onto his clients.
Sections 14, 14A, 14AA, 14AB and 14AC of the EPF Act are D
the provisions postulating prosecution; in contradistinction
Section 148 contemplates the power to "recover from the
employer by way of penalty such damages, not exceeding the
amount of arrears, as may be ~pecified in the Scheme". It is
true that it is not a river but a mere rivulet that segregates and E
distinguishes the legal concepts of damages or compensatory
damages or exemplary damages or deterrent damages or
punitive damages or retributory damages. We shall abjure from
writing a dissertation on this compelling legal nodus; save lo
clarify that modern jurisprudence recognizes that the impositidp F
of punitive damages, quintessentially quasi-criminal in
character, can be resorted to even in civil proceedings to deter
wilful wrongdoing by making an admonished example of the
 wrongdoer. This is the essential purpose, it seems to us, of
 Section 148 of the EPF Act, and an imposition within its G
 confines does not assume criminal prosecution so as to stand
 proscribed insofar as transfer of establishment from one
 management/employer to its successor is concerned.

       11. It has also been argued that damages as postulated
                                                                   H
    180       SUPREME COURT REPORTS                   [2014] 9 S.C.R.


A   in Section 148 would not be transferable under Section 178.
    This argument has to be stated only lo be rejected for the reason
    that Section 178 specifically speaks of "the contributions and
    other sums due from the employer under any provision of
    this Act or the Scheme" (emphasis added). The proviso to
8   Section 178 indeed clarifies the position inasmuch as it
    restricts and/or limits the liability of the transferee up to the date
    of the transfer to the value of the assets obtained by him through
    such transfer.

         12. We are also not impressed by the argument
C   addressed by Mr. 8hushan to the effect that damages under
    Section 148 are not jointly and separately recoverable from the
    erstwhile and the present managements under Section 178 as
    Section 148 moves in its own and independent orbit. Several
    amendments have been made to the EPF Act so far as the
D   fasciculous of Sections 7A to Section 7Q is concerned. This
    is also true of the pandect containing Sections 14A, 14AA,
    14A8, 14AC, 148 and 14C; and for that matter Sections 17A,
    17AA and 178. Where such widespread amendments and
    changes are incorporated in a statute, it is always salutary and
E   advisable to reposition the provisions and number them
    sequentially and logically. The argument that the phrase
    "determination of amounts due from any employer'' is found in
    Section 7A as well as in Section 178 is not factually correct.
    Section 178 speaks of "contributions and other sums dues from
F   the employer under any provision of this Act ....... "; the latter
    Section is, therefore, wider in ambit than the previous one. In
    our opinion, Section 148 is complete in itself so far as the
    computation of damages is concerned. It is conceivable that
    the money due from an employer would have to be calculated
G   under Section 7A, ·and in the event the default or neglect of the
    employer is contumacious and contains the requisite mens-r'ea
    and actus reus yet another exercise of computation has to be
    undertaken under Section 148. Where the Authority is of the
    opinion that damages under Section 148 need to be imposed,
H   the computations would come within the purview of Section 148
   MCLEOD RUSSEL INDIA LTD. v. REG. P. F.     181
COMMISSIONER, JALPAIGUR~ [VIKRAMAJIT SEN, J.]
and it would be recoverable jointly and severally from the              A
erstwhile as well as the current managements. A perusal of the
Appeals Section, namely, 71 is illustrative of the fact that these
exercises are distinct from each other as per the enumerations
found in the first sub-Section of Section 7L It also appears
logical to us, in the wake of the numerous and different dates          8
of amendments, that Section 7A(2) would also be available to
proceedings under Section 148 of the Act. The applicability of
Civil Procedure Code, 1908 to proceedings under Section 148
has not specifically been barred by the statute.

      13. It is necessary to clarify that Eveready Industries (India)
                                                                        c
Ltd. had in the interregnum of this litigation changed its name
to Mcleod Russel India Ltd. In view of our above analysis, it is
our considered opinion that the impugned Judgment deserves
to be upheld. It contains a detailed and logical exposition of
facts as well as the law pertaining to the present dispute. We          D
also approve the pithy observations of the RPF Commissioner,
Jalpaiguri in the subject Order that failure on the part of the
employers to make remittances of accumulations and
contributions, undermines the objectives and purposes of the
statute. We underscore that the liability of the Fund to pay            E
interest to subscribers regardless of whether employers have
paid their dues, runs relentlessly. The Commissioner has
specifically recorded that he has taken a lenient view in the
matter and has eschewed imposition of damages to the extent
of 100 per cent of the .arrears even though this is envisaged           F
 by the EPF Act. The Appellant-Petitioner has, in the
 circumstances of the case, been also rightly burdened with the
 payment of interest under Section 70 of the EPF Act.
 Accordingly, the Appeal is dismissed and the interim Orders
 are recalled. Although, it is our opinion that the Appeal is wholly    G
 devoid of merit, we refrain from imposing costs.

Rajendra Prasad                                    Appeal dismissed.