16. The constitutionality of Section 14(B) of the Act came to be examined
by the Hon'ble Supreme Court in Organo Chemicals Industries vs. Union of India
reported in 1979 (4) SCC 573, wherein Section 14(B) of the Act was challenged on
two grounds. One of the grounds was that the said provision does not authorize
levy of any penal damages, i.e., a penalty or fine but deals with the power to
recover damages. It was further contended that it is not the power to impose a
penalty on the defaulting employer, though the maximum amount of damages that
can be recovered has been indicated in the Section. It was further submitted
that the damages must have some correlation with the loss suffered as a result
of delayed payments and the authority imposing damages must apply its mind to
this aspect of the matter. In other words, it was contended that unless it is
shown that the beneficiary has suffered a loss, question of levying damages does
not arise, since the damages contemplated under Section 14(B) of the Act cannot
be construed as a penalty. The Hon'ble Supreme Court, after elaborately
examining the said contention, ultimately, in Paragraph No.22, has held as
follows;-
21. At this juncture, we may usefully refer to a Judgment of the Hon'ble
Supreme Court in Hindustan Times Ltd., vs. Union of India reported in 1998 (2)
SCC 242, wherein while examining the scope of 14(B) of the Act, the Hon'ble
Supreme Court has held as follows;-
In Dilip N.Shroff v. Joint Commissioner of Income Tax, Mumbai & Anr reported in
2007 (6) SCC 329, the Hon'ble Supreme Court has held as follows;-
Thus, it appears that there is distinct line of authorities which clearly
lays down that in considering a question of penalty, mens rea is not a relevant
consideration. Even assuming that when the statute says that one is liable for
penalty if one furnishes inaccurate particulars, it may or may not by itself be
held to be enough if the particulars furnished are found to be inaccurate is
anything more needed but the question would still be as to whether reliance
placed on some valuation of an approved valuer and, therefore, the furnishing of
inaccurate particulars was not deliberate, meaning thereby that an element of
mens rea is needed before penalty can be imposed, would have received serious
consideration in the light of a large number of decisions of this Court.