PROVIDENT FUND UPDATE
January 2014
Editor's Note
The number of beneficiaries and the volume of financial transactions undertaken by the Employees’ Provident Fund Organisation (EPFO) is the largest in the country. Its total assets are more than Rs. five lakh crore as of 1st May 2013. This money belongs to the investors—employees and employers. Every organization that employs 20 or more employees is obligated to be the investor. The scheme must enjoy the confidence and approval of all stakeholders as far as its methods, fairness, and integrity are concerned, and that is how it can meaningfully contribute to the economic and social well-being of members.
Despite all claims about improvements in the functioning of the organization, we often hear about the alleged malfunctioning and cases of corruption within the organization. There has been a report in the Economic Times that out of 107.16 lakh PF claims received during 01.04.2012 to 13.12.2012, around 7 lakh claims are pending for settlement. As per the provisions contained in para 72(7) of the Employees’ Provident Funds Scheme, 1952, all claims found in order are to be settled within 30 days, but this time limit is hardly adhered to.
It is not only employees who have to run from pillar to post, but employers are also aggrieved by the provident fund authorities. Most employers are unaware that there is an EPF Appellate Tribunal (Delhi)—the only one for the whole of India—where they can file their appeals. What the Tribunal has been deciding is summarized below, which will be informative to know in order to ward off harassment by the provident fund authorities.
HIGHLIGHTS OF ORDERS OF EPF APPELLATE TRIBUNAL
Coverage of Establishment Employing Below 20 Persons Set Aside
M/s. Sh. Mahabaleshwara Auto Industries (P) Ltd. vs. APFC, Bangalore, ATA No.793(6) 2005, decided on 26.12.2013
In an appeal filed before the Employees’ Provident Fund Appellate Tribunal, the appellant challenged the orders dated 09.05.1997 and 18.12.1991, passed by the EPF Authority, under section 7-A of the Act, covering the establishment of the appellant for compliance of the Act as well as for determination of the PF dues.
The plea taken by the appellant is that it had never engaged more than 14 employees. Services of 3 security guards were engaged through a contractor M/s. Ex. Soldiers Industrial Security Services, covered under the Act.
The employees, already covered under the Act by their employer, cannot be counted again for covering the establishment of the appellant under the Act. Hence, the impugned order is set aside. The appeal is allowed.
Arrears of Wages - Not to Attract Interest/Damages
M/s. HSIL Ltd. vs. RPFC, Hyderabad, ATA No.561(1) 2012, decided on 6.11.2013
The appellant filed an appeal before the Employees’ Provident Fund Appellate Tribunal, questioning the validity and legality of the order dated 15.05.2012, passed by the EPF Authority, under section 14-B of the Act, imposing interest and damages on account of delayed remittance in respect of arrears of wages paid later on in compliance with a settlement between the employer and the workmen/union.
‘Actually drawn’ must be understood as actually due, payable, and drawn. If the disbursement has not occurred, it must be understood as liable to be drawn and payable when they become due and payable. Accordingly, the levy of damages in the case in hand is contrary to the law settled by the Andhra Pradesh High Court, and the impugned order is set aside. The appeal is allowed.
Damages for Late Deposit Sustained but Instalments Allowed
M/s. Air Force School vs. APFC, Bangalore, ATA No. 06(06) 2012, decided on 24.12.2013
The appellant filed an appeal before the Employees’ Provident Fund Appellate Tribunal, questioning the order dated 17.11.2011, passed by the EPF Authority, under section 14-B of the Act, levying damages for late deposit of PF dues on the ground that the impugned order is arbitrary, illegal, and pre-determined, whereas the default of the appellant was not willful.
The EPF Appellate Tribunal concluded that since the appellant had admitted the delayed remittance of dues, to remit the damages in instalments, hence the appellant is permitted to deposit the damages and interest in 10 equal monthly instalments.
Trainees Under Standing Orders Are Not Employees to Be Covered
M/s. ISS Catering Services (South) Pvt. Ltd. vs. APFC, Chennai, ATA No.44(13) 2011, decided on 8.11.2013
The appellant filed an appeal before the Employees’ Provident Fund Appellate Tribunal, challenging the order dated 31.12.2010, passed by the EPF Authority, under section 7-A of the Act, determining the EPF dues in respect of trainees engaged on the basis of Certified Standing Orders.
The EPF Appellate Tribunal has held that the trainees were appointed and certification of Standing Orders was obtained subsequently. So long as the Standing Orders were not certified by the competent authority, the trainees appointed shall be governed by Model Standing Orders incorporated in the Industrial Establishment (Standing Orders) Act, 1946.
Excluded Employees Not Entitled to Be Member of Pension Scheme
M/s. Manikgarh Cement vs. RPFC, Nagpur, ATA No.529(9) 2011, decided on 6.12.2013
An appeal was filed before the Employees’ Provident Fund Appellate Tribunal by the appellant against the order dated 30.06.2011, passed by the EPF Authority, under section 7-A of the Act on the ground that the assessment of EPF dues in respect of ‘unrolled employees’ by the EPF Authority is wrong and illegal.
The EPF Appellate Tribunal observed that it is an admitted fact by both parties that the wages of the employees are above the prescribed limit of ‘excluded employees’ i.e. Rs.6500 per month. Such employees are to be treated as ‘excluded employees’ in view of para 2(f) of the Scheme. Even the excluded employees who attended the proceedings conducted under section 7A of the Act stated not to be interested in the pension scheme, as per paragraph 26(6) of the Scheme, 1952. Hence, the impugned order is not sustainable and quashed.
No Interest or Damages When Default is Not Willful
M/s. Looksan Tea Estate vs. RPFC, Jalpaiguri and Another, ATA No.468(15) 2012, decided on 25.11.2013
The appellant filed an appeal before the Employees’ Provident Fund Appellate Tribunal, questioning the validity and legality of orders passed by the EPF Authority, under section 14-B of the Act, imposing damages and interest on account of delayed remittance, whereas the appellants have been suffering losses and delay was not willful.
It is a settled position that a penal provision should be construed strictly. Levy of damages cannot be construed as imperative by the reason of an enabling provision. After amendment to Para 32A of the EPF Scheme with effect from 26.09.2008, the damages are to be levied at the lower rate by excluding the element of interest included earlier. In the impugned order, the EPF Authority has not indicated the reasons for delay in remittance of EPF dues attracting levy of damages. There is no finding by the EPF Authority to establish that the appellant had unlawfully diverted the funds collected from the employees for its business use. Since there is no mens rea on the part of the appellant, damages or interest should not be levied. Hence, the impugned order is set aside.
Default in Deposit When Not Willful, Penal Damages Unjustified
M/s. Shiv Herbal Research Laboratory Ltd. vs. APFC, Nagpur, ATA No.103(09) 2007 decided on 21.11.2013
The appellant filed an appeal before the Employees’ Provident Fund Appellate Tribunal, challenging the order dated 11.12.2003, passed by the EPF Authority, under section 14-B of the Act, levying damages and interest for delayed remittance of PF dues without giving an opportunity of hearing, which is illegal.
Since the EPF Authority has failed to prove on record the willful default on the part of the appellant, the levy of damages is restricted to 25% of the actual amount of damages levied under the impugned order. The appeal is disposed of accordingly.
Levy of Damages - Reduced to 5% When Default Not Willful
M/s. Kattima Export vs. APFC, Chennai, ATA No.293(13) 2012, decided on 29.11.2013
The appellant filed an appeal before the Employees’ Provident Fund Appellate Tribunal, questioning the order passed by the EPF Authority, under section 14-B of the Act, levying damages and interest for delayed remittance of PF dues on account of poor financial condition.
In the impugned order, the EPF Authority has not indicated the reasons attracting levy of damages. Since there is no mens rea on the part of the appellant, the levy of damages is restricted to 5% of the actual amount of damages levied under the impugned order. Hence, the appeal is disposed of accordingly.
HIGHLIGHTS OF THE JUDGMENTS OF HIGH COURTS AND SUPREME COURT
An order passed by the EPF Authority under section 7-A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, without affording an opportunity to be heard to the employer for submitting his defense, is liable to be quashed.
Rallis India Ltd. vs. The Asst. Provident Fund Commissioner & Ors., 2014 LLR 25 (Bom. HC)
An order passed by the EPF Authority determining the EPF dues towards the employer and imposition of interest thereon for belated remittance is a composite order under Sections 7-A and 7-Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and is appealable before the EPF Appellate Tribunal.
Arcot Textile Mills Ltd. vs. The Regional Provident Fund Commissioner and Ors., 2014 LLR 89 (SC)
When the evidence recorded by the Trial Court reveals that no cogent evidence has been placed and proved on record by the EPF Authority i.e. complainant to substantiate that during the material time, the firm of the respondents was working, employing a particular number of workers, etc., the question of depositing the EPF contributions by the employer does not arise.
Regional Provident Fund Commissioner vs. Atma Ram and Sons and Anr., 2014 LLR 29 (P&HHC)
Unless the issue with regard to contribution, as pending before the EPF Appellate Tribunal, is decided, the petitioner cannot be directed by the Employees Provident Fund Authority to pay interest and damages.
Guru Nanak College, Chennai vs. Assistant Provident Fund Commissioner, Chennai and Others, 2014 LLR (SN) 110 (Mad. HC)
No appeal Section 7-I of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, is maintainable for challenging the order, passed by the EPF Authority, imposing only interest under Section 7-Q of the Act.
Arcot Textile Mills Ltd. vs. The Regional Provident Fund Commissioner and Ors., 2014 LLR 89 (SC)