Contractor's PF and ESIC Default: Is the Principal Employer Still Liable?

Please help me with the following:

If a contractor has their own PF and ESIC code, is the principal employer liable in case of default by the contractor? If there are any recent judgments on this matter, please provide them.

Liability of Principal Employer in Case of Contractor Default

Even if the contractor has their own code, the principal employer will be liable for non-payment of the dues. However, if the principal employer has taken adequate steps to conduct their due diligence, then they may be considered not liable by the court.

Court Rulings on Independent Contractors

In the past, courts have declared that in the case of independent contractors who work for multiple principal employers, it is not possible for the employer to know the computation of PF that the contractor is liable for. Therefore, the principal employer cannot know whether PF was properly paid. In such cases, the courts have let off the principal employer.

You need adequate proof that you tried to ensure that the contractors have paid.

Dear Colleague, Madras High Court Judgment on the exact case as appeared in The High Court of Judicature At... vs The Employees' Provident Fund... on 6 February 2015, M/s Breaks India Ltd vs EPFO is an important judgment relevant in addition to what the colleague had briefed above. Kindly read the full judgment and decide whether it is a related case for your present situation. The crux is given below:

"With respect to the contractors, who are registered with the Provident Fund Department, having an independent code number, they are to be treated as 'independent employer.' The petitioner (Breaks India Ltd) therefore cannot be treated as 'principal employer' for the purposes of those contractors." It is a very sound judgment worth reading and is available on the websites.

Dr. Shivakumar, Thanks for the citation. However, I have noticed that all the cases are specific to the matter at hand and the circumstances under which the problem occurred. The judgments are therefore to be read deeply to know how much of those conditions apply to the particular case.

Unfortunately, people look at the summary of the judgment and automatically assume the same judgment will be in their own cases. So, I thought I would take the opportunity to reiterate that (as you have pointed out), people must read the judgment carefully to know the circumstances. Second, unless you are diligent in ensuring that the workers are given their dues, the courts will not support you.

If you are careless or in any way collaborating with the contractor in avoiding dues, paying lower, etc., the courts will make you as much liable. Of course, the first recourse is to the contractor and then to the principal employer. But if the contractor fails to pay, they are very much likely to transfer the amount to the PE.