Supreme Court Ruling on Provident Fund Liabilities
The Supreme Court has held that a company which takes over another is liable to pay damages for default in payment of contributions to the provident fund committed by the latter. The damages are punitive in nature and could be recovered from the transferee employer, the court held in the judgment, Mcleod Russel India vs Regional PF Commissioner, Jalpaiguri.
In this case, Saroda Tea Company defaulted in payment of PF contributions. Later, it was taken over by Eveready Industries, later named Mcleod Russel. According to the takeover agreement, Mcleod cleared all PF arrears of the tea company. However, it contested the imposition of a penalty for the default of the tea company. It pointed out the agreement in which the damages were the liability of the tea company. The Calcutta High Court rejected the argument. On appeal, the Supreme Court upheld the high court view and underlined that even if there was such an agreement, the liability was that of the new employer. The court asked the company to pay interest on the damages also.
Source:
[Business Standard - New employer to pay PF penalty](http://www.business-standard.com/article/opinion/new-employer-to-pay-pf-penalty-114072000755_1.html)
Copy of the judgment of the Supreme Court:
[Supreme Court Judgment](http://judis.nic.in/supremecourt/imgs1.aspx?filename=41734)
From India, Malappuram
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1446The Supreme Court has held that a company which takes over another is liable to pay damages for default in payment of contributions to the provident fund committed by the latter. The damages are punitive in nature and could be recovered from the transferee employer, the court held in the judgment, Mcleod Russel India vs Regional PF Commissioner, Jalpaiguri.
In this case, Saroda Tea Company defaulted in payment of PF contributions. Later, it was taken over by Eveready Industries, later named Mcleod Russel. According to the takeover agreement, Mcleod cleared all PF arrears of the tea company. However, it contested the imposition of a penalty for the default of the tea company. It pointed out the agreement in which the damages were the liability of the tea company. The Calcutta High Court rejected the argument. On appeal, the Supreme Court upheld the high court view and underlined that even if there was such an agreement, the liability was that of the new employer. The court asked the company to pay interest on the damages also.
Source:
[Business Standard - New employer to pay PF penalty](http://www.business-standard.com/article/opinion/new-employer-to-pay-pf-penalty-114072000755_1.html)
Copy of the judgment of the Supreme Court:
[Supreme Court Judgment](http://judis.nic.in/supremecourt/imgs1.aspx?filename=41734)
From India, Malappuram
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As per the Supreme Court ruling in the case of Mcleod Russel India vs Regional PF Commissioner, Jalpaiguri, it is established that when a company takes over another entity, it inherits the liability for any defaults in provident fund contributions committed by the acquired company. Therefore, the new employer, in this case, Mcleod Russel, is indeed liable to pay the damages for the PF contribution default of Saroda Tea Company, despite any agreements stating otherwise. It is crucial for organizations involved in mergers or takeovers to thoroughly assess and address any outstanding liabilities, including provident fund contributions, to avoid legal repercussions. It is advisable for businesses to conduct comprehensive due diligence and seek legal counsel to ensure compliance with labor laws and regulations regarding employee benefits and contributions.
From India, Gurugram
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From India, Gurugram
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Supreme court judgment on bifurcation of PF.pdf