High Court Rulings 2024 – Employees’ Provident Fund Act Cases & Decisions

The ‘High Court Rulings 2024 – Employees’ Provident Fund’ outlines important cases decided by various High Courts under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and Schemes framed thereunder (collectively referred as “EPF Act”), during the calendar year 2024. The digest of cases has been presented High Court wise for easy reference.

SUMMARY

Allahabad High Court (“Allahabad HC”)

1. The EPF Appellate Tribunal is empowered to grant stay of the order passed by the EPF Authorities subject to certain reasonable conditions.

Patton Logistics Private Limited V. Employees’ Provident Fund Appellate Tribunal and Another [W.P No. 8647 of 2024; dt. March 15, 2024]

The second respondent EPFO passed an order u/ss 7Q and 14B, directing the appellant to pay interest and penal damages for delayed provident fund remittances. The appellant has challenged the order in the Tribunal. The Tribunal allowed the appeal granting interim stay of operation of the order on a condition that appellant has to deposit a sum of Rs. 3,00,000 u/s 14B and Rs. 1,00,000 u/s 7Q. The order of the Tribunal was challenged in the Allahabad HC.  The appellant argued there is no requirement of pre-deposit in an appeal preferred u/s 7-I of the EPF Act. The requirement of pre-deposit is there in an appeal filed u/s 7A of the Act,

The Allahabad HC while dismissing the petition held, Tribunal have passed the interim order after admitting the appeal subject to the condition that petitioner should deposit certain sum of money as directed. It is only a conditional stay hence, no interference warranted.

2. It is mandatory on the part of the employer to pre-deposit 75% of the amount assessed u/s 7A to get the appeal admitted.

 M/s Shrasty Computer Solutions and Technologies v. Employees’ Provident Fund Organisation [W.P (C) No. 3277 of 2024; dt. April 10, 2024.]

The appellant has challenged the order passed by the Central Government Industrial Tribunal (“CGIT”), whereby the appeal has been dismissed as being barred by the period of limitation as provided under rule 7(2) of the EPF appellant tribunal rules, 1997.

The brief facts of this case are the petitioner filed a Writ Petition challenging the order passed by the respondent u/s 7A of the EPF Act and same was dismissed on the ground of availability of alternative remedy. The petitioner was provided with 15 days of time to file an appeal in the CGIT. The time of 15 days granted by the Allahabad HC expired on 31^st October 2023. The petitioner filed the appeal on 7^th November 2023 without depositing the 75% of the amount assessed u/s 7A. The CGIT dismissed the appeal holding that the appeal was not filed even within the extended time granted by the Allahabad HC, and CGIT has no power to condone the delay. Aggrieved appellant filed the present Wrtit Petition.

The Allahabad HC held that the petitioner has not complied with the mandate of rule 7C on two counts (i) he did not file the appeal within the prescribed period of limitation or even within the extended period granted and (ii) he did not deposit 75% of the amount determined u/s 7A. Allahabad HC dismissed the petition.

Bombay High Court (“Bombay HC”)

3. An inquiry u/s 7A is mandatory to ascertain the PF dues.

Edunetwork Private Limited and Others V. The Regional Provident Fund and Others [WP 7No. 4679 of 2018; dt. January 17, 2024]

The present Writ Petition was filed to quash the criminal proceedings initiated u/ss 406 and 409 of the IPC. Factual matrix of this case is petitioner being the employer, deducted EPF contribution from salary of employees, however, has not deposit the same with EPFO. On the directions of the EPF Authority petitioner deposited the contributions. Subsequent to the remittance of the contributions, EPF Authority lodged a report with police stating petitioners misappropriated the funds.

Petitioners challenged F.I.R. Petitioner contended that their office was shifted from Mumbai to Bangalore and new staff inadvertently left PF dues unpaid. On the receipt of notice petitioner has paid the dues along with the interest and penalty. It further contended, lodging of FIR without holding inquiry u/s 7A is untenable. The EPF Act contemplates an opportunity be given to the employer to answer.

The Bombay HC agreed with the contention of the petitioner and held, proper procedure was not followed, i.e., the inquiry under section 7A was not conducted which is not in consonance with the principles of natural justice. Prosecution, without holding an inquiry u/s 7A, cannot conclude that the petitioner has evaded or tried to evade payment of PF dues. Accordingly, continuation of the F.I.R. would be an abuse of process of law. FI.R. quashed.

Calcutta High Court (“Calcutta HC”)

4. When an establishment already covered under the EPF Act, subsequently it cannot contend EPF Act will not apply to it.

North 24 Paraganas co-operative Agricultural and Rural development Bank Limited V. The Union of India & Anr. [MAT 1692 of 202 with IA No. CAN 1/2023, 2/2023; dt. March 6, 2024]

The Writ Petitioner, is a co-operative bank employing less than 50 persons, has challenged the order of the Regional Provident Fund Commissioner, Barrackpore, before single judge of the Calcutta HC. According to the said order petitioner is required to pay an amount of Rs. 1,45,97, 661 for the period September 1979 to July 2009.

Petitioner argued, it being a co-operative bank employing less than 50 employees and running without the aid of the power, hence, EPF Act is not applicable by virtue of sec 16(1)(a).  Further, bank has established a separate provident fund u/s 83 of the West Bengal Co-operative Societies Act, 2006 and is exempted u/s 17 of the EPF Act. On the other hand, EPFO argued, the exclusion u/s sec 16 does not apply to the bank, at no point of time it produced any evidence that it is working without the aid of the power. The petitioner has not made any application seeking exemption u/s 17 of the Act. The EPFO further argued that it is of no consequence that bank may have created its own provident fund scheme, that per se will take the bank out of the purview of the EPF Act.

The learned single judge observed that petitioner remitted the contributions from the period January 2007 to 2008, having made such payments the bank cannot thereafter contend the provision of the EPF Act would not apply to the bank. The Learned single judge also referred previous petitions filed by the appellant in W.P No 4097 of 2011. The petitioner never disputed the applicability of the EPF Act and scheme. The single judge upheld the order of the respondent. Aggrieved appellant approached the division bench. The division bench of the Calcutta HC upheld the decision of the single judge and dismissed the petition.

5. Employer is liable for delayed transfer of accumulations by Board of Trustees of an exempted PF trust.

Paschim banga Gramin bank V. Union of India & Ors. [WPA 19141 of 2023 dt. June 21, 2024]

The subject matter before the Calcutta HC in the present Writ Petition is liability of BOT in transferring provident fund accumulations and constitutional validity of sec 14B of the EPF Act.

The Mayurakshi Gramin bank (“Gramin Bank”), a rural bank, was exempted from the provisions of EPF Act. In 2007 Ministry of Finance amalgamated various regional rural banks into Paschim Banga Gramin Bank, Gramin Bank was also one among them. The EPF authorities passed orders u/s 14B of the EPF Act for belated remittance made by the Gramin Bank and directed the petitioner to pay the penalty. The petitioner filed the present Writ Petition challenging the orders passed by the authorities with a prayer to read down the sec 14B of the EPF Act. The contention of the petitioner is, there was delay in transferring EPF contributions on part of the BOT, and BOT is a separate and distinct entity from the petitioner as well as from Gramin Bank., hence petitioner is not liable to pay the penalty.

The Calcutta HC held, the petitioner bank was entrusted with all the assets and liabilities of Gramin Bank. Petitioner being the employer cannot escape its liability by contending that BOT is an independent authority. According to sub-Clauses 22 and 23 of Appendix A of para 27AA of the EPF Scheme, the employer is equally duty bound to perform his obligation failing which the employer is liable to prosecution for delayed transfer of funds. There was inordinate delay in transferring funds to the EPF authority by the BOT for which the Petitioner being the employer cannot escape liability.

Delhi High Court (“Delhi HC“)

6. The Writ Court will not interfere at the stage of show cause notice if due process of law is followed.

 M/s Lotues Herbal Private Limited V. Employees’ Provident Fund Organisation and Ors. [W.P (C) No 2881 of 2019 & CM appl. 13382 of 2019; dt. January 16, 2024]

Petitioner establishment was inspected by officials of the respondent in the year 2018. During the inspection petitioner was informed about discrepancies in remitting the provident fund contributions, which were denied by the petitioner. Due to the denial, the respondent sent another officer to verify the status and to submit a detailed report. The respondent issued a show cause notice to the petitioner u/s 7A of the EPF Act. Aggrieved petitioner has preferred the present Writ Petition before Delhi HC.

The Delhi HC relying on the decision of the Supreme Court in Union of India v. VICCO Laboratories[1] held that where a show-cause notice is issued either without jurisdiction or there is an abuse of process of law the Writ Court would not hesitate to interfere even at the stage of issuance of show cause notice. However, Writ Court will not interfere with show cause notice as the authorities have submitted on record that the petitioner entity provided with adequate opportunity to contradict preliminary findings. Delhi HC dismissed the petition.

7. The Director of the Company, having ultimate control over the affairs is to be treated as employer.

Yash Pal Ashok V. Regional Provident Fund Commissioner [W.P (C) 77 of 2020 & CM Appl 257 of 2020; dt. April 30, 2024]

The instant writ petition is filled to quash the proceedings-initiated u/ss 8B to 8F arising out of sec 7A of the EPF Act. YPA Hospitality Private Limited (“Company”) is operating restaurants. The petitioner served as a director of the Company from 21^st January 2011 to 1^st October 2011. On 1^st January 2012 an inquiry u/s 7A of the EPF Act was initiated. The Assistant Provident Commissioner held that the Company failed to remit PF dues to the tune of Rs. 56, 63, 502 for the period of inquiry. Pursuant to the order passed u/s 7A the respondent-initiated recovery proceedings. The Recovery Officer also wrote to the petitioner banker to prevent him to operate his personal account. Company sent a letter to the recovery officer seeking non-initiation of recovery proceedings against the petitioner. The recovery officer directed the petitioner to produce the details of his bank account. Aggrieved by the order petitioner filed present Writ Petition.

Petitioner argued, Recovery Officer overstepped his authority by initiating proceedings against the him who has neither control over the establishment nor a director during the period of default. He further submitted, determination of monies u/s 7A shall be against the Company and petitioner in his personal capacity is not liable. The petitioner merely a share holder of the Company. The money withdrawn by the petitioner from the Company’s bank account was utilised to meet daily requirements of the Company. The respondent argued, petitioner was authorised signatory to operate bank account of the Company and involved in administration of various business transactions of the Company. Further, resignation details of the petitioner were not available, even board resolution was not produced.

The Delhi HC held, the petitioner continuously withdrawing amount from the bank account of the Company establishes the fact he had ultimate control over the financial affairs of the Company and shall be treated as an employer, moreover he is the largest shareholder. Court observed that Company has not filed the balance sheets and did not provide reply to the letter issued by the Recovery Officer. In the view of the aforesaid observation court held that impugned recover order does not warrant interference.

8. Messes, except military messes, which employ twenty or more persons are covered under the provisions of the EPF Act.

JDT Islam Orphanage Committee V. Employees PF Appellate Tribunal & Qrs, [W.P No. ( C) 5651 of 2010; dt. May 29, 2024]

Petitioner is a charitable institution which provides lodging. feeding, clothing, medical aid, education and rehabilitation at free of cost to orphans and destitute. The petitioner also runs a mess in its premises. The Assistant Provident Commissioner (in short “APFC”) conducted an inquiry and held that the mess run by the petitioner institution falls under the purview of the EPF Act. Aggrieved petitioner preferred an appeal before the legal advisor, Ministry of Labour Government of India, which remanded the matter to the Assistant Provident Fund Commissioner for reconsideration. APFC upheld the earlier order passed on 13^th May 1997. The petitioner again preferred an appeal before the legal advisor Ministry of Labour & Employment. The APFC initiated the proceedings against the petitioner for default in payment of contributions and imposed a fine of Rs. 1,00,000.

On 19th July 2000, the APFC again conducted an inquiry and issued an order against the petitioner for default in payment of contribution along with an outstanding arrears amounting to Rs. 5,06, 146.70/-, which was challenged in the Tribunal. The Tribunal dismissed the petition, aggrieved petitioner filed the present Written Petition.

Petitioner contended, institution being a charitable in nature does not fall under the purview of the EPF Act, and non-profitable mess forms an integral part of the institution, hence, not covered under the EPF Act. The second respondent argued, a mess or canteen employing twenty or more than twenty will fall under the ambit of the EPF Act as per Sec 1(3)(b). It is further submitted that as per sec 2(f) of the Act, any person employed for wages in connection with the work of an establishment is considered as an employee. Further, mess has a separate building, its own utensils, furniture, pay wages. As per the notification GSR dt. 24^th march 1973 issued by the Government of India and the notification no. GSR 346 dated 7^th March, 1962 messes other than military messes, where twenty or more employed, are covered under the Act.

The Delhi HC held, the determining factor is not whether the establishment is earning profit or not instead whether establishment has employed more than twenty persons, only military messes are excluded from the purview of the EPF Act. Delhi HC held, the order of EPFO does not warrant any interference and same is upheld.

Karnataka High Court (“Karnataka HC”)

9. The Karnataka HC struck down the provisions with respect to International Workers.

Stone Hill education foundation and another V. the Union of India and others [W.P No. 18486 of 2012, dt. April 25, 2024].

The question for consideration before the Karnataka HC in these batch of Writ Petitions is “whether introduction of para 83 of the EPF Scheme and Para 43A of the EPS Scheme is unconstitutional and violative of Article 14”.

Background:

The Parliament enacted the EPF Act to provide social security benefit to the weaker sections of the working class. At the time of commencement of the EPF Act wage ceiling prescribed was Rs. 300. The employees drawing wages of Rs 300 per month were mandatorily covered under the EPF Act. The wage ceiling enhanced to Rs. 1000, Rs. 1600, Rs. 2500, Rs. 3500, Rs. 5000, Rs. 6500 and finally to Rs. 15,000 in due course of time.

The Union of India vide notification (“Impugned Notification”) dated 1st October 2008 introduced Para 83 in the Employees’ Provident Fund Scheme, 1952 (“EPF Scheme”) and Para 43 in the Employees’ Pension Scheme, 1995 (“Pension Scheme”) to bring the International Workers under the purview of the EPF Act, irrespective of the salary drawn by them. Batch of Writ Petitions were filed in the Karnataka HC by the employers and employees challenging the Impugned Notification, issued by the Government of India, as the provisions introduced in the EPF Scheme and Pension Scheme are arbitrary and violative of Article 14 and Article 21 of the Constitution of India, 1950.

Contention of the Respondent 1 (“Union of India”):

• Union of India effected changes by making special provisions for different class of workers at various points of time. Similarly, provisions with respect to International Workers were brought in accordance with the bilateral Social Security Agreements (“SSA”) with various countries.
• The intention of the Parliament to amend the EPF Scheme is to ensure that no Indian deputed to work outside the country should be deprived of the social security benefits.

Contention of the Petitioners:

• The amendments are defeating the objective of the EPF Act which intends to provide social security to weaker section of the working class.
• The EPF Act provides wage ceiling of Rs. 15,000 for an employee to get covered under the Act. However, there is no salary limit prescribed for International Workers.
• The employer is required to pay the contributions on full salary. Hence, there is a huge financial burden on the employers.
• Para 83 and Para 43A are violative of Article 14 of the Constitution of India.

Decision of the Karnataka HC: The Karnataka HC held that the subordinate legislation cannot travel beyond the scope of the parent legislation. Employees who are citizens of India are treated differently and Article 14 applies to foreigners also, the classification-made is unreasonable and defeat the very purpose of the Act. Provisions related to International Workers struck down.

(Note: In Sachin Vijay Desai V. Union of India W.P No 1846 of 2018; dt. August 7, 2019, the Bombay High Court upheld the provisions related to international workers)

10. The offence of criminal breach of trust u/s 405 of IPC will be attracted if the employer deducts the amount, however, does not deposit with EPFO.

 In Swapna & Anr. V. State of Karnataka & Anr. [Criminal Petition no. 3188 of 2017; dt. May 29, 2024] the question for consideration before the Karnataka HC is “whether EPF authorities can initiate the proceedings u/s 406 of IPC against an employer who has not deducted provident fund from the salary of his/her employees”.

The appellants are secretary and founder of an educational trust which runs an international school and pre-university college respectively. The second respondent issued a notice demanding employees’ provident fund dues for the period June 2014 to January 2015 in respect of the employees of the said trust. Soon after the receipt of the notice the appellants have made the payment of the due amount. Subsequent to the payment, the second respondent re-issued inquiry notice u/s 7A of the EPF Act,  initiated the proceedings and passed an order directing to pay an amount of Rs. 31,758 within 15 days. The respondent initiated another proceedings u/ss 7Q and 14B of the EPF Act directing the appellants to pay Rs. 14,952 and Rs. 26,522 as interest and penalty which was paid by the Trust. Parallelly, the second respondent made a complaint to first respondent for offences punishable u/ss 406 and 409 of the IPC.

The contention of the appellants is that basic requirement to invoke sec 406 of IPC is an offence u/s 405 which requires the employer to deduct the provident fund contributions from the salary of an employee and not to remit to the EPFO. In the instant case no deductions have been made from the salary, hence, the Secretary and trustee are not liable for any offence. The amount demanded has already been deposited by the appellants. No amount is liable to be paid whether deducted or not.

The Karnataka HC held, on perusal of explanation 1 to sec 405 it indicates when a person being employer deducts employees’ provident fund contribution from the salary of the employee payable to provident fund or pension fund, the employer shall be deemed to have been entrusted with the amount of contribution so deducted and if there is a default in remitting the contribution then the provisions of Sec 405 would be attracted. In the present case the employer has not deducted the contributions, hence, the provisions of sec 406 will not be attracted. Further, on the date of police complaint the employer does not have any dues to pay, he already paid the amount raised in the demand notice. The Karnataka HC quashed the proceedings-initiated u/ss 406 and 409.

Madhya Pradesh High Court (“Madhya Pradesh HC”)

11. Exemption u/s 16(1) can apply only if the establishment is covered by some other scheme which is more beneficial than the benefits provided under the EPF Act.

Arya Kanya Ucchtar Madhyamik Vidyalaya V. Regional Provident Fund Commissioner & Another [W.P No. 15811 of 2010; dt. March 20, 2024]

The petitioner establishment which is an educational institute receiving grant in aid from the Government of Madhya Pradesh, has challenged the order of the Tribunal which confirms the order passed by the RPFC, Jabalpur, u/ss 7Q and 14B of the EPF Act. The contention of the petitioner was educational institutions are not covered under the EPF Act by virtue of sec 16(1)(b).

The Madhya Pradesh HC held, “settled law is that when the benefits under the Act and the EPF Scheme, 1952, are more beneficial, the provisions of the EPF Act would be applicable. Exemption u/s 16(1)(b) can apply only if the institution is covered by some scheme more beneficial than the benefits under EPF Act. EPF authority is empowered to recover damages where an employer makes default in remittances of EPF dues, not exceeding the amount of arrears”. High Court upheld the levy of damages which are 25% of arrears, Appeals are dismissed.

Madras High Court (“Madras HC”)

12. Employer is not required to discharge provident fund contributions on HRA.

A.K Ahmed & Co. V. the Employees’ Provident Fund Organisation [W.P (MD) Nos. 10027 and 11239 of 2020; W.M.P Nos 9400 & 9831 of 2020; dt. February 19, 2024]

Subject matter in the instant appeal is the order passed by the Tribunal.

Petitioner establishments are two sister concerns, challenged the orders passed by the respondent u/s 7A of the EPF Act which is confirmed by the Tribunal in appeals filed u/s 7-I.  The brief facts of the case are petitioners have been paying house rent allowance and conveyance allowance to its employees. The respondent assessed the PF contributions in respect of the HRA also and passed the orders which were confirmed by the Tribunal.

The Madras HC held, by virtue of sec 6 and sec 2(b) of the EPF Act both the allowances are excluded from the purview of sec 6, there by no obligation on the part of the establishment to remit the contribution in respect of such amounts. Madras HC further held that EPFO appears to have passed the impugned orders in a mechanical manner on the premise that EPF Act is a beneficial legislation and that should be given affect to. The matter is remanded to the respondent for fresh consideration.

Patna High Court (“Patna HC”)

13. Apart from contributing on higher wages, employees are required to exercise joint option with the employer to avail higher pension under Pension Scheme.

 Sudhir Kumar and anr. V. the Union of India and Ors. [CWP case No. 20195 of 2019; dt. December 19, 2024]

Petitioners are retired employees of Bihar State Food and Civil Supplies Corporation, invoked the Writ Jurisdiction seeking pension on higher pensionable salary in terms of decision of the Supreme Court in R. C Gupta & Ors. V. the RPFC, EPFO & Ors.[2].

Petitioners had contributed on higher wages to avail higher pension with matching contribution by the employer. Petitioners contended that at the time of superannuation the aggregate of basic salary and dearness allowance is Rs. 19,035. However, the respondent, EPFO has fixed the pension on statutory wage ceiling of Rs. 6500. Respondent EPFO contended, to get eligible to higher pension, employer and employee are required to make contributions on higher wages, in addition, it is mandatory to submit a joint option u/p 26(6) of the EPF Scheme and u/p 11(3) of the Pension Scheme, which had not complied by the employer and employee.

The EPFO further contended that the Hon’ble Supreme Court in the case of R.C. Gupta (supra), has made it very clear that exercise of option u/p 26(6) of the EPF Scheme is inevitable and necessary precursor to exercise option u/p 11(3) of the Pension Scheme, since there is no joint option exercised the petitioners cannot claim pension on higher wages.

The Patna HC, relying on decision of the Supreme Court in Employees Provident Fund Organization & Ors. Vs. Sunil Kumar B. & Ors[3] and on its own decision in Ram Nandan Prasad V. The Union of India & Ors[4], held, petitioners are entitled to get the benefit of pensionable salary restricted to the statutory limit as the employer and the employees did not submit any joint request before the competent authority to contribute on higher wages the excess contribution shall be treated as erroneous and shall be refunded to the petitioners.

Rajasthan High Court (“Rajasthan HC”)

14. Employer can claim deduction under IT Act, provided the employees’ share of PF and ESI deposited within the due date prescribed under the respective Acts.

Principal Commissioner of Income Tax Jaipur -II, Jaipur V. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. [D.B.IT appeal No. 329 of 2018; dt. September 26, 2024]

The present appeal is filed against the order passed by the Income Tax Appellate Tribunal, Jaipur bench. The respondent company, which is engaged in distribution of electricity, filed income tax return for the assessment year 2009-10 and assessment was done. One issue aroused in the assessment proceedings was “whether deduction can be allowed if employees’ share of PF and ESI is deposited after the due date stipulated under the EPF Act and ESI Act respectively”.

ITAT taken a view that employees’ contribution to provident fund and ESI is governed by the provisions of the Sec 43B of the IT Act not by sec 36(1)(va).

On appeal the Rajasthan HC, relying on the decision of the Supreme Court in Checkmate services Pvt. Ltd. V. Commissioner of Income Tax-I[5] wherein it held that share of employees’ deducted by the employer towards provident fund and ESI has to be deposited within the due dates prescribed under the respective acts not in accordance with the sec 43B of the IT Act, if it is only on the deposit in compliance with the provisions of the EPF Act and ESI Act, the retained amount is treated for deduction under IT Act.

[1] (2007) 13 SCC 270

[2] (2018) 14 SCC 809

[3] 2023 (1) PLJR 104 (SC)

[4] 2014 (3) PLJR 98

[5] (C.A No 2833 of 2016)