Article (March-2018)


Abuse of powers by EPFO on rise PF Authorities cannot make recovery during appeal period

H.L. Kumar

Designation : -   Advocate, Supreme Court

Organization : -  New Delhi


Here is the latest judgment of the High Court of Karnataka in Writ Petition No.1082 of 2018 (L-PF) wherein the Court has chastised the Provident Fund Authorities for showing their contempt for the mandatory provisions of the Employees' Provident Funds & MP Act. This case is illustrative of the mindless use of the power by the Employees' Provident Fund Authorities. The matrix of the case, in brief, is : G4SSecure Solutions India Private Limited, incorporated under the Indian Companies Act, provides security services by employing guards. The company remits Provident Fund contribution on their wages consisting of basic wages and some other allowances. Besides, the company has also been paying 'site allowance' to employees for certain specific locations, which entailed certain difficulties and dangers for them. The issue involved in the case is whether 'site allowance' is to be included as the basic wages or not? The Company's claim is that "site allowance" is purely a temporary allowance paid only to some employees. The same can be changed or withdrawn, when the employee is deputed to another site. Therefore, the site allowance does not fall under fall under the definition of 'basic wages' as defined by section 2(b) of the Employees' Provident Funds & MP Act, 1952.
On 12.01.2017, the Regional Provident Commissioner of Bangalore issued the notice to the company alleging 'subterfuge of wages'. The company appeared before the PF Authority, which got the establishment enquired and thereafter ordered the company on 15.12.2017 for depositing Rs.16,31,58,755. Thus far there is hardly any dispute. The arbitrariness and the glaring illegality of the Provident Fund Authorities began hereafter. They started behaving in a manner as if they are not bound by any law. The Employees' Provident Funds & MP Act provides sixty days' time for appeal before EPF Appellate Tribunal against such orders. Rule 7(2) of the Employees' Provident Funds Appellate Tribunal (Procedure) Rules, 1997 categorically provides as under:
7(2) Any person aggrieved by a notification issued by the Central Government or an order passed by the Central Government or any other authority under the Act, may within 60 days from the date of issue of the notification/order prefer an appeal to the Tribunal:
Provided that the Tribunal may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the prescribed period, extend the said period by a further period of 60 days.
But without waiting for the time to appeal to lapse, the Regional Provident Fund Commissioner directed for the attachment of the entire amount from the company's banker, HSBC Bank. Such officers must be aware about the above provisions. But not the concerned APFC Bangalore but invariably all such officers in their orders direct the employers in the same order of determination of money to make compliance by making payment within 15 days. The paragraph with stock language is inserted such orders.
The establishment is, therefore, directed to deposit the above assessed amount within 15 days, and submit challan along with relevant returns to this office, failing which action u/s 8B to 8G of the Act shall be initiated against the establishment. This will be without prejudice to any other action that may be initiated under the provisions of law for which the establishment has rendered itself liable.
It is a fundamental right of every citizen to have access to the justice but that apart section 7A of the Employees' Provident Fund Act bestows the right to file an appeal before the EPF Appellate Tribunal by the aggrieved party, within a period of sixty days from passing of the impugned order. The right to have access to justice is right to life and livelihood. The said right is not only a fundamental right, but is also a statutory right, as the Act does contain sufficient provision for filing an appeal under section 7-I of the Act. Therefore, neither the statutory right, nor the fundamental right. The Regional Provident Fund Commissioner cannot scuttle and violate this right by passing an obviously illegal, unjustified and patently wrong order and direction for making payment before the prescribed period of limitation for filing of appeal. This will amount to a flagrant violation of the law and that is what the Regional Provident Fund Commissioner has done in this case. It clearly shows that he has prevented the company to exercise its fundamental and legal right to approach the appropriate Appellate Authority.
Be that as it may, the million-dollar question remains as to why PF Authorities often work and behave in a manner, which is morally reprehensible, legally contemptible and administratively deplorable. The best course to bring such aberrant authorities on the track is to hold them individually irresponsible for such waywardness as it is provided in the Right to Information Act when the concerned authority is penalized for withholding the information from its seekers. Powers are to be judiciously used but the Provident authorities appear to relish the arbitrary use of powers. They are vested with powers of the Civil Court while determining the amount payable by the employer including levying of damages and interest for delayed payment or non-payment of contributions.
Insertion of 7D in the Act
In fact, the Government had inserted section 7D in the Employees' Provident Fund and MP Act, w.e.f. 1.7.1997 to set up one or more single - member tribunals, for hearing of appeals filed against the order of provident fund authorities in the matter of applicability of the provisions of Act. As a result, thereto, an EPF Appellate Tribunal was constituted for the whole of India. In order to facilitate the difficulties of the far-off establishments, another tribunal was constituted in Bengaluru in 2016 for the establishments located in South India with a motive for redressal of grievances at the doorstep and to the advantage to lawyers also, by a notification dated 23.07.2017 territorial jurisdiction has been fixed for 22 Industrial Tribunals (CGIT) in different States for quick disposal of appeals since they have also vested with the powers of EPF Appellate Tribunals. It will be relevant to state that the aggrieved establishments could file an appeal within 60 days of the impugned order by the RPFCs or APFCs whereas the tribunal could also condone the delay of 60 days for the filing of the appeal.
There has been hardly any order by such an authority wherein direction has not been given to the aggrieved employer to deposit the money within 15 days failing which recovery would be made as per sections 8B to 8G of the Act deliberately overlooking the provisions for filing of appeal before the Appellate Tribunal. The bank accounts of the employers were frequently frozen resulting in financial hardships and harassment. Representations are made by the Labour Law Reporter and by Association of Industries and Institutions (Regd.), New Delhi to the Government and the Chief Provident Fund Commissioner. The whole purpose of constituting Appellate Tribunals from one to twenty-two was frustrating and the recoveries were made. Every employer could not dare or bear the financial burden to approach the High Courts. In the above-noted writ petition, the audacity and the perversity of the Employees Provident Fund authorities particularly the Recovery Department Organisation of the Regional Office, who notwithstanding an order of stay of the operation of the impugned order 15.12.2017 has encashed the amount of Rs. 16,31,58,755/-.
In order to fix the responsibility, the government as well as the Chief Provident Fund Commissioner must conduct a random survey to find out the factual position with regard to the misuse of power by the Provident Fund Authorities. It is a well - settled principle that for the sake of promoting any employee or officer the quality, the speed, accuracy and the intent are to be taken into consideration. Strangely, the Provident Fund Authorities, who often assume the role of a judge and also of the executioner, become so unscrupulous that they forget their basic responsibility of serving the people with sincerity, devotion and impeccability. Hence, stringent and severe punishment is, undoubtedly, called for to mend them.
The above judgment would, hopefully, go a long way by providing relief to the aggrieved appellants since they can now comfortably challenge the orders of the EPF Appellate Tribunals in the Higher Courts.