Article (July-2016)


Misuse of powers by EPF Authorities

H.L. Kumar

Designation : -   Advocate, Supreme Court

Organization : -  New Delhi


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Officials of the Employees' Provident Fund Organisation behave in their conduct as if they are above the statutory provisions. Inebriated with power, they often transgress the limits of their jurisdictions. Bengaluru based renowned lawyer B.C. Prabhakar, who is also the President of Karnataka Employers' Association has found it to his dismay that PF Authorities recklessly misuse the provisions, which go against the grains of the statute. 

Provident Fund Authorities under section-7A of the Act have been vested with the powers of the Civil Court with regard to (a) decide such disputes that arise regarding the applicability of the Act to an establishment and (b) determine the amount due from an employer under any provisions of the Act and for conducting such enquiries as they may deem necessary. The Employees' Provident Fund Commissioner have also been vested with power under the Code of Civil Procedure for trying a suit for (a) enforcing the attendance and examining the person on oath, (b) requiring the discovery and production of documents, (c) receiving evidence of affidavit and (d) issuing commissions for the examination of witness.

The Provident Fund Commissioners, however, have not been given the powers to decide the abstract questions of law but only to determine the actual concrete differences in payment of contribution and other dues by identifying the coverable employees. Way back in 2005, the Andhra Pradesh High Court had cautioned in the case of Vignan Education Development Society, Ongole vs. Assistant Provident Fund Commissioner Authority, Guntur, 2005 LLR 451 (AP HC) that issuance of arrest warrant of the employer for failure to furnish information for determination of provident fund contribution will be gross misuse of power.

Provident Funds Act contains a provision for appeal before the Employees' Provident Fund Appellate Tribunal (EPF Appellate Tribunal for short) so that the parties as aggrieved by the orders of the Regional Provident Fund Commissioner (RPFC) or Assistant Provident Fund Commissioner (APFC) could file appeals against their orders under section 7A of the Provident Fund Act.  Rule 7 of the Employees' Provident Funds Appellate Tribunal (Procedure) Rules, 1997 provides that any person so aggrieved can file an appeal against the order passed by RPFC / APFC within 60 days from the date of issue of the order which period can, however, be extended by another 60 days if the appellant was prevented by sufficient cause from preferring appeal. However, the concerned officials under the Provident Fund Act vested with vast powers including that of quasi-judicial powers do not care to look into the provisions of the Act and the Scheme since there is hardly any order under section 7A of the Act whereby the following language is missed.

    "The employer in respect of the establishment is directed to deposit the above said assessed PF dues in respective accounts of EPFO within 15 days of receipt of this order and the receipted copy of challans be produced in support thereof failing which the same will be recovered in the manner prescribed under section 8B to 8G of the Act." 

    (The above sentence is invariably downloaded from the computer in every order without considering its disastrous consequences and harassment to the employers)

As a practitioner of labour and employment laws, this writer gets the opportunity to see hundreds of such orders wherein above sentence is not inserted and the employers have complained that the recovery of the amount so determined under section 7A of the Provident Fund Act has been initiated and made by the authorities under the Act within 60 days without considering that an appeal can be filed by the aggrieved employer before the EPF Appellate Tribunal.  This clearly shows that the authorities are ignorant of law which they have to follow and implement the provisions of the Provident Fund Act and the Scheme. Reference is made to various judgments of the High Courts wherein it has been categorically held that no recovery can be made pursuant to an order under section 7A of the Provident Fund Act within 60 days which is the time prescribed for filing of appeal before the EPF Appellate Tribunal.

In TI Metal Forming, Chennai vs. The Regional Provident Fund Commissioner-II, Chennai and Another, 2013 LLR 1251 (Mad. HC) and in Popular Industries (Pynadath Crusher) vs. Assistant Provident Fund Commissioner & Recovery Officer, 2015 LLR (SN) 108: 2014 (4) KLT 538 (Ker. HC) it has been held that: - 

(a) An aggrieved party is having a right to file appeal against order of the EPF Authority as per section 7(1) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 within 60 days.

(b) Right of statutory appeal cannot be curtailed by initiating attachment proceedings before expiry of 60 days by EPF Authority under the Act.

(c) Order passed by EPF Authority determining the amounts of contributions due from employer would become effective only on expiry of 60 days as provided under section 7(1) of the Act.

(d) Issuance of attachment order by the EPF Authority prior to expiry of prescribed limitation of 60 days, from the date of order determining the amount of contributions, is liable to be quashed being violative of section 7(1) of the Act.

In Regional P.F. Commissioner, E.P.F. Organisation vs. Melagaon Sah. Sakhar Karkhana Ltd., 2014 (143) FLR 1066 the Bombay High Court has held that once the Commissioner was exercising quasi-judicial functions while passing the order which has been set aside by the Appellate Authority, it would not be permissible for the Commissioner to challenge the order of the Appellate Authority.

(The above judgments (only a few as cited) bear the testimony that the employers have to approach the High Court for redressal of their grievances whereby the authorities under the EPF&MP Act have not adhered to the statutory provisions).

The prescribed provisions of the Provident Fund Act, the Employees' Provident Funds Appellate Tribunal (Procedure) Rules, 1997 and the judgments of the High Courts as stated above are either intentionally overlooked or that the authorities are ignorant since they lack competence in this context.

Well known legal practitioner B.C. Prabhakar has relied upon an order dated 25.5.2016 of the EPF Appellate Tribunal in Daman Ganga Papers Pvt. Ltd. vs. APFC, ATA No.603(5)/2016  and he has said that 'the Association has come across several instances where the Provident Fund Officials had initiated recovery proceedings against the 'establishment' without adhering to the statutory provisions as stipulated under EPF Act and Scheme. An instance was brought before the EPF Appellate Tribunal wherein the Asst. Provident Fund Commissioner, Vapi (Gujarat) had recovered the amount of provident fund dues without complying the mandatory provision of section 8-B of the EPF&MP Act.  The Tribunal has taken serious view of such non-compliance and further ordered appearance of the concerned APFC in person before the Tribunal along with the written explanation as to why he is not adhering to the provisions of law and why departmental proceedings should not be recommended against him? Such aberrations are not few and far between but this has become the general tendency among the Provident Fund Authorities to discard the expected norms.

The employers have mostly been suffering in isolation and silence by the exercise of arbitrary and self-assumed powers of the authorities which needs to be curbed. The authorities will have to be reminded from time to time about the provisions of section 166 of Indian Penal Code providing that 'Public servant disobeying law, with intent to causing injury to any person. - whoever, being a public servant, knowingly disobeys the directions of the law as to the way in which he is to conduct himself as such public servant, intending to cause, or knowing it to be likely that he will, by such disobedience, cause injury to any person, shall be punished with imprisonment for a term which may extend to one year, or with fine, or with both. The provision for penalty is certainly a deterrent for the law abiding persons but it cannot be allowed to be arbitrarily used. After all, even the discretionary power is to be used with circumspection and prudence. Arbitrariness of any type is to be eschewed to inject the faith in the system. Strangely, those who are assigned the task of instilling faith in the law, they themselves become the gross violators of the Act.