The court held that while statutory references to obsolete industrial rehabilitation bodies must be interpreted as references to modern insolvency tribunals to uphold legislative intent, the authority's power to waive statutory damages remains conditional upon the existence of a formally sanctioned resolution or repayment plan.

Headnote:(A) Provident Fund legislation - Power to recover damages - Insolvency and bankruptcy framework - Statutory interpretation - Purposive approach.

(B) Statutory Interpretation - Provisions referencing defunct industrial rehabilitation bodies must be read as equivalent to modern insolvency tribunals to ensure legislative efficacy and continued operation of the statute. (Paras 5.2, 6.2).

(C) Damages Waiver - Discretionary power to waive statutory damages is contingent upon the existence of a sanctioned resolution or repayment plan as recognized by the relevant insolvency adjudication process. (Paras 6, 6.1).

Facts of the case:
The liquidator of a company under insolvency proceedings sought a waiver of damages levied by the provident fund authorities. Previous judicial guidance had directed the authority to reconsider the waiver request in light of contemporary insolvency legislation. The authority denied the request, citing that the relevant statutory provisions had not been explicitly amended to replace the references to the defunct industrial body with the current insolvency framework.

Findings of Court:
The court determined that the legislative intent requires a purposive interpretation, equating defunct industrial rehabilitation boards with active insolvency tribunals. However, the court established that even under this interpretation, the waiver power remains strictly limited to scenarios where a resolution or repayment plan has been formally sanctioned by the adjudication authority.

Issues: The primary questions were whether the authority's interpretation of the statute was sustainable and what, if any, specific relief could be granted for the waiver of damages in the absence of a sanctioned resolution plan.

Ratio Decidendi: Legislative provisions must be interpreted to enable their functioning; references to dissolved bodies in older statutes are, by implication of subsequent bankruptcy legislation, to be read as references to the current insolvency adjudicators. However, the authority to waive damages is substantively restricted to cases where an approved resolution or repayment plan exists.

Result: The petition was disposed of, with the court clarifying the legal position but finding no grounds to grant the substantive relief claimed.

ORDER

A. The Prayer:

The writ petition is filed by the liquidator of a company under liquidation, namely Flora Footwear Pvt. Limited. The writ petition contests the order of the Central Provident Fund Commissioner, Employees Provident Fund Organisation, New Delhi, dated 30.05.2025.

B. The Brief Facts:

2. The brief facts leading to the filing of the writ petition are that the company mentioned above, namely Flora Footwear Pvt. Limited was found liable for the contribution payable under the Act, and an order was passed under Section 14(A) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for brevity, 'EPF & MP Act, 1952'). Additionally, damages amounting to Rs.88,87,860/- had already been levied against the said company under Section 14(B) of the EPF & MP Act, 1952. While so, at the request of the company's operational creditors, insolvency proceedings were initiated under the Insolvency and Bankruptcy Code, 2016 (for brevity, 'IBC, 2016'), and no revival or resolution plan was worked out. By an order dated 03.09.2019, the petitioner was appointed as a liquidator, replacing the interim resolution professional, and orders were passed under Section 33(1) of IBC, 2016, directing the liquidation of the company in accordance with Chapter III, Part 2 of the IBC, 2016. Under these circumstances, the official liquidator initially submitted a representation on 20.04.2021 seeking a waiver of the damages. It is also stated that the original amount due, including interest, has already been paid to the Provident Fund Organisation. The request was rejected by the Provident Fund Organisation, leading to the filing of W.P. No.18328 of 2022 by the petitioner.

2.1 After examining the issue and the proviso to Section 14(B) of the EPF & MP Act, 1952, the writ petition was allowed with a direction to reconsider the waiver proposal afresh. The Court's findings are contained in paragraphs Nos. 5 and 5.1, with the operative portion in paragraph No. 6, which is extracted hereunder for ready reference.

“5. Section 14(B) of the Employees' Provident Fund and Miscellaneous Provisions Act reads as below:

14B. Power to recover damages - Where an employer makes default in the payment of any contribution to the Fund [,the [Pension] Fund or the Insurance Fund] or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 4[or sub-section (5) of section 17] or in the payment of any charges payable under any other provision of this Act or of 5[any Scheme or Insurance Scheme] or under any of the conditions specified under section 17, 6[the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf] may recover 7[from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme:] 8[Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:] 9[Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.] This clearly shows that the portion of this Section of the EPF & MP Act has not been updated yet. The Preamble of the I&B Code, 2016 reads as follows:

"An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including a

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