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2026 Supreme(Online)(Mad) 26567
IN THE HIGH COURT OF JUDICATURE AT MADRAS
HEMANT CHANDANGOUDAR, J
M/s Kodaikanal International School – Appellant
Versus
The Regional Provident Fund Commissioner – Respondent
WMP(MD)Nos.478 & 479 of 2026
For the Appellants/Petitioners: Mr.G.Kalyan Chand Jhabakh
For the Respondents: Mr.Robert Chandra Kumar
Section 7Q mandates 12% interest on delayed PF payments without discretion; enhancement requires prior notice.
Headnote:The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, particularly Sections 17(1)(a), 17(5), 7Q, and Paragraph 28 of the EPF Scheme, 1952, govern exemption surrender and transfer of provident fund accumulations. An educational institution surrendered its exemption effective 01.06.2003 and was required to transfer accumulations within 10 days for cash and 30 days for securities but delayed due to asset liquidation. The court found the 12% interest under Section 7Q mandatory, rejecting claims of excessiveness, but held enhancement of interest amount without notice impermissible. Key issues included whether 12% interest under Section 7Q is discretionary and applicability of precedents on damages under Section 14B. The ratio decidendi affirms Section 7Q mandates simple interest at 12% per annum without discretion, distinguishing it from discretionary damages; prior notice required for any enhancement in demand. The writ petition is partly allowed; impugned order modified to direct payment of Rs. 49,77,828/- within one month, with 6% interest on default and credit for Rs. 56,829/- recovered.
| Table of Content |
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| 1. exemption surrender requires timely pf accumulations transfer. (Para 2 , 3 , 7) |
| 2. parties dispute interest rate excessiveness and compliance. (Para 4 , 5) |
| 3. section 7q mandates 12% interest without discretion. (Para 9 , 10 , 11) |
| 4. interest enhancement impermissible without prior notice. (Para 12 , 13) |
| 5. order modified; reduced payment with conditional interest. (Para 14) |
ORDER
The petitioner challenges the order dated 20.12.2024 passed by the respondent under Section 17B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, whereby the petitioner has been called upon to pay a sum of Rs. 52,53,047/- towards belated remittance of provident fund accumulations.
2. The petitioner, an educational institution, was granted exemption under Section 17(1)(a) of the Act with effect from 01.08.1982. Subsequently, the petitioner, on its own volition, surrendered the exemption with effect from 01.06.2003, and was permitted to comply as an unexempted establishment by order dated
25.05.2023.
3. As per the said order, the petitioner was required to transfer the provident fund accumulations of its members within the stipulated time, namely, ten (10) days in the case of liquid cash and thirty (30) days in the case of securities. However, the petitioner belatedly transferred the amounts after liquidating its assets, which led to the initiation of proceedings under Section 17B of the Act. After affording an opportunity of hearing, the respondent passed the impugned order.
4. Learned counsel for the petitioner contended that the levy of interest at the rate of 12% per annum is excessive and arbitrary, particularly since the delay was not wilful but occasioned due to the time taken to liquidate assets. In support of this contention, reliance was placed on Central Board of Trustees vs. Bake ‘N’ Joy Hot Bakery (2024 SCC OnLine Ker 11) and Employees’ State Insurance Corporation vs. HMT Ltd. [(2008) 3 SCC 35].
5. Per contra, learned counsel for the respondent submitted that, in terms of the order dated 25.05.2023, the petitioner was bound to transfer the provident fund accumulations within the prescribed time. Since the petitioner failed to comply with the same, the respondent has rightly exercised powers under the Act and passed the impugned order.
6. This Court has considered the submissions made on either side and perused the materials on record.
7. By order dated 25.05.2023, the petitioner was permitted to surrender the exemption and function as an unexempted establishment. In terms of Section 17(5) of the Act read with Paragraph 28 of the EPF Scheme, 1952, the petitioner was required to transfer the provident fund accumulations within ten (10) days in the case of liquid cash and thirty (30) days in the case of securities. 8. Admittedly, the petitioner failed to transfer the provident fund accumulations within the stipulated time. Consequently, proceedings were initiated under the Act.
9. Section 7Q of the Act mandates that the employer shall be liable to pay simple interest at the rate of 12% per annum, or such higher rate as may be specified, on any delayed payment from the date on which the amount becomes due till the date of actual payment.
10. A plain reading of Section 7Q makes it clear that the levy of interest at 12% per annum is mandatory and does not confer any discretion on the authority to reduce the rate. Therefore, the contention of the petitioner that the interest is excessive or arbitrary cannot be accepted.
11. The decisions relied upon by the petitioner relate to the levy of damages under Section 14B of the Act, where discretion is vested with the authority. However, such discretion is not available under Section 7Q, which deals with statutory interest. Hence, the said decisions are not applicable to the present case.
12. However, it is seen that a notice dated 02.11.2023 was issued by the respondent calling upon the petitioner to pay a sum of Rs. 49,77,828/- towards interest. The impugned order, however,
