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Is EPF Mandatory for Delayed Payment? Refers Key Question to Larger Bench
A bench of Justices JB Pardiwala and K Vinod Chandran has cast doubt on the for delayed provident fund deposits, referring the question of discretion under to a larger bench.
In a significant development for employers and resolution applicants under the , the on , expressed doubts over its earlier ruling in Horticulture Experiment Station Gonikoppal v. (2022), which held that for delayed payment of provident fund contributions were .
The court was hearing a batch of appeals led by , arising from orders that required to pay provident fund and gratuity dues in full under the , even after a was approved.
The Core Legal Question
At the heart of the dispute was whether the authority under has the the for delayed payment. The argued, relying on the 2009 ruling in , that the was mandatory. This was applied by the in , and upheld by the .
However, the bench noted that the 1988 amendment to Section 14B, which introduced Section 7Q for , separated the from the . While interest under Section 7Q became mandatory, the word "" in Section 14B preserved the authority's discretion.
A Closer Look at the Amendment
The pre-amended Section 14B used the phrase
"
... such
, not exceeding the amount of arrear, as it may think fit to impose."
The post-amendment version reads
"
from the employer by way of
such
, not exceeding the amount of arrears, as may be specified in the Scheme."
The court, relying on
Organo Chemical Industries v. Union of India
(1979), held that the word "may" confers a
.
"The discretion is still left with the authority to decide as to whether there should be an imposition of
at all,"
the bench observed.
This directly contradicted the 2022 ruling in Horticulture Experiment Station Gonikoppal , which had held that imposition of was automatic and that no or was required. The present bench agreed that no such inquiry was needed but differed on the question of discretion.
Key Observations
In a crucial passage, the court stated:
“We are of the opinion, with abiding respect to the Co-ordinate Bench, that Section 14B even after its amendment confers a discretion on the authority to decide on whether the circumstances justify a complete .”
The court also noted that the Central Board has the power under the to reduce or waive for sick industrial companies with a rehabilitation scheme under . Since has been repealed, the board may consider similar relief for SRAs implementing a under the .
What the Court Ordered
While referring the question to a larger bench, the court clarified that the reference would not impair the SRAs' right to approach the Central Board for or . It also directed the appellants to pay the EPF dues along with Section 7Q interest in four quarterly installments starting , and ending . Any interest on deferred installments must be paid by . A single default would allow the EPFO to proceed with recovery.
The case will now be placed before the Chief Justice of India for consideration by a larger bench, leaving employers and resolution applicants watching closely for the final word on whether for delayed PF deposits can ever be waived.
