Karnataka High Court Restores EPFO Damages in PF Delay Case; Tribunal’s Rs. 25,000 Penalty Cut Set Aside

The EPFO challenged a tribunal order that reduced damages imposed on Enchanting Travels from Rs. 3.28 lakh to Rs. 25,000 for delayed provident fund contributions of two international workers. The Karnataka High Court held the reduction unjustified as per the provisions of Section 14B of the EPF Act and Paragraph 32A of the EPF Scheme, 1952, and recalculated damages at Rs. 77,633. Now, the respondent company has been directed to pay the remaining amount.

The Employees’ Provident Fund Organisation (EPFO) recently filed a writ petition in the Karnataka High Court against a company named Enchanting Travels Private Limited, challenging an order dated September 07, 2020, passed by the Central Government Industrial Tribunal-cum-Labour Court (CGIT).

The respondent is a private limited company engaged in providing travel assistance and is registered under the provisions of the Companies Act, 1956. Previously, the respondent company had lately made payments of contributions in respect of two international workers, Nina Loges and Gonser Rebecca Anne, who worked with the company between March 20, 2014, and March 31, 2016. Considering the negligence, the Assistant Provident Fund Commissioner, K.R. Puram, Bangalore, had imposed damages amounting to Rs 3.28 lakh and also arrears of Rs 2.04 lakh along with interest of Rs 1.06 lakh on the respondent vide order dated December 05, 2016, under Section 14B of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.

Being aggrieved with the decision, the respondent company challenged the aforesaid demand before the CGI tribunal. After analysing the case and examining the facts of the case, the tribunal significantly reduced the penalty amount from Rs. 328,083 to Rs. 25,000 via an order dated September 07, 2020. The Employees’ Provident Fund Organisation (EPFO), being dissatisfied with the aforesaid order, challenged the same before the Karnataka High Court, arguing that such a drastic reduction was not justified under the law.

When the court examined the provisions of Section 14B of the EPF Act and Paragraph 32A of the EPF Scheme, 1952, it observed that when PF contributions are delayed for more than six months, the penalty can increase up to 25% per year of the arrears. However, in the present case, the payment was delayed for more than two years. Therefore, the tribunal was wrong in reducing the penalty amount below the prescribed limit.

The court recalculated the penalty based on the total arrears and interest amounting to Rs. 310,534. It ruled that 25% of this amount, i.e., Rs 77,633, should be imposed as damages. Since the company had already paid Rs 25,000, the court directed it to pay the remaining Rs 52,633 within two weeks. The writ petition was disposed of with these directions.