Legal Articles

43,000 Crore Lies in Inoperative EPF Accounts

Union Labour Minister Bandaru Dattatreya made startling revelation in the Parliament that a whopping amount of ` 43,000 crore is lying inoperative in the PF accounts. The government has although been adopting a slew of measures to identify the beneficiaries of the Provident Fund yet till it is done; why the money is recovered, at all, from the employers? In catena of decisions the Supreme Court and various High Courts have observed that before determination and recovery of the Provident Fund amount from the employers, the workers must be identified, who are the real beneficiaries.

About ` 43,000 crore is lying in inoperative Employees’ Provident Fund accounts and interest would be credited to such accounts, government said on
20-6-2016.  As early as in 1989 the Supreme Court in its judgment The Food Corporation of India v. Provident Fund Commissioner & Others, 1990 LLR 64 has categorically observed that the Provident Fund Authorities (the Regional Provident Fund Commissioner and Assistant Provident Fund Commissioner) vested with the powers of the Civil Court must identify the workmen for whom the amount is determined and recovered from the employers.  It is pertinent to refer to the relevant part for ready reference :-

“8. It will be seen from the above provisions that the Commissioner is authorised to enforce attendance in person and also to examine any person on oath.  He has the power requiring the discovery and production of documents.  This power was given to the Commissioner to decide not abstract questions of law, but only to determine actual concrete differences in payment of contribution and other dues by identifying the workmen.”

Despite the above, the Provident Fund Authorities recklessly went on determining and recovering provident fund contributions without identifying the beneficiaries.  The Supreme Court again reminded in the judgment of Himachal Pradesh State Forest Corporation v. Regional Provident Fund Commissioner, 2008 LLR 980 (SC) holding that the amounts due from the Corporation will be determined only with respect to those employees who are identifiable and whose entitlement can be proved on the evidence.  It would be re-collected that Employees’ Provident Funds Appellate Tribunal, in its order of May 5, 2014, has quashed the recovery of ` 592.76 crores against B.L. Kashyap & Sons stating, “More importantly, the assessment of dues is made on the basis of the figures given in the balance sheet without identification of the beneficiaries.”

In Sandeep Dwellers Pvt. Ltd. v. Union of India, (2007-I LLJ), the Bombay High Court has held that the contractor and sub-contractor are necessary parties for identification of beneficiaries and the determination of dues under section 7A of the Provident Fund Act. The Hon’ble High Court concluded:

”Identification of employee is, therefore, held to be must before effecting such recovery. It is the part of wages earned by such employees, which is being deducted by the PF Department and ultimately it is to be returned back to him. If his/her identity is not known, the amount cannot definitely be returned to him/her and as such there is no point in effecting deduction from employer on account of such unknown workers.”

In Raj Kumar Gupta v. Asstt. Provident Fund Commissioner, Muzaffarpur&Anr., 2013 LLR 1253 (Pat. HC) the EPF Authority determined the amount towards  EPF contributions without identifying the beneficiaries by not complying with the provisions of the Act.   No collection can be made by the P.F. Authorities for faceless, nameless or non-identifiable workmen on mere head-count or herd count.  Collection of EPF dues without identifying the beneficiaries is per se illegal, clear breach of legislative intent and object.

It becomes more necessarily relevant in view of the recent order of the Supreme Court dated 2-5-2016 in Builders Association of India v. Union of India, inter alia holding that “Therefore, it is made clear that during the process of enquiry conducted by the respondent (EPFO), the steps will also be taken to identify the workmen either of the petitioner or engaged through contractors.”

In the present era of digitalization, it is not difficult to identify the beneficiaries because they are now linked with the unique identity numbers i.e. Aadhar Card but it is certainly a Herculean task to identity those workers who have either not left their addresses with the organisations they worked for or where have they gone. It is also not certain whether they are dead, alive or displaced. However, with the help of erstwhile colleagues and their family members the identification of such employees can certainly be made easier. The PF authorities must not leave any stone unturned to identify the beneficiaries otherwise the intended objective would not be achieved. So much so, in Regional Provident Fund Commissioner v. Faridabad Thermal Power Station & Anr., 2015 LLR 269 (P&H HC) the facts were that the employer was engaging employees through contractors. While deciding proceedings under section 7A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the EPF Authority did not summon the contractors despite direction of the EPF Appellate Authority to pass a reasoned order in compliance with the provisions of law and to identify the beneficiaries. The Appellate Tribunal set aside the order. EPF Authority challenged the order of the Tribunal as well as that of the EPF Authority in writ petition. It has been held that in absence of identification of concerned employees, the impugned order being without probative evidence is set aside. The petitioner-EPF Authority is directed to pass a fresh order in accordance with law including calling of contractors, identification of beneficiaries by the modes prescribed under the law, taking help of the police authorities to secure them the monetary benefits due to them from their contractors while conducting proceedings under section 7A of the Act. Passing any such order without identification of beneficiaries would construe that the same has been passed without application of mind and not sustainable.

In view of the above, there is a need for the massive identification exercise to be done by the EPFO so that unclaimed money must reach the concerned persons. The accumulated unclaimed money is mainly through deposits, and recoveries from the employees and the employers for the unidentified employees. Former Central Provident Fund Commissioner Mr. R.C. Mishra was conscious of this aspect and in his administrative wisdom, he had issued Guidelines on 30th November 2012 for quasi judicial proceedings under section 7A of the Employees’ Provident Funds & Miscellaneous Provisions Act laying down as under:

“There should be no assessment without identifying individual members in whose account the fund is to be credited.”

The concerned Central Provident Fund Commissioner (who incidentally retired on the same date of issuing the guidelines) has done enough spadework of information to all concerned by holding seminars in the Chambers of Commerce and

Industry besides interacting with employers, employees and trade unions. He has also provided the Guidelines by saying: “It has been observed that open ended assessment enquiries and investigation serve no real purpose. Moreover, such enquiries often do not result in identification of beneficiaries and only tend to harass the employers and establishments. It is accordingly directed that no enquiry or investigation shall ordinarily go beyond seven years, i.e., it shall cover the period of default not exceeding preceding seven financial years. It is to be ensured that compliance actions are initiated in time and there is normally no reason for extending the scope of investigation and assessment enquiry beyond previous seven financial years.”
The above Guideline has had the positive effect because it was necessary to curtail the harassment of employers since there is no prescribed maximum period for which that determination of money is made by the Provident Fund Authorities. These recoveries for old period without any prescribed period of limitation and without identification of beneficiaries filled the coffers of EPFO hence the unclaimed money has swallowed. The EPF Authorities harass the employers to produce the records/account books for any number of years. However, the above Guidelines have been kept in abeyance, as perhaps it did not suit the authorities who take perverted pleasure in harassing the employers. It is, therefore, high time that the above two Guidelines as issued by former Provident Fund Commissioner Mr. R.C. Mishra be revived i.e. employees (beneficiaries must be identified). The time limitation for production of records and registers for determination of money, etc. should be restricted to three years. Thereafter, this unclaimed money could be lapsed and released for the better use of the working class and the industrial development of the country.

As and when constructive steps are to be taken, the EPFO has proved to be lethargic. Nevertheless, since the communication systems and digital technology have made dramatic changes in the world we live, a revolution is occurring in the way people and the authorities including EPFO transact their business and carry on functions. They are increasingly using computers to create, transmit and store information in the electronic form instead of traditional paper documents. Information stored in electronic form has many advantages including time saving and as such even the senior officials can take care for releasing the unclaimed money to the beneficiaries or their legal heirs. With 53 Regional Provident Fund Commissioners, and 493 Asstt. Provident Fund Commissioners in addition to thousands of Enforcement Officers and other staff, the Provident Fund Authorities should intimate the depositor as well as their nominees and next of kin, who would not even make a phone call, send an e-mail or drop an intimation letter to collect their dues if not claimed. Remedial steps be also taken that if the claimants go to claim their own money, the concerned officials should not treat them with suspicion at every step, going as far as doubting the genuine documents presented personally, be it passport, PAN card, driving license or even the new Aadhar Card. Many a time, the genuine claimant is asked to get the affidavit re-verified by an elected representative. Everybody knows as to what this means. No wonder, people of current generation, who are given to hopping jobs, think EPF contribution is more as a tax rather than a saving instrument.

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