Delay in commencing proceedings under Section 14B of the Provident Fund Act – does it waive the responsibility of a Company from making contributions?

As per Section 14B of the Provident Fund Act;

“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 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17 the Central Provident Fund Commissioner or such other officer as may authorised by the Central Government by notification in the Official Gazette in this behalf may recover from the employer by way of penalty such damages not exceeding the amount or arrears as may be specified in the Scheme….; “

In M/s. K. Streetlite Electric Corporation V/s Regional Provident Fund Commissioner, Haryana, 2001, the Regional Provident Fund Commissioner, Haryana had imposed damages to the tune of almost Rs 90 lakhs on account of belated deposit of the amount towards the provident fund of the Company. However, the Regional Provident Fund Commissioner initiated the proceedings about 10 years after the default was stated to have been committed. The Company raised the defence that since the proceedings were initiated by the Commissioner after a considerable delay they were waived from the responsibility of paying the contributions.

The Hon’ble Supreme Court, referring to the law laid down in Hindustan Times Ltd V/s Union of India & Ors, 1998 opined that, the mere fact that the proceedings were initiated or demand for damages was made after several years cannot, by itself, be a ground for drawing an inference of waiver of the employer’s responsibilities. Therefore, a mere delay of a few years by the Commissioner to initiate proceedings under section 14B of the Provident Fund Act was not by itself a ground for waiving the damages with respect to the Company.

However, the Hon’ble Court further stated that, the Company could claim prejudice if there was proof that, between the period of default and the date of initiation of action under Section 14-B, the Company had altered its position to its detriment to such an extent that if the recovery was made after a large number of years, the prejudice to the Company would be irretrievable. Such prejudice could also be established by stating that records/documents which could establish that there was some basis for the delay in making the payments were not available. Since no such prejudice was either pleaded or proved, the Court held that the Commissioner’s delay in commencing proceedings was by itself no reason to waive the Company’s liability.

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