Can proceedings for recovery of damages be initiated as per Section 14-B of the Provident Fund Act against a Company exempted under Section 17(1-A) (a) of the Provident Fund Act?

Section 14-B of the Provident Fund Act states as follows –

“Power to recover damages.- Where an employer makes default in the payment of any contribution to the Fund, the Family 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 be 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 of arrears, as may be specified in the Scheme:

Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:

Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.”

As per Section 17 (1-A) (a) of the Provident Fund Act;

“Where an exemption has been granted to an establishment under clause (a) of sub-section (1), the provisions of sections 6, 7A, 8 and 14-B shall, so far as may be, apply to the employer of the exempted establishment in addition to such other conditions as may be specified in the notification granting such exemption, and where such employer contravenes, or makes default in complying with any of the said provisions or conditions or any other provisions of this Act, he shall be punishable under Section 14 as if the said establishment had not been exempted under the said clause (a);”

In N.K. Jain V/s CK Shah, 1991, the Hon’ble Supreme Court in deciding the question whether criminal proceedings can be instituted under Section 14 of the Act in respect of an establishment which is exempted under Section 17 thereof, for contravention of the provisions of Section 6 of the Act held that the Provident Fund Act, held that, being a welfare legislation, the Act was meant to ensure the employees the continuance of the benefits of the provident fund. Hence the Act should be interpreted in such a way so that the purpose of the legislation is allowed to be achieved. Therefore proceedings for recovery of damages can be initiated as per Section 14-B of the Provident Fund Act against a Company exempted under Section 17(1-A) (a) of the Provident Fund Act.

More recently, in Regional Provident Fund Commissioner V/s Hoogly Mills Company Limited and Others, 2012, the Respondent Company, being granted exemption under the Provident Fund Act, framed a Provident Fund Scheme and set up a Trust to administer the same. However, there were defaults on the part of the Respondent Company in making timely payments of dues towards the provident fund owing to which proceedings were initiated against the Company. Thus, the question that arose before the Hon’ble Apex Court was, whether proceedings for damages can be initiated against the employer of an establishment who is an exempted under the Provident Fund Act in the event of default of payment of contribution; The Apex Court held that, Section 14-B of the Employee’s Provident Fund Act was applicable to the employers of an exempted establishment.

In reaching this conclusion, the Apex Court stressed that provisions of welfare labour laws in India like the Provident Fund Act must be construed liberally and the greater scheme of the law must be considered while interpreting sections.

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