Facts of the Case

M/s Pine Tree Hospitality, a proprietorship firm engaged in the hospitality sector, filed an appeal against the order dated 28.02.2024 issued by the Assistant Provident Fund Commissioner (APFC), Gurugram West. The impugned order directed the establishment to deposit damages amounting to ₹10,01,567 under Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions (EPF & MP) Act, 1952 for delayed payment of provident fund contributions from 05.10.2011 to 26.09.2023. An additional interest of ₹5,54,379 was levied under Section 7Q for the same period.

The appellant contended that the firm faced substantial financial difficulties, particularly during the COVID-19 pandemic, which severely impacted operations between 2020 and 2023. These financial constraints led to the inability to deposit PF contributions on time. It was argued that the delay was unintentional, and the appellant had submitted explanations and documents to the EPFO. However, the authorities allegedly passed orders without granting a proper hearing or verifying submitted challans.

Additionally, the appellant challenged the delay in initiating proceedings asserting that they were commenced after more than thirteen years in violation of the EPFO’s own circular dated 20.08.1990, which prescribes finalising such proceedings within three years. They further claimed the orders were non-speaking, arbitrary, and failed to account for mitigating factors. Several Supreme Court judgments were cited to support their claim that mens rea must be shown for the imposition of damages.

Legal Justification Given by the Tribunal

The Tribunal acknowledged both the arguments raised by the appellant and the contentions of the respondent (EPFO). It was reiterated by the EPFO that the EPF Act is a welfare legislation mandating timely deposit of contributions, and non-compliance attracts penalties regardless of financial hardship. The EPFO emphasized that the appellant had defaulted on 144 occasions, with delays ranging from 6 days to over 1400 days, showing repeated and significant lapses.

The Tribunal noted that although the EPF Act does not prescribe a limitation period, the internal circular dated 20.08.1990 issued by the EPFO has legal sanctity, being framed under Section 20 of the Act. It mandates finalisation of damages proceedings within a reasonable period. The Tribunal found the delay of thirteen years by the EPFO in initiating action to be unreasonable and without justification. Accordingly, the Tribunal set aside the demand for damages and interest for the period from 05.10.2011 to 29.08.2020.

While the appellant claimed financial hardship, the Tribunal held that the mere production of a balance sheet for FY 2021–22 was insufficient to establish genuine constraints. The extensive and repetitive nature of the delays (even from September 2020 to March 2023, ranging from 153 to 954 days) negated the argument of occasional or excusable delay. Therefore, the Tribunal upheld the demand for the period from 09/2020 to 03/2023, directing the appellant to deposit the damages and interest under Section 7Q.