Orissa High Court Refuses to Quash Criminal Case Against Director for Failing to Deposit Rs 15 Lakh PF Deductions
Court rules subsequent payment of EPF dues does not erase criminal liability; says offence endangered workers' right to pension and life
Quick Look
- The Orissa High Court has ruled that a company director must face criminal proceedings for failing to deposit Rs 15.14 lakh deducted from employee salaries for provident fund between 2012-2013.
- Despite the company becoming insolvent and the director later clearing all dues between July 2014-February 2015, the court held that subsequent payment cannot eliminate criminal liability for the initial default.
- The court emphasized that EPF dues must be deposited within 15 days of the succeeding month, and any delay constitutes a penal offence.
AI-generated summary
Why It Matters
This case highlights the tension between insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 and employee protection under the EPF & MP Act. The court noted that Section 17B of the EPF Act remains unaltered even after IBC 2016 enactment, as the EPF Act was not amended to align with the new insolvency code.
The Orissa High Court has ruled that a company director will face a criminal case for failing to deposit Rs 15 lakh deducted from employee salaries for provident fund, despite the company becoming insolvent and the dues later being cleared.
A company had deducted Rs 15.14 lakh from employees' salaries for their provident fund for the period March 2012 to March 2013 and from May 2013 to July 2013, but didn't deposit this money with the Employee Provident Fund Organisation (EPFO). The company later became insolvent.
The Employee Provident Fund inspector, on July 3, 2014, filed an FIR bearing P.S. Case No. 155/14 against the company's director. During the course of the police investigation, the director deposited the pending dues of the employees' PFs and thus cleared all statutory EPF dues between July 2014 and February 2015.
However, the Orissa High Court ruled that subsequent payment of employees' provident fund dues cannot eliminate criminal liability for prior default. The court refused to quash the criminal proceedings against the director of the defaulting company which is now insolvent.
The court said: "The CBT EPF dues must be deposited mandatorily within 15 days of subsequent month and any deposit made after 15th of the subsequent month is a penal offence. Therefore, even if the deposit has been made after the due date, the offence is already committed."
The director told the high court that the company is now insolvent and the case is with NCLT, Cuttack, which had passed an approved resolution plan in February 2022. Another company has taken over their company.
Opposing his contentions, EPFO argued that EPF dues must be deposited within 15 days of the succeeding month and any delay constitutes a penal offence. Further, subsequent payment does not absolve the offence once committed.
The high court agreed with EPFO and said that EPF dues need to be paid within the prescribed statutory period and any delay can attract penal consequences. The court also said EPF dues cannot be waived off by NCLT as they lack the jurisdiction to decide EPF matters.
The court emphasized: "The offence committed by the director is grave, endangering the right to pension and the right to life of the workers employed in the establishment, and there is no ground to quash the criminal proceedings against the petitioner."
The case is pending before the learned court of J.M.F.C (R), Cuttack.
Open Questions
- What specific penalties the director may face
- Whether the new company that took over has any liability
