No Penal Damages for Delay in Payment of PF Contribution During Lockdown

The Employees Provident Fund Organization (E.P.F.O.) issued a Letter inter alia onto all Central Provident Fund Commissioners (C.P.F.C.) and Regional Provident Fund Commissioners (R.P.F.C.) on 15th of May 2020. As per the contents of the said Letter, any delay in the payment of Provident Fund Contributions or related administrative charges, during the prevailing lock-down, shall not attract any proceedings for levy of penal damages.

Vide the said Letter, EPFO has more importantly discussed about the pre-requisite for any proceedings to be initiated u/s 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 which deals with the powers of the CPFC and RPFC to initiate proceedings in case of default by an employer to make contributions towards Provident Fund. In this regard, the said Letter reiterates the ratio of the Hon’ble Supreme Court in the matter of Mcleod Russel India Ltd. vs RPFC 2014 (15) SCC 263, that the provision u/s 14 B shall get attracted only when there is positive evidence of mens rea on the part of the employer, while committing default in timely remittance. Therefore mens rea or a culpable mind of the employer is a sine-qua-non for inviting proceedings u/s 14B of the Act.

In view of the said Judgement and its underlying principle, the EPFO observed that both COVID-19 pandemic and the lock-down implemented to combat its effect, have caused unprecedented disruption across establishments covered under the provisions of the EPF Act. This has in turn prevented many such establishments to make payment of contribution and additional charges in time. However considering the unprecedented crisis that our economy is combating and the detrimental condition of establishments, default in making payment of contribution and additional charges is bereft mens rea. Therefore the EPFO has instructed all CPFC’s and RPFC’s, not to initiate proceedings u/s 14B of the said Act, against establishments in case of delay in making payment of contribution and additional charges for any period while the lockdown is in force.

This measure by the EPFO has been welcomed by establishments across the entire country and has been seen as a relief during this time of severe financial crisis.


Amrit Tarafdar |Abhay Nevagi & Associates, Advocate