What is the provision for recovery of interest and damages under EPF Act? Is there any provision under EPF Act or Rules to allow recovery of interest and damages for 3 years together or year on year basis only?
The payment by the employer of such sums of money as may be necessary to meet the cost of administering the Fund and the rate at which and the manner in which the payment shall be made. The Constitution of any committee for assisting any Board of Trustees. The opening of regional and other offices of any Board and Trustees. The manner in which accounts shall be kept, the investment of moneys belonging to the Fund in accordance with any directions issued or conditions specified by the Central Government, the preparation of the budget, the audit of accounts and the submission of reports to the Central Government or to any specified State Government.
Introduction: Section 40(1) of the Act read with Section 43 of the Act mandates the employers to make the payment of the contributions due and submit the related returns within the clear time-limits prescribed under the Act and the relevant Regulations. These deadlines are inviolable and are to be strictly adhered to. Law does not allow the employers to delay these time bound actions for any reason however justifiable they are. Reasons like Financial stringencies faced by the units etc. do not permit any delay. Law has provided that any such delay in remitting the Contributions should necessarily be visited by the provisions of Interest. Various Courts have uniformly held its validity and have categorically spelt out that interest at the rate prescribed under Regulation-31-A is payable. The provision for payment of interest on contribution due but not paid in time by the employers has been made in the Act vide ESI (Amendment) Act 1966 by inserting a Sub-Section 39 (5) under Chapter-IV. The Corporation was also empowered to make regulations in this behalf by inserting a Sub-Section (iiia) under Section 97 (2) of the Act. Accordingly, a new Regulation 31-A has been added in the ESI (General) Regulations 1950. These provisions have come in to effect from 28-1-1968. Thus, the provision for claim, recovery and payment of interest has come in to effect only from 28th day of January, 1968. L.17.1 Provision for interest and its recovery in the Act: Section 39 (5) (a); If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate as may be specified in the regulations till the date of its actual payment: Provided that higher interest specified in the Regulations shall not exceed the lending rate of interest charged by any scheduled bank. (b) Any interest recoverable under clause (a) may be recovered as an arrear of land revenue or under Section 45C to Section 45-I. L17.2 Provision to make Regulation by the Corporation in the Act: Section 97 (2) (iiia): the rate of interest higher than twelve per cent on delayed payment of contribution. L17.3 Regulation relating to Interest on contribution due, but not paid in time and its recovery: Regulation 31-A: An employer who fails to pay contribution within the periods specified in Regulation- 31, shall be liable to pay simple interest at the rate of 12 per cent per annum in respect of each day of default or delay in payment of contribution. ESIC REVENUE MANUAL 291 INTEREST AND DAMAGES (LAW & PROCEDURES) Regulation 31-B: Recovery of interest. CHAPTER XVII Any interest payable under Regulation 31A may be recovered as an arrear of land revenue or under Section 45C to Section 45-I of the Act. L17.4 Rate of interest from time to time: The following is the rate of interest from time to time; 28-01-1968 to 19-10-1989: 6% p.a. 20-10-1989 to 31-8-1994 : 12% p.a. 01-9-1994 to 30-9-2005 : 15% p.a. 1-10-2005 onwards : 12% p.a. Thus, if the contributions that fell due on, say, 30th June, 1989 is remitted on 11th November 2005 , even if the delay is because of a Court Case , Interest is payable at 6% p.a. from 1/7/1989 to 19/10/1989, at 12% p.a for the period from 20/10/1989 to 31/8/94, at 15% p.a. for the period from 1/9/1994 to 30/9/ 3005 and at the rate of 12% p.a. from 1/10/2005 to 11/11/2005 L17.5 Interest is not a penalty but a statutory liability: Interest is a statutory liability. Since the employer has not paid the contribution on the date due for its payment, it is deemed to have been utilized the said amount in his business. He is, therefore, liable to pay the interest at the rate prescribed by the Corporation. Therefore, no notice for reasonable opportunity of being heard is to be given before claiming the interest. Case law: It was held by the Supreme Court that the payment of interest on delayed payment of contribution is statutory and therefore the question of waiver, settlement or compromise, does not arise. (M/s Goetez(India) Ltd., v. ESIC 2008(118)FLR 654; 2008LLR,897; 2008(3)LLN 649; 2008(3)LLJ 356; and 2008(4)LIC 4415.) L17.6 Financial constraints / incurring loss in business not a ground to escape from statutory liability: The Rajasthan High Court observed that the mere fact, a factory or concern has incurred loss on account of various reasons is not enough to deprive the contribution to the Employees’ State Insurance Fund. (ESIC v. Jaipur Spinning and Weaving Mills Ltd- 1987(72) FJR 57) A similar view has been expressed by the Andhra Pradesh High Court in the case of ESIC v. Chirala Co-operative Spinning Mills Ltd., Chirala in CMA No. 2905/2001 dated 9th November, 2004. (2005(1) LLJ1016; 2005(2) LLN584; 2005(100) FLR703; 2005LLR591) The Division Bench of Kerala High Court held that if at all a unit is declared as a sick unit, only damages could be waived but not the interest. (Mosaic Industries private Ltd., Mangalore v. ESIC Bangalore and others-2008(3) LLJ 436; 2008(118) FLR 182; 2008 (2) LIC 2067; 2008 (4) LLN 425)
Any amount due : (a) from the employer in relation to an establishment to which any Scheme or the Insurance Scheme applies in respect of any contribution payable to the Fund or as the case may be the Insurance Fund damages recoverable under section 14B accumulations required to be transferred under sub-section (2) of section 15 or under sub-section (5) of section 17 or any charges payable by him under any other provision of this Act or of any provision of the Scheme or the Insurance Scheme; or (b) from the employer in relation to an exempted establishment in respect of any damages recoverable under section 14B or any charges payable by him to the appropriate Government under any provision of this Act or under any of the conditions specified under section 17 or in respect of the contribution payable by him towards the Pension Scheme or the Insurance Scheme under the said section 17 may if the amount is in arrears be recovered in the manner specified in sections 8B to 8G.
Matters for which provisions may be made in a Scheme. 1. The employees or class or employees who shall join the Fund and the conditions under which employees may be exempted from joining the Fund or from making any contribution. 2. The time and manner in which contributions shall be made to the Fund by the employers and by, or on behalf of employees (Whether employed by him directly or by or through a contractor), the contributions which an employee may, if he so desires, make under Sec.6, and the manner in which such contributions may be recovered. 2A. The manner in which employees’ contributions may be recovered by contractors from employees employed by or through such contractors. 3. The payment by the employer of such sums of money as may be necessary to meet the cost of administering the Fund and the rate at which and the manner in which the payment shall be made. 4. The Constitution of any committee for assisting any Board of Trustees. 5. The opening of regional and other offices of any Board and Trustees. 6. The manner in which accounts shall be kept, the investment of moneys belonging to the Fund in accordance with any directions issued or conditions specified by the Central Government, the preparation of the budget, the audit of accounts and the submission of reports to the Central Government or to any specified State Government. 7. The conditions under which withwrawals from the Fund may be permitted and any deduction or forefeiture may be madde and the maximum amount of such deduction or forefeiture. 8. The fixation by the Central Government in consultation with the boards of trustees concerned of the rate of interest payable to members. 9. The form in which an employee shall furnish particulars about himself and his family whenever required. 10. The nomination of person to receive the amount standing to the credit of a member after his death and the cancellation or variation of such nomination. 11. The registers and records to be maintained with respect to employees and the returns to be furnished by employers or contractors. 12. The form or design of any identity card, token or dise for the purpose of identifying any employee, and for the issue, custody and replacement thereof. 13. The fees to be levied for any of the purposes specified in this Schedule. 14. The contraventions or defaults which shal be punsihable under subsection (2) of Sec.14. 15. The further powers, if any, which may be exercised by inspectors. 16. The manner in which accumulations in any existing provident fund shall be transferred to the Fund under Sec.15, and the mode of valuation of any assets which may be transferred by the employers in this behalf. 17. The conditions under which a member may be permitted to pay premia of life insurance from the Fund. 18. Any other matter (Which is to be provided for in the Scheme or) which may be necessary or proper for the purpose of implementing the Scheme