Perfil Profesional

Introduction

The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is one of the social security legislations and therefore invariably provides for the consequences which would follow, if any, of its provisions are violated. Such provisions are called penal provisions. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 also contains penal provisions which were amended in the year 1973 and 1988 so as to make it more stringent and thereby to ensure its proper implementation.

With a view to ensure expedite action of invoking the penal provisions, the power to prosecute (which was initially vested with Central and respective State Governments) was delegated, effective from 1.11.1973, to Central Provident Fund Commissioner and Regional Provident Fund Commissioners.

The penal action should be initiated promptly by the Compliance Sections, in the following contingencies:

 Non-payment of dues (part or full) assessed under Section 7A of the Act;

 non-submission of statutory return as reported through the defaulters list / CCTS Report and defaulters list of annual returns in Form 3A and 6A or Form 7 & 8 and the Enforcement Officers report;

 non-transfer of past accumulation dues;

 contravention or non-compliance on any provisions of the Act/Schemes, both by exempted and Unexempted establishments;  _{for giving false statement and false representation with a view to}

avoid any payment.

The Penal provisions should be invoked through, - a) Filing prosecution,

b) filing complaint with the police for criminal breach of trust, and c) filing application under Section 110 of The Code of Criminal

Procedure, 1973.

OFFENCES UNDER THE EPF & MP ACT AND THE SCHEMES THEREUNDER:

SECTION 14 PENAL PROVISIONS: Provisions of Section 14 have been made stringent with the new amendments, which have come into force with effect from 1.8.1988. The gist of the various penal provisions and the amendments introduced and the enhanced punishments prescribed are given below:

(1) Section 14(1) : Punishment for making a false statement or representation or for causing to be made any such false statement or representation with a view to avoid any payment under the act and the three Schemes is imprisonment upto one year or with fine of Rs.5000/- or with both.

(2) Section 14(1A) : a) Punishment for non-payment of provident fund contributions: b) for non-payment of inspection charges in the case of exempted establishments under Section 17(3): c) for non-payment of administrative charges under Employees’ Provident Fund Scheme in Account No.2 is imprisonment upto 3 years but it shall not be less than one year and fine of Rs.10,000/- in the case of default in payment of employees contribution which has been deducted by the employer from the employees wages and in other cases, it shall not be less than six months, and a fine of Rs.5,000/-. The Court is empowered to impose a sentence of imprisonment for a lesser term for adequate and special reasons to be recorded in the judgement. It may be noted that the Courts power to impose a fine in lieu of imprisonment has been taken away by this new amendment.

Under this section the Courts are bound to give minimum fine of Rs.10,000/- irrespective of the amount in default in case there is any default in payment of employees contribution deducted from their wages and offences are proved. In case the Court wants to give a lesser punishment, the court has to record specifically the special reasons or other adequate reasons for which it considers it necessary to impose a lesser sentence and such lesser sentence can be given only in respect of imprisonment and not in the quantum of fine.

(3) Section 14(1B): a) Punishment for non-payment of Employees Deposit Linked Insurance contributions b) for non-payment of Employees Deposit Linked Insurance administrative charges c) for non payment of Employees Deposit Linked Insurance Inspection charges is imprisonment upto one year but the court shall award a minimum imprisonment of six months and a fine upto Rs.5000/- for the offences under this section. However, here also the Court has got discretionary powers to award a lesser sentence of imprisonment for adequate and special reasons to be recorded in the judgment.

(4) Section 14(2) : This is an enabling provision which enables the Government of India while framing the Schemes to incorporate suitable provisions for punishments for any offences. The ambit of this section is quite wide in as much as it provides for punishment to any person who defaults in complying with any of the provisions contained in the three schemes. Thus, not only the default in payment of contribution but also the non submission of returns or any other requirements under the Schemes can be brought under the purview of this section read with the relevant sub clause of Para 76 of the EPF Scheme.

Punishment provided under this Section is imprisonment upto one year or with fine which may extend upto Rs.4000/- or with both.

(5) Section 14(2A) : In the case of exempted establishments if they are not complying with any of the provisions of the Act or any of the conditions subject to which exemption was granted under Section 17 they can be prosecuted under this Section. Punishment provided is imprisonment upto six months but shall not be less than one month and shall also be liable to pay a fine upto Rs.5000/-. There is no discretion for the Court under this section to award lesser sentence if the accused is guilty.

(6) Section 14AA : Under this Section those who have been convicted previously for any offence under the Act and the three schemes are liable for enhanced punishment. Punishment is imprisonment upto five years but which shall not be less than two years and shall also be liable to a fine of Rs.25000/-. Unlike in Section 14(1A) or in Section 14(1B) there is no discretion for the Court under this section to impose a lesser sentence of imprisonment and the Courts are bound to give a minimum sentence of imprisonment for two years and a fine of Rs.25,000/-

OFFENCES UNDER EMPLOYEES’ PROVIDENT FUNDS SCHEME:

Paragraph 76 of the Scheme enumerates the following offences:

a) Deduction from wages/salary of a member the whole or any part of the employer’s contribution;

b) Failure to submit any return of contribution/statement or submission of a false return/statement/document;

c) Obstruction of an Inspector or an Officer in discharge of his duties; d) Non-compliance with any other requirement of the EPF Scheme.

OFFENCES UNDER EMPLOYEES’ FAMILY PENSION SCHEME:

i) Non-remittance of Family Pension contribution to Account No.10 at the State Bank of India;

ii) Non-submission of various returns prescribed under paragraphs 13,15 and 16 etc.

OFFENCES UNDER EMPLOYEES’ DEPOSIT LINKED INSURANCE SCHEME:

i) Non-remittance of Employees’ Deposit Linked Insurance contribution as per Para 8 of the Scheme.

ii) Non-submission of various returns prescribed under Para 10 of the Scheme.

The penal provisions are given in a tabular statement on Page 62 & 63 for easy reference.

NON-PAYMENT OF EMPLOYEES’ SHARE OF CONTRIBUTION- ACTION (OFFENCE) UNDER 406, 409 IPC

Criminal Breach of Trust

The Explanation-1 below Section 405 of Indian Penal Code provides that -

“A person being an employer of an establishment whether exempted under Section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, or not, who deducts the employees contribution from the wages payable to the employees for credit to a Provident Fund or Family Pension Fund shall be deemed to have been entrusted with the amount of contribution so deducted by him and if he makes default in the payment of such contributions so deducted to the said fund in

violation of the said law, shall be deemed to have been dishonestly used the amount of said contributions in violations of directions of law as aforesaid”

Thus where an employer after deducting the employees’ share from their wages fails to remit the contributions so deducted within a specified time, he shall be deemed to have committed an offence of criminal breach of trust as explained in Section 405 of the Indian Penal Code, which is punishable under Section 406 and 409 of the Indian Penal Code.

The Enforcement Officers need not wait for the sanction of the Regional Provident Fund Commissioner for prosecution of the accused for the above offence. Before initiatiing action, it should be ascertained that the wages for the relevant period of default of employees’ share, has been paid to the members. They may lodge a complaint (FIR) direct with the police authorities within whose jurisdiction the offence of criminal breach of trust is alleged to have been committed by the accused employer after collecting all basic documentary evidence such as Form 12A salary registers, etc., so as to build up a strong case against the accused. Case filed under this provision cannot be withdrawn by the Employees’ Provident Fund Organisation. A special feature on cognizable offence under section 47 of Cr. PC is that a police can arrest a person concerned in such offence without a warrant from the Magistrate.

SECURITY FOR GOOD BEHAVIOUR FROM HABITUAL OFFENDER – Section 110 CrPC, 1973:

For punishing the erring employer and to get compliance from him an enforcement officer can take the recourse of the provisions of Section 110 CrPC,1973, which provides as under:

“When an Executive Magistrate receives the information that there is within his local jurisdiction a person who habitually commits, or attempts to commit, or abets the commission – of any offence under the Employees’ Provident Funds and Family Pension Act, 1952” (Section 110 (f)(i)(c) of CrPC)

Such Magistrate may in the manner provided require such person to show cause why he should not ordered to execute a bond, which secures for his good behaviour for such period, not exceeding 3 years as a Magistrate thinks fit. Accordingly a good behaviour bond can be obtained from the erring employers.

Section 138 – Negotiable Instrument Act:

Normally, the employers of the covered establishments are advised to make remittance into State Bank of India through cheque alongwith the prescribed single challan. Out of such cheques some are dishonoured due to insufficient fund available at the bank. When a cheque is dishonoured and the intimation is received from the bank, immediate necessary action need to be taken to realize the amount. Assistant Commissioner, in charge of enforcement section should issue a show cause notice to the employer informing him the ill fate of the cheque and require the employer to pay the amount due by DD. The said notice has to be issued to the employer within 15 days of the receipt of the dishonour intimation from the bank. In case of non-adhering to the direction given in the notice a prosecution complaint need to be filed before the first class magistrate court within one month after the notice period. It should be noted the issue of the notice within 15 days is mandatory. The forms prescribed under the Negotiable Instruments Act are required to be followed.

RETURN OF OWNERSHIP IN FORM 5A (REVISED) – IMPORTANCE:

The Return of Ownership of the factory/establishment in Form 5A to be filed by the employer under paragraph 36-A of the EPF Scheme is a starting point in the implementation by a covered unit. Its importance as a basic document need not be emphasized. The Provident Fund Inspectors are well advised to collect this return (in duplicate) from the Occupier/Managing Director/Proprietor/Managing Partner/Secretary or other responsible Officer of the factory/establishment at the time of investigation for coverage and forward one copy (in original) of the same to the Regional Office alongwith the Inquiry Report and the other copy may be retained by them on their file for future reference. Under Compliance Programme, the intelligence section which handles issue of code number should ensure receipt of Form 5A alongwith other prescribed returns. Care should be taken to get the correct entries entered in the form so that only those persons responsible for the affairs of the factory/establishment are brought on record. The Provident Fund Inspectors should also keep a close watch over subsequent changes in the managerial set up so that as and when changes take place, they have to get fresh declaration of ownership in duplicate for record. While launching/recommending prosecution of the employer only such persons who are responsible for the commission of the offence shall be impleaded in the recommendation such as Secretary/Managing Director/Director in the case of a company, Partners/Managing Partners in the case of a Partnership firm, Manager in the case of factory, Sole proprietor in the case of a Proprietory concern and the Head of the Department in the case of Departmentally run establishment.

EOs are advised to make it a point to call on the person or persons shown in Form 5A at the time of every visit and to bring the observations in Part II of Inspection Report.

PRELIMINARIES FOR INITIATING PROSECUTION:

i. On detection of a default in remittance or submission of returns for a period exceeding two months, a report in the prescribed form has to be sent to the Regional P.F. Commissioner concerned for obtaining sanction of prosecution under Section 14AC of the Act after issuing a show cause notice to the accused employer for default.

ii. On receipt of sanction of prosecution and after the amount is determined under Section 7A of the Act, a written complaint should be filed by the Provident Fund Inspector in the competent Court of Law within 7 days of such receipt of sanction alongwith such documents as copies of Form 5A submitted by the employer, of notification issued under Section 14AC of the Act delegating the powers of sanction to the Regional commissioner, of sanction order and a copy of the show causes notice issued on the accused employer.

iii. A list of documents/witnesses which/who are to be cited/summoned in the course of the prosecution should also be filed alongwith the complaint.

iv. The complaint to be filed by the Inspector under Section 200 of Cr.P.C. need not however bear the Court Fee Stamp as he is exempted from Court Fee Stamps as a Public Servant.

NOTE:-

a) Under Section 25 of the Cr.P.C.1973, all the Inspectors appointed under Sec.13(1) of the Act, have been appointed as Assistant Public Prosecutors for purpose of conducting EPF cases in the Courts of Magistrates.

b) A set proforma prescribed for preparing the complaint may be used by the Complainant Inspector with suitable changes wherever required for preparing and complaint;

c) Sanction, once given, should under no circumstances be returned or withdrawn even when the accused employer makes good the default by subsequent remittance and returns.

d) In cases of habitual defaulters, special prayer should be made before the Court for awarding the maximum punishment including imprisonment prescribed under the Act.

e) Alongwith every complaint under Section 14AA, a certified copy of the previous judgement should be attached.

JOINDER OF CHARGES :

The Inspectors are well advised to file separate complaints before the Court in respect of not more than 3 offences of the same kind committed within a span of 12 months as required under 218 and 219 of Cr.P.C. Each of the following is a separate offence for the purpose of Section 218 of Cr.P.C. Misjoinder of charges would run the risk of dismissal of the complaint.

i. Non-remittance of PF or Pension or E.D.L.I. contribution for each month is a separate offence.

ii. Non-remittance of inspection charges or Administrative charges for each month is a separate offence

iii. Non-submission of monthly returns/annual returns/contribution card/nomination /declaration /initial return in Form 9 (EPF) or in Form 3(PS) etc., is a separate offence.

It may be noted that separate complaints should be filed in respect of 1) Provident Fund – Inspection charges and Adm. Charges (14-1A) 2) Deposit Linked Insurance Fund (14-1B)

3) Under Sec.14AA in case of repeated offences of all the above cases.

If any of the above complaints are filed jointly, Provident Fund Inspector runs the risk of Misjoinder of charges.

PERSONS LIABLE TO BE IMPLEADED IN THE COMPLAINT

The following persons are liable for offences under the Act and the various schemes framed there under. As such they may be impleaded in the complaint filed before the Court.

i. Where the accused is a company, a) The Company itself,

b) Every director/Managing Director/Manager/Secretary or other responsible officer of the Company;

ii. Where the accused is a partnership firm; a) The firm itself,

c) Manager or other occupier of the Factory/establishment iii. Where the accused is a Proprietory Concern.

a) The Proprietor himself;

iv. Where the accused is a departmentally run Government or Semi Government under taking;

a) The Heads of Departments;

It may however be noted that while prosecuting official Receiver/Liquidator of a Company/Firm being wound up/closed, prior sanction of the Court by which such Liquidator/Receiver was appointed may be obtained. Where an offence is committed by a Company and it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other officer of the Company, such Director or Manager or Secretary or other officers shall be deemed to be guilty of the offence and are liable to be proceeded against and convicted. Law therefore presumes that all such persons are guilty of the offence committed by the Company. Burden is however upon such persons to prove that the offence was committed without their knowledge or that they exercised due diligence to prevent the commission of the offence. Company, for the purpose of Section 14 of the Act, includes partnership firm (see citation : State Vs. Bhadami – 1959 Cr. L.J. Page 68)

LIMITATION OF TIME FOR PROSECUTION OF THE ACCUSED EMPLOYER:

(Please see Section 468 (B)

There was a conflict of judicial opinion in the matter whether the offences prescribed under this Act are continuing offences or are barred by limitation prescribed under Section 468 of the Code of Criminal Procedure 1973. The Madras High Court has laid down in M/s. Premier studs and chaplets Co., and others – Vs. State (56 FJR 611) that the duty to pay the contribution or to submit the return still remains and continues till the contributions are made or the returns submitted. Therefore a failure to pay the contribution or to submit the return is a continuing breach of duty which continues till it is performed and the non performance of such a duty from day-to-day is a continuing wrong. Therefore, the offences under this Act will come under the ambit of Section 472 of Code of Criminal Procedure which defines a continuing offence. The Section 472 states as follows:- In the case of a continuing offence, a fresh period of limitation shall begin to run at every moment of the time during which the offence continues. The matter has however been set at rest by the Supreme Court ins their judgement dated 17.9.1984 in Criminal Appeal No.372 of 1984 in Provident Fund Inspector, Chandigarh, Vs. M/s. Delhi Faridabad Textile Mills case wherein it has been held that refusal to pay Provident Fund and to submit returns is a continuous offence and every day the breach continues a fresh cause of action arises.

The field officers however, should launch prosecution proceedings against erring employers promptly.