The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) is a social welfare legislation intended to provide adequate social security to employees working in every establishment employing 20 or more employees (Covered Establishment/Employer). To ensure that these benefits are correctly extended to the covered employees of an establishment, the EPF Act provides for the appointment of Provident Fund (PF) Commissioners, that are appointed by the Employees' Provident Fund Organisation (EPFO), to initiate inquiries for assessment, under Section 7A of the EPF Act, of any deficit in the contributions remitted by any Covered Establishment or to assess damages under Section 14B thereunder. Given that wide powers are conferred upon the PF Commissioner under the EPF Act, if there is a default in deposit of contribution/damages/interest by a Covered Establishment, various coercive measures can be taken by the PF Commissioners for recovery of money, such as attachment of bank accounts and recovery of the amount as arrears of land. The exercise of such quasi-judicial powers by the PF Commissioners is required to be in a reasonable and fair manner, in accordance with the principles of natural justice. However, in the absence of the implementation of a strict regulation framework, there is scope for misuse and abuse of the powers so granted under the EPF Act, resulting in a digression from the basic tenets of natural justice.
In practice, it is generally seen that the PF Commissioners often (a) pass orders determining the liability of an establishment without identification of beneficiaries; (b) initiate inquiries against principal employers even when contractors have independent employer PF codes/ registrations; (c) pass orders determining the liability of an establishment without actually having established the existence of an employer-employee relationship between the establishment and the personnel in question (analyzed in further detail here). In certain situations, PF Commissioners are also empowered to order the arrest of the concerned representatives of the establishment. It is thus incumbent upon the PF Commissioner to furnish the orders to the Employers without any delay so that they can then avail of remedies available to them before the expiry of statutory limitation prescribed under the Act. The present article focuses on the aspect of accurate recording and timely uploading/ communication of orders passed by PF Commissioners in inquiry proceedings under the EPF Act in the backdrop of the recent circular no. LC-12011(15)/3/2022-LEGAL on 14 June 2022 issued by the EPFO.
In this background, the EPFO's said circular dated 14 June 2022 sets out instructions for the conduct of quasi-judicial proceedings under the EPF Act in pursuance of (a) the decisions of the Hon'ble Delhi High Court in the cases of Vichitra Prestresses Concrete Udhyog Private Limited and Others v Central Board of Trustees EPF and Others [2022 SCC Online Del 192] (Vichitra) and Civicon Engineering Contracting India Private Limited v Central Board of Trustees and Others [2021 SCC OnLine Del 660] (Civicon) and (b) detailed instructions issued to all field offices vide HO Letter No. C-I/ 3(28)2016/7A & 14B/ 1189 dated 19 January 2021. The EPFO has directed vide its order dated 14 June 2022 that all orders passed by the PF Commissioners are to be uploaded correctly and in a proper manner.
Analysis of recent directives of the EPFO and judicial pronouncements
In the past, the EPFO had vide its order dated 19 January 2021 inter alia directed as follows:
- All quasi-judicial proceedings under the EPF Act for which functionality has been created in 'e proceedings portal' must be conducted through the portal. If the conduct of the proceedings is not possible in any case through the portal for functional or technical reasons, it must be brought to the notice of the concerned Zonal Officers.
- Instructions have already been issued vide EPFO, HO Circular No. C-II/20/76/Misc./2020/CBE/TN/1027 dated 14 February 2020 against initiation of fishing and roving inquiries. It is reiterated that such proceedings are impermissible in law. Adjudicating authorities must record reasons qua the existence of a prima facie case before commencing any inquiry/proceeding under the EPF Act.
- Whenever the proceedings are adjourned, the next date of listing must be informed to the parties present at that stage itself and the case status i.e., upload of daily order sheet and next date should be uploaded on the compliance e-proceeding portal so that all parties can access the same.
- Whenever any case is reserved for orders, the Adjudicating officer must fix a date of pronouncement, preferably within the next 15 days and inform the same to the parties by issuing the order to the parties through the email address submitted in official returns.
- All final orders must be properly authenticated with the dated signatures of the adjudicating officers and an official stamp. The provisions of The State Emblem of India (Regulation of Use) Rules, 2007 must comply with the use of official seals.
- Final orders must be dispatched through speed post with a post of delivery. Additionally, a copy should be sent to the email address submitted in official returns. A copy thereof must be uploaded to the Compliance e-proceedings portal within the next 3 days of the pronouncement to make it available to the parties.
The said Order dated 19 January 2021 had been issued by the EPFO in view of the Civicon judgement (supra) of the Hon'ble Delhi High Court, wherein a petition was preferred by M/s. Civicon Engineering Contracting India Private Limited (i.e., the petitioner) seeking a copy of the order passed by the EPFO under Section 7B and 14Q of the EPF Act. The petitioner submitted that despite repeated visits to EPFO and making requests, a copy of the order was not supplied. On the other hand, The Central Board of Trustees (i.e., the respondent) claimed that the order was already available with the petitioner and that the petition was merely an excuse to overcome the objections on limitation. After considering the submissions of both the parties, the court opined that the orders passed by such departments should be readily available to the litigants and their counsel, in order to enable them to avail of their remedies in accordance with law. The court observed that all courts and tribunals across the country make orders and proceedings sheet available online and the EPFO needs no exception, especially during the COVID-19 pandemic when most offices are working in online mode. Further, considering that not a single order had been uploaded on the EPFO website since June 2019, the court directed the Central Provident Fund Commissioner (CPFC) to pass immediate directions on uploading of all orders passed by the Regional Provident Fund Commissioners, Assistant Provident Fund Commissioners, Central Government Industrial Tribunal and other subordinate officials/authorities who adjudicated disputes. The court further directed that the practice directions shall stipulate the manner of passing orders, timelines for uploading, timelines for communication to parties etc., which shall be adhered to by all the adjudicating authorities/officers. The court also instructed that the order ought to be communicated by email to parties while simultaneously being uploaded on the EPFO website.
Despite the above directives of the EPFO and the observations made by the Hon'ble Delhi High Court in the Civicon judgement (supra), in Vichitra (supra), Vichitra Prestressed Concrete Udhyog Private Limited and other petitioners therein were aggrieved that the orders passed under Section 14B and 7Q of the EPF Act were not provided to the Petitioner despite their best efforts. In addition, the Petitioners averred that when the orders were checked on the website of EPFO, it was found that orders corresponding to the case diary number of the case of Petitioners were not available on the EPFO website. While the Court, in this case, dismissed the Writ Petition in view of the peculiar facts of the case, the Court adversely noted the practice of uploading incorrect orders on the 'e-proceedings portal' and directed the EPFO to ensure that the orders which are passed in the future are uploaded in a proper manner as per the directions passed by the Hon'ble High Court of Delhi in the Civicon judgement.
The establishment's perspective
In light of the aforesaid directions of the Hon'ble High Court of Delhi, the EPFO, issued the Order dated 14 June 2022, directing PF Commissioners to adhere to the directions issued by the Hon'ble Delhi High Court. It is pertinent to note that access to the daily orders passed by the PF Commissioners is crucial because, unlike the court proceedings, the orders passed by the PF Commissioners are usually not dictated in the presence of the parties but are rather recorded post-facto in closed chambers after the proceedings are over. In cases of physical hearing, the Establishment's representative is only required to sign on a blank order sheet to be populated later and is not privy to the contents until the order is in fact communicated. In case of virtual hearing, the extent of transparency from the Establishment's perspective is even lower. Further, considering that all quasi-judicial proceedings under the EPF Act are virtual for the time being, the availability of the daily orders becomes even more critical because the parties in these virtual proceedings do not have access to physical records and can access the orders only via electronic mode.
In addition to the aforesaid issues, recording in the orders passed by the PF authorities, both procedural and substantive, are often found to be in stark contrast to what may actually have transpired during the proceedings. For instance, the order may record that the concerned party sought for a further opportunity to file a pleading whereas in reality, the PF authority was otherwise engaged in or was discharging administrative duties and may not have been available to hold the proceeding on the said date. The Covered Establishments/ Employers, in respect of whom such orders are passed, are usually not in a position to object to very such order passed during a proceeding under the apprehension of antagonizing the PF authority who will be hearing their matter on merits. Accordingly, with a view to obviate the risk of prejudicing the merits of their case, Employers choose not to object to such orders.
The predicament that these Employers face is that in case the final order is passed against them and consequently, when they approach the appellate authority or court, as the case may be, to assail such substantive orders imposing liability, interim procedural orders passed during the proceedings that incorrectly indicate delay/ non-appearance, etc. on part of the establishment, may prejudice their case. However, unfortunately, they do not have any evidence to substantiate that the order was incorrectly recorded by the PF Authority. On the other hand, when the establishment objects to such orders for the first time before the appellate authority or court, as the case may be, the same is likely to be construed as an afterthought, thus causing severe hardship to the Employers and prejudicially affecting their stand.
The previous sections make it apparent that EPFO has issued circulars from time to time to curtail the excessive exercise of powers by the PF authorities, discourage the initiation of fishing and roving inquiries against establishments and ensure the compliance with the principles of natural justice in a proceeding. Parallelly, various courts have also intervened to set aside decisions passed by the PF authorities in violation of the aforesaid directives. For instance, recently, the Hon'ble Delhi High Court observed yet again, that a PF Commissioner, in discharge of his/ her powers under Section 7A of the
EPF Act is required to comply with the principles of natural justice by impleading the contractors/ sub-contractors and identifying the actual beneficiaries, specifically when such a submission has been made by the concerned establishment (reference Central Board of Trustees (EPFO) v M/s Era Infra Engineering Limited and Another [2022 SCC OnLine Del 1643]).
However, as stated above, in spite of the various orders passed by the constitutional courts and consequent implementing directions issued by the EPFO, establishments often continue to be subjected to harassment of fishing and roving inquiries, in the absence of the strict implementation of these directives. In order to ensure effective implementation of these directions, it is imperative to ingrain that PF authorities, in their quasi-judicial capacity, must exercise their powers under the EPF Act reasonably, fairly and in accordance with the principles of natural justice and basic tenets of the law such as the identification of the beneficiary, the existence of an employer employee relationship and the nature of PF contribution (i.e., the benefit of employees and not in the nature of a tax) so that frivolous, harassing and unwarranted Section 7-A proceedings can be curbed.
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