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The employer cannot be saddled with the liability to pay the employee’s contribution for the retrospective period as per the pre-deposit condition: High Court of Delhi

Section 7-O of the Employees’ Provident Fund and Miscellaneous Act, 1952 provides that the employer shall in the first instance, pay both the contributions payable by himself and also the contribution payable by the employees. It shall be the responsibility of the principal employer to pay both the contributions payable by himself and also in respect of the employees directly employed by him and also in respect of the employees employed by him or through a contractor. It confers upon the employer the right to recover the employee’s contribution that has been paid by him, but the employer cannot be saddled with the liability to pay the employees’ contribution for the retrospective period, since he has no right to deduct the same from the future wages payable to the employees. These were stated by High Court of Delhi consisting, Justice Prathiba M. Singh in the case of M/S Teleone Consumers Private Limited vs. Regional P.F. Commissioner I, Delhi, North [W.P.(C) 1423/2022] on 24.01.2022.

The facts of the case are that a petition was filed challenging the order passed by the Presiding Officer, Central Government Industrial Tribunal, Delhi (CGIT) wherein the Appellant/ Establishment was directed to deposit 30% of the amount assessed under section 7A of the Employees’ Provident Fund and Miscellaneous Act, 1952 as the pre-deposit condition under section 7-O of the Act i.e. Housing Rent Allowance, Conveyance Allowance, and dues. An order under Section 7A of the Act was passed by the RPFC raising a demand of Rs.1,59,08,286 against the Establishment. An appeal was preferred by the Establishment before the CGIT under Section 7O of the Act, in which interim stay was prayed for.

The Counsel for the petitioner submitted that there are three components, which have been added for making the demand i.e., Housing Rent Allowance, Conveyance Allowance, and dues in respect of Excluded Employees which were paid to the employees. He further submitted that during the COVID-19 pandemic, the Establishment faced financial difficulties and took loans from the financial institutions, hence prays that the pre-deposit be reduced. Finally, it was contended that a prima facie view with regard to the merits of the case was not taken by the CGIT. The CGIT has merely considered the grounds taken, the period of default and the amount assessed and no prima facie view has been given by the Tribunal in view of the settled law.

The Counsel for the Respondent submitted that the predeposit order is a discretionary order and such a discretionary order does not warrant interference by this Court in a writ petition. It was further contended that the employer’s share of contribution should be included in the demanded amount under section 7A of the Employees’ Provident Fund and Miscellaneous Act, 1952 as the pre-deposit condition under section 7-O of the Act.

The High Court of Delhi held that the liability to pay employees’ contribution turns upon the implementation of the Provident Fund Scheme. It provides that the employer shall, in the first instance, pay both the contributions payable by himself and also the contribution payable by the employees. It shall be the responsibility of the principal employer to pay both the contributions payable by himself and also in respect of the employees directly employed by him and also in respect of the employees employed by him or through a contractor. It confers upon the employer the right to recover the employee’s contribution that has been paid by him, but the employer cannot be saddled with the liability to pay the employees’ contribution for the retrospective period, since he has no right to deduct the same from the future wages payable to the employees. It was observed by the Court that last two years have been difficult for businesses in view of the pandemic. In view of this, the Court, without going into the merits of the present case observed that predeposit condition under section 7O of the Act ought to be reduced to Rs.25 lakhs, which would be approximately 50% of the amount directed to be deposited by the CGIT. With these observations, the petition along with all pending applications was disposed of.

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Judgment reviewed by Shristi Suman.

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