EPF Penalty for Delayed Contribution Cannot Be Reduced Below 25% of Arrears; CGIT Order Modified: Karnataka HC [Read Order]

Bengaluru: The High Court of Karnataka at Bengaluru has held that the penalty imposed on an establishment under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, for delay in payment of provident fund contributions cannot be reduced below 25% of the arrears, including interest.

The order was passed by a Division Bench comprising Justice D.K. Singh and Justice S. Rachaiah in Writ Petition No. 23372 of 2021.

The writ petition was filed by the Assistant Provident Fund Commissioner, Employees’ Provident Fund Organisation, Sub-Regional Office, Whitefield, Bengaluru, challenging an order dated September 7, 2020, passed by the Central Government Industrial Tribunal-cum-Labour Court, Bengaluru (CGIT) in EPF No. 388/2017.

The respondent, M/s. Enchanting Travels Pvt. Ltd., a private limited company registered under the Companies Act, 1956, and engaged in providing travel assistance services, had registered itself with the EPF Organisation and had been allotted a PF Code number. The dispute arose in relation to two international workers on the rolls of the respondent company.

After the Assistant Provident Fund Commissioner obtained a list of foreign and international workers employed by the respondent company from the Foreigner Regional Registration Office (FRRO), it came to light that the names of two international workers appointed by the company were not reflected in the International Worker-1 Returns filed by the company.

The Commissioner sought clarification from the company regarding the two international workers, namely Ms. Nina Loges and Ms. Gonser Rebecca Anne. No PF contributions in respect of these two foreign workers had been deposited by the company. In its response to the show-cause notice, the company stated that the two foreign nationals had been working with it but had since left.

Considering the failure of the respondent company to make PF contributions in respect of the two international workers for the period from March 20, 2014, to March 31, 2016, the liability was assessed at ₹2,04,440, with interest of ₹1,06,094, vide order dated December 5, 2016. The penalty under Section 14B of the EPF Act was assessed at ₹3,28,083, representing 100% of the shortfall in PF payments along with interest.

The respondent company challenged this order before the CGIT by filing Appeal No. EPF 388/2017. The CGIT drastically reduced the penalty to ₹25,000. It was this order of the CGIT that was challenged by the EPF Organisation before the High Court by way of the present writ petition.

The Court noted that none appeared on behalf of the petitioner, the EPF Organisation, even on the revised call, while counsel for the respondent was present and made submissions.

The Court examined Section 14B of the EPF Act, which empowers the Central Provident Fund Commissioner or an officer authorised by the Central Government to recover damages where an employer defaults in the payment of any contribution to the Provident Fund. The Court observed that Section 14B empowers recovery of damages by way of penalty not exceeding the amount of arrears, as may be specified in the Scheme.

The Court further noted that under the Employees’ Provident Fund Scheme, 1952, the rate of penalty has been fixed under Para 32A, and the maximum penalty for delay of six months and above has been prescribed at 25% per annum.

The sole question before the Court was whether the CGIT was correct in reducing the penalty from ₹3,28,083 to ₹25,000 in the facts and circumstances of the case.

The Court referred to its earlier judgment dated January 27, 2026, passed in Writ Petition No. 6617/2023, wherein it had held that the penalty for non-deposit of PF contributions for more than six months cannot be reduced to less than 25% of the arrears, including interest.

Applying this principle to the present case, the Court observed that the arrears had been deposited after more than two years from the due date, and therefore, the penalty ought to be 25% of the arrears of contribution, including interest. The Court calculated that the arrears of PF contribution amounted to ₹2,04,440 and the interest thereon was assessed at ₹1,06,094, making the total arrears including interest ₹3,10,534. Accordingly, 25% of this amount, coming to ₹77,633.50, rounded off to ₹77,633, should have been the damages in the nature of penalty.

The Court modified the impugned order of the CGIT dated September 7, 2020, and assessed the damages by way of penalty at ₹77,633. The Court further directed that if the respondent company had already paid ₹25,000 pursuant to the CGIT order, the balance amount of ₹52,633 shall be paid within a period of two weeks.

The writ petition was accordingly disposed of with the aforesaid modification. No costs were imposed.

Appearances:
For the Respondent: Sri M.C. Thimmaiah, Advocate for Sri Joshua Hudson Samuel, Advocate

Case Title: The Assistant Provident Fund Commissioner, Employees’ Provident Fund Organisation v. M/s. Enchanting Travels Pvt. Ltd., Writ Petition No. 23372 of 2021.

[Read Order]