EPFO set to crackdown on defaulting employers

Surabhi Posted online: Tuesday, Apr 15, 2014 at 0000 hrs
New Delhi : With over Rs 3,000 crore of arrears in interest and damages, the Employees’ Provident Fund Organisation is set to crack the whip on defaulters.

According to the action plan finalised for FY15, the EPFO has decided to focus on recovery of such dues from errant employers.

The retirement fund manager has also launched a software to identify defaulters. It plans to send notices to all employers that have defaulted on payments of Rs 1 lakh and above by the end of the month while for defaults of lesser amounts, notices will be issued by June 30 this year.

“After the notices are issued, we will take another three months to determine the exact default. We plan to recover as much as possible of the pending Rs 3,000 crore this fiscal,” said a senior official, adding that the PF offices have initiated a drive to recover arrears since last year.

The move would also give a boost to the EPFO’s over Rs 6 lakh crore and help improve returns at a time when trade unions have been demanding an interest rate of at least nine per cent on contributions to counter the high inflation rate. For FY14, the EPFO has announced an interest rate of 8.75 per cent, which is marginally higher than the 8.5 per cent rate prevailing for the previous two financial years.

Under the EPF Act 1952, employers with over 20 workers are mandated to deduct and deposit provident fund contributions in the first 15 days of the month. Under Section 7Q and 14 B of the EPF Act, defaulters have to deposit the pending contributions along with a simple interest at the rate of 12 per cent on the amount as well as penalty.

Defaults in contribution of PF by employers can be charged under Sections 405 and 420 of the IPC Act and can lead to attachment of property as well as arrest of the defaulter.

The Comptroller and Auditor General in a recent report had also pulled up the EPFO for delay in recovery of arrears and dues. According to CAG data, total arrears of the EPFO amounted to Rs 1,723 crore by March 31, 2012. Of this, Rs 313.20 crore was recoverable from 20,974 establishments. Meanwhile, another Rs 265.75 crore was outstanding as damages that were levied but not realised from defaulting un-exempted establishments.

Defaulting companies include a number of public sector units such as HMT Ltd (for the period of April 1999 to November 2005) as well as private companies such as Ahluwalia Contracts (September 2007 to March 2009) and Metro Cash and Carry Private Ltd (for the period November 2008 to June 2012), according to EPFO data.