Isabella Mariam

The High Court of Karnataka Division Bench of Justice D K Singh and Justice S Rachaiah held that an employer's liability for delayed provident fund contributions cannot attract a penalty below 25% of the total arrears, inclusive of interest, when the delay exceeds six months. The court was hearing a petition filed by the Employees' Provident Fund Organization challenging a tribunal's order that had drastically cut a travel company's penalty — originally assessed at over Rs. 3.28 lakh for failing to deposit contributions for two international workers — to merely Rs. 25,000. Modifying the tribunal's order, the court fixed the penalty at Rs. 77,633.

The writ petition was filed by the Assistant Provident Fund Commissioner, Employees’ Provident Fund Organization, challenging the order dated 07.09.2020 passed by the Central Government Industrial Tribunal-cum-Labour Court, Bengaluru. The dispute arose from an order dated 05.12.2016 by which damages of Rs.3,28,083/- were imposed under Section 14B of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 for belated payment of provident fund contributions in respect of two international workers employed by the respondent establishment for the period from 20.03.2014 to 31.03.2016.

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The respondent establishment had challenged the penalty before the Tribunal, which reduced the damages to Rs.25,000/-. The petitioner contended that the Tribunal erred in reducing the penalty contrary to the statutory scheme. The liability assessed included Rs.2,04,440/- towards contribution and Rs.1,06,094/- towards interest. The issue before the High Court was whether the Tribunal was correct in reducing the penalty from Rs.3,28,083/- to Rs.25,000/- in the facts and circumstances of the case.

The Court recorded: “None has appeared, even on the revised call, on behalf of petitioner - the Employees’ Provident Fund Organization (for short ‘EPF Organization’). However, the counsel for the respondent is present, who has made submissions.”

On the scope of Section 14B, the Bench observed: “Section 14B of the EPF Act empowers the Central Provident Fund Commissioner or an Officer authorised by the Central Government in this behalf to recover damages, wherein an employer makes default in the payment of any contribution to the Provident Fund.” It further stated: “Section 14B empowers to recover damages by way of penalty not exceeding the amount of arrears, as may be specified in the Scheme.”

The Court noted: “Thus, Section 14B of the EPF Act empowers to recover damages upto 100% of the amount of arrears which would also include the interest.” Referring to the Scheme, it recorded: “However, under the Employees’ Provident Fund Scheme, 1952, the rate of penalty has been fixed under Para 32A. The maximum penalty for delay of six months and above has been fixed at 25% per annum.”

Framing the issue, the Court stated: “The only question which is involved in the present writ petition is, Whether the Central Government Industrial Tribunal-cum-Labour Court has been correct in reducing the penalty from Rs.3,28,083/- to Rs.25,000/-, in the facts and circumstances of the case?”

The Bench referred to its earlier judgment and observed: “This Court, in its judgment dated 27.01.2026, passed in Writ Petition No.6617/2023, has considered the provisions of Section 14B of EPF Act and has held that the penalty for not depositing the PF contribution for more than six months cannot be reduced to less than 25% of the arrears, which would include the interest.”

Applying the facts, it recorded: “Here, the arrears were deposited after more than two years from the due date and therefore, the penalty should be 25% of the arrears of the contribution, including the interest.” The Court calculated: “Thus, total arrears including the interest would be Rs.3,10,534/-. 25% of the above amount, which comes to Rs.77,633.50 ps., rounded off to Rs.77,633/-, should have been the damages in the nature of penalty.”

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The Court directed: “Thus, we would modify the impugned order dated 07.09.2020 in EPF No.388/2017 passed by the Central Government Industrial Tribunal-cum-Labour Court, Bengaluru, and assess the damages by way of penalty to Rs.77,633/-. If the petitioner has already paid Rs.25,000/-, in pursuance to the order passed by the CGIT, the balance amount of Rs.52,633/- is to be paid within a period of two weeks from today. With the aforesaid modification, the writ petition is disposed of.”

Advocates Representing the Parties

For the Petitioners: Smt. Vanita K.R. and Smt. Varsha Hittinhalli, Advocates (Absent)
For the Respondents: Sri. M C Thimmaiah, Advocate for Sri. Joshua Hudson Samuel, Advocate

Case Title: The Assistant Provident Fund Commissioner v. M/s. Enchanting Travels Pvt. Ltd.
Neutral Citation: NC: 2026: KHC:7990-DB
Case Number: Writ Petition No. 23372 of 2021
Bench: Justice D K Singh and Justice S Rachaiah