Odisha High Court Upholds Prosecution of Company Director Over Unremitted Provident Fund Contributions

Orissa High Court Ruling: Payment of EPF Dues Does Not Absolve Company Director of Prior Default

The Orissa High Court has delivered a significant ruling in a case involving a company that failed to deposit employees' provident fund (EFP) dues. According to a report by The Economic Times, the company in question had deducted ₹15.14 lakh from employees' salaries towards provident fund between March 2012 to March 2013 and May 2013 to July 2013, but failed to deposit the amount with the Employee Provident Fund Organisation (EPFO).

The court was informed that an EPFO inspector filed an FIR against the company's director on July 3, 2014, and during the investigation, the defaulted amount was deposited into employee accounts. However, the court noted that this subsequent payment of dues does not negate the criminal liability of the original default.

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The company's director claimed that the dues were cleared between July 2014 and February 2015, and that his company is now insolvent, with the matter pending before the National Company Law Tribunal (NCLT) in Cuttack. The director also stated that the resolution plan was approved in February 2022, and another company took over operations.

The EPFO argued that dues need to be paid within the prescribed period and that delay can attract penalties. The court agreed with the EPFO and held that the offence is "grave" and endangers the right to pension and right to life of workers. The court further noted that there are no grounds for the investigations and criminal proceedings to be halted.

The court also ruled that EPFO dues cannot be waived by the NCLT as they lack jurisdiction over the matter, citing Section 17B of the Insolvency and Bankruptcy Code (IBC), 2016. The bench further noted that allowing a grave offender to go free would harm public interest and weaken public trust on the law and the protection of law.

The court held that EPF dues must be deposited within 15 days of the subsequent month, and any delay is subject to penalty. The order dismissed the director's plea to quash criminal proceedings against the petitioner, stating that the offence is already committed even if the deposit has been made after the due date. The original case is pending before the Judicial Magistrate First Class (JMFC), Cuttack.

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