The High Court of Kerala on June 11, 2020 in the case of Manuel Mohandas vs The Assistant Provident Fund, has considered the issue of whether the provident fund department can proceed against a present occupier of an establishment basis prior dues owed by such establishment. Incidental issue that the court considered was whether the department could determine the liability under Section 7A of Employees Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) for a period of larger duration, where the notice preceding such determination pertained to a shorter period.

Facts of the case:

The petitioner in the present case was an employer under a lease agreement in respect of the establishment for a period commencing from September 15, 2006 till October 23, 2007. A demand notice was issued by the provident fund department in relation provident fund arrears for the period commencing from November, 2005 to December, 2006 and ultimately, the determination was made period from April, 2004 to February, 2008.

The petitioner challenged such determination by contending that as he was not an employer during the entire period demanded in the notice, his liability to pay the contribution was limited to only for the period covered by lease and not be personally liable for effecting payment for the period not covered by the lease.

Issue:

The issues which arose before the High Court of Kerala were:

a. the extent of liability of the petitioner with respect to the establishment in relation to the past dues; and

b. the validity of the review order passed under Section 7B of the EPF Act, which made the petitioner liable beyond the period covered in the notice issued under Section 7A of the EPF Act.

Decision by the court:

The High Court observed that, pursuant to Section 14B (‘Power to recover damage’) read with Section 17B (‘Liability in case of transfer of establishment’) of the EPF Act, the Provident Fund Authority has the right to proceed against the establishment for any dues, without being required to choose the employer from whom the amount is to be recovered. However, the court recognised that a person could not be saddled with any personal liability in respect of the past dues and held that, if the petitioner is forced to pay for any period which pertained to past dues, the remedy of the petitioner would be to pay and recover it from the person who is actually liable.

Thus, the court held that, the Provident Fund Authority was well within its competence to proceed against the assets of the establishment in accordance with law for any recovery impugned order, although the petitioner could not be saddled with any personal liability in respect of the period not covered by the lease.

In relation to the second issue, the court further held that the determination under Section 7A cannot go beyond the period which was not mentioned in the demand notice. However, it recognized the authority’s power to cover any other period, subject to a fresh notice being issued in this regard.

This update has been contributed by Arka Majumdar (Partner) and Juhi Roy (Associate).