Case Background
The petitioner is the Central Board of Trustees of the Employees Provident Fund Organization (EPFO), acting through the Regional Provident Fund Commissioner-II (Legal), Patna. The respondent is M/S Urmila Info Solutions, a company based in Patna, which is covered by the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
According to the EPFO, the respondent company defaulted in depositing provident fund contributions for a long period from 01.04.2017 to 30.09.2021. After issuing notice and conducting proceedings, the competent authority passed an order on 09.12.2021 under Sections 7Q and 14B of the EPF Act. Under this order, interest of Rs. 63,72,264/- was levied under Section 7Q, and damages of Rs. 38,46,225/- were imposed under Section 14B.
The respondent then approached the Central Government Industrial Tribunal-II (CGIT-II), Dhanbad. On 01.07.2022, the Tribunal passed an ex parte order setting aside the 09.12.2021 order under both Sections 7Q and 14B, without hearing the EPFO.
Aggrieved, the EPFO filed CWJC No. 10921 of 2022 before the Patna High Court. By order dated 30.11.2022, the High Court set aside the ex parte Tribunal order dated 01.07.2022 and remanded the matter back to CGIT-II, Dhanbad, with directions to hear both sides afresh. The High Court also observed in that earlier case that there is no appeal provided under the Act against an order passed solely under Section 7Q.
After remand, the CGIT-II, Dhanbad, passed a fresh order on 28.03.2023 in IT No. 2/9/2022. This time, the Tribunal set aside the EPFO’s order dated 09.12.2021 under both Sections 7Q and 14B and directed that the entire amount of Rs. 1,02,18,489/- be refunded to the respondent company. This new Tribunal order is what the EPFO challenged in the present writ petition (CWJC No. 9089 of 2023).
What the Court Examined and Decided
The Patna High Court, through Hon’ble Mr. Justice A. Abhishek Reddy, heard both sides. The key questions before the Court were whether the CGIT-II could:
- Entertain and allow an appeal against an order under Section 7Q of the EPF Act; and
- Set aside the entire order under Section 14B, instead of remanding it for reconsideration, especially in light of the COVID-19 related circular of 15.05.2020 issued by the Central Provident Fund Commissioner.
On behalf of the EPFO, it was argued that the Tribunal had exceeded its jurisdiction. Counsel pointed out that:
- The earlier Patna High Court order in CWJC No. 10921 of 2022 had clearly noted that no appeal lies against an order passed only under Section 7Q. Therefore, the Tribunal should not have entertained or decided any appeal against the interest portion.
- The EPF Act makes interest under Section 7Q automatic and mandatory once there is delay in payment of contributions. The Tribunal cannot waive or set aside such statutory interest.
- The Tribunal wrongly held that penalties or damages could not be imposed without proving mens rea (criminal intent), which runs contrary to the Supreme Court’s judgment in Horticulture Experiment Station Gonikoppal, Coorg v. Regional Provident Fund Organization, (2022) 4 SCC 516.
The EPFO relied on several judgments, including:
- Organo Chemical Industries v. Union of India, 1979 AIR 1803
- Horticulture Experiment Station Gonikoppal, Coorg v. Regional Provident Fund Organization, (2022) 4 SCC 516
- Arcot Textile Mills v. Regional Provident Fund Commissioner, (2013) 16 SCC 1
- The earlier Patna High Court decision in CWJC No. 10921 of 2022 between the same parties
On the other hand, the respondent employer questioned the maintainability of the writ petition and defended the Tribunal’s order. It was submitted that:
- The primary authority had passed the 09.12.2021 order without giving proper opportunity to the company to be heard.
- Notice was served on 10.10.2021 fixing hearing on 29.10.2021, but that date was affected due to a Minister’s visit. The case was then listed on 18.11.2021, when the respondent could not appear due to illness, and then on 30.11.2021 there were technical problems in virtual hearing despite the physical presence of the company’s representative.
- The authority refused adjournment and proceeded to pass the 09.12.2021 order, so there was no fair opportunity to file objections or an explanation.
- The EPFO did not consider the impact of the COVID-19 pandemic and the headquarters’ letter dated 15.05.2020 which instructed authorities to consider the pandemic while deciding on levy of damages, and not to initiate such proceedings for the COVID period.
- Part of the dues had already been recovered under pressure even before the 09.12.2021 order, and the rest was subsequently recovered.
The respondent relied on various decisions, including M/S Rajiv Gandhi Cancer Institute v. Regional Provident Fund (AIRONLINE 2021 DEL 1488), Arcot Textile Mills, and other High Court decisions, to support its plea that the damages and interest order deserved to be set aside.
To decide the matter, the Patna High Court examined the scheme of Sections 7A, 7Q and 14B of the EPF Act. The Court reproduced the statutory text and highlighted that Section 7Q makes interest on delayed payment of contributions mandatory. Once an establishment covered by the Act defaults or delays provident fund contributions, the liability under Section 7Q automatically arises.
Referring to its own earlier judgment in CWJC No. 10921 of 2022 between the same parties, the Court reiterated that where the authority passes a composite order under Sections 7A and 7Q together, such an order may be appealable. However, if the authority passes an independent order solely under Section 7Q, there is no appeal provided against such an order.
The Court also relied on the Supreme Court’s ruling in Arcot Textile Mills v. Regional Provident Fund Commissioner, (2013) 16 SCC 1, where it was clarified that a composite determination under Sections 7A and 7Q can be appealed, but an independent Section 7Q order is not appealable.
Based on this legal position, the Court held that the Tribunal’s act of entertaining and allowing the appeal against the Section 7Q portion and setting aside the interest order dated 09.12.2021 had “no legal basis”. Since Section 7Q is mandatory and automatic, and there is no statutory appeal against an independent Section 7Q order, the Tribunal’s order dated 28.03.2023 setting aside interest was contrary to law and had to be quashed to that extent.
On the question of damages under Section 14B, the Court examined two important Supreme Court judgments.
First, it referred to Organo Chemical Industries v. Union of India (1979 AIR 1803), where the Supreme Court held that “damages” under Section 14B is a guided power, and that high officers entrusted with such discretion are expected to act fairly and responsibly with reference to statutory policy.
Second, it quoted extensively from Horticulture Experiment Station Ganikopal, Coorg v. Regional Provident Fund Organization, (2022) 4 SCC 516, where the Supreme Court clearly held that mens rea or actus reus is not an essential element for imposing damages for breach of civil obligations like EPF defaults. Any default or delay in payment of EPF contributions is itself sufficient ground to impose damages under Section 14B.
The Patna High Court noted that the CGIT-II had simply set aside the entire 14B order. However, there was an important intervening factor: the circular dated 15.05.2020 issued by the Central Provident Fund Commissioner directing all Commissioners to consider the COVID-19 pandemic situation while dealing with levy of damages. This circular was not fully factored into the original 09.12.2021 order.
The Court held that the correct course for the Tribunal, instead of fully setting aside the damages, should have been to remand the matter back to the primary EPF authority to reconsider the damages with specific reference to the COVID-19 circular.
Emphasising that the EPF Act is a beneficial legislation and that amounts recovered as damages are used for the benefit of employees, the Court held that the EPF authorities have every right to levy and collect damages under Section 14B, though the discretion is not absolute and must take into account relevant directions like the 15.05.2020 circular.
Ultimately, the Court concluded that:
- The Tribunal’s order dated 28.03.2023, to the extent it set aside the Section 7Q interest order dated 09.12.2021, was illegal and was set aside. Thus, the interest levied under Section 7Q stands restored.
- The Tribunal’s order dated 28.03.2023, to the extent it set aside the Section 14B damages order, was also set aside. However, instead of restoring the damages as they stood, the Court remanded the matter back to the primary EPF authority for fresh consideration under Section 14B.
The primary authority has been directed to:
- Consider the circular dated 15.05.2020 regarding the COVID-19 pandemic;
- Issue notice to the respondent company;
- Give an opportunity for filing explanation and calculation charts;
- Grant a hearing; and
- Pass a reasoned order afresh under Section 14B.
The entire exercise must be completed preferably within twelve weeks from receipt of the High Court’s order. The amounts already paid by the respondent company under Section 14B are to be kept intact and adjusted depending on the fresh order to be passed.
With these directions, the writ petition was allowed to the extent indicated.
Why This Judgment Matters
This judgment is important for both employers and employees under the EPF Act.
First, it clarifies that interest under Section 7Q is automatic and cannot be avoided once there is delay in paying provident fund dues. Tribunals cannot entertain appeals against standalone Section 7Q orders, nor can they set aside such interest merely on sympathetic grounds.
Second, it reinforces that damages under Section 14B do not require proof of bad intention. Delay itself is enough to attract damages. However, authorities must still exercise their discretion fairly, keeping in view circulars and exceptional circumstances like the COVID-19 pandemic.
Third, for establishments affected by COVID-19, the judgment ensures that the EPF department must consider the 15.05.2020 circular before finalising damages but cannot simply waive everything without lawful basis.
For employees, the decision protects the integrity of provident fund contributions and confirms that delayed deposits will carry mandatory interest and potential damages, which ultimately safeguard their financial rights.
Legal Issues and Answers
- Issue: Can the Central Government Industrial Tribunal entertain and allow an appeal against an independent order levying interest under Section 7Q of the EPF Act and set it aside?
Answer: No. The Patna High Court held that there is no appeal provided against a standalone Section 7Q order, and interest under Section 7Q is mandatory once there is delay. The Tribunal’s order setting aside the Section 7Q interest was contrary to law and was quashed. - Issue: How should damages under Section 14B be dealt with when COVID-19 related directions of the Central Provident Fund Commissioner exist?
Answer: The Court held that, instead of fully setting aside the damages, the matter should be remanded to the primary authority to reconsider damages under Section 14B after taking into account the 15.05.2020 circular, giving due hearing and passing a reasoned order. - Issue: Is proof of mens rea (bad intention) necessary for imposing damages under Section 14B for delayed EPF contributions?
Answer: No. Following the Supreme Court’s decision in Horticulture Experiment Station, the Court reaffirmed that mens rea or actus reus is not an essential element for imposing damages under Section 14B; delay or default itself is sufficient.
Cases Cited by the Court
- Organo Chemical Industries v. Union of India, 1979 AIR 1803
- Horticulture Experiment Station Gonikoppal, Coorg v. Regional Provident Fund Organization, (2022) 4 SCC 516
- Arcot Textile Mills v. Regional Provident Fund Commissioner, (2013) 16 SCC 1
- Central Board of Trustees Employees Provident Fund Organization v. M/S Urmila Info Solutions, CWJC No. 10921 of 2022 (Patna High Court)
Case Details
Case Number: Civil Writ Jurisdiction Case No. 9089 of 2023
Case Title: Central Board of Trustees, Employees Provident Fund Organization through the Regional Provident Fund Commissioner-II (Legal) v. M/S Urmila Info Solutions
Citation: 2025 (3) PLJR 213
Coram: Hon’ble Mr. Justice A. Abhishek Reddy
Date of Judgment: 07-05-2025
Court: High Court of Judicature at Patna
Advocates:
- For the Petitioner: Mr. Prashant Sinha, Advocate
- For the Respondent: Mr. Deo Prakash Singh, Advocate
Nature of the Case: Writ petition under civil writ jurisdiction challenging an order of the Central Government Industrial Tribunal-II, Dhanbad, relating to interest under Section 7Q and damages under Section 14B of the EPF Act.
Impugned Order: Order dated 28.03.2023 passed by CGIT-II, Dhanbad in IT No. 2/9/2022.
Outcome: Writ petition allowed in part; Tribunal’s order setting aside Section 7Q interest quashed and interest restored; Tribunal’s order setting aside Section 14B damages also set aside, with matter remanded to primary EPF authority for fresh decision under Section 14B after considering the 15.05.2020 circular and hearing the respondent.
Link to Judgment:https://patnahighcourt.gov.in/viewjudgment/MTUjOTA4OSMyMDIzIzEjTg==-wBZ–ak1–urKGIFk=
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