KIND ATTENTION TRAINING PROGRAMME ON COMPLIANCE

This hand book covers the study material on Compliance area. The objective of the course is to apprise the trainees appropriately so that they have a true insight into the compliance mechanism and the act provisions in its real spirit. Keeping this in view, the background material on topics relating to Compliance 2001, CCTS, statutory provisions on applicability, assessment of dues and default management are incorporated in this booklet for the benefit of trainees. The participating trainees are expected to study the provisions of the Act/Schemes relating to the topic so as to interact effectively with the faculties. This handbook is a sincere attempt on the part of Zonal Training Institute, EPFO, Chennai to compile all relevant issues and the latest Instructions are appended at the end of the book. However this hand book is not a substitute to the statute or manuals. 2. The valuable guidance and suggestions received from many serving and

retired officers and officials of EPFO and their expertise in the Compliance Wing made this book a valuable reference book. It is hoped that the participants will be immensely benefited by the contents of this hand book.

(K. NARAYANAN) (K.SRINIVASAN) Assistant PF Commissioner(Training)

Regional PF Commissioner - I

Dated: Chennai 40.

HAND BOOK ON COMPLIANCE CONTENTS PART II

S.No.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Topic
An Introduction to Compliance Compliance 2001 Set up of Compliance Wing Plan of Action & implementation. Role of APFC (Compliance / Circle Officer ) Role of E.Os under Compliance C.C.T.S Object & Scope C.C.T.S Preparatory Action. C.C.T.S Salient Features C.C.T.S Compliance & Default Codes C.C.T.S Input & Output Monitoring Report. Detection of Defaulters through C.C.T.S Role of Compliance Circle Applicability of the Act Inquiry under Section 7A Role of APFC Default Management Penal Provisions Introduction Penal Damages Application of Section 7Q Inspectors EPFO Recovery Machinery Effect of BIFR under the Act. Grant of Instalmental facility Action against establishments under liquidation.

Page No.
1-5 5-8 9 9-10 11-12 12-13 14-15 15-16 16-18 19 19-27 27-35 35-47 47-54 54-56 57-65 65-80 81-82 82-83 84

21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

Contractors Securing Compliance Exemption Provisions of Act & Scheme Duties of Employer Exempted Establishment Functions of Exemption Section Terms & Conditions of Exemption under EPF Scheme Relaxation under Para 79 Board of Trustees Election procedure Application of Penal provisions to Exempted Establishment Drill for conduct of Inspection of Un-exempted Establishment. Drill for conduct of Inspection of Exempted Establishment. Pattern of Investment Withdrawal and Sale of Securities. Holding of Securities in Demat Form Transfer of P.A on Grant/Cancellation of Exemption Returns due from PF exempted establishments Legal Cell EPS-1995 Benefits Dos & Donts in processing the Claims Scrutiny of Form 10C and 10D. APPENDIX IMPORTANT CIRCULARS

84-85 86-91 91-93 93-95 96-98 99 99-101 101-103 103-104 104-105 105-109 110-111 112-117 118-120 120-122 123-126 127-143

144

INTRODUCTION TO COMPLIANCE
In terms of securing compliance with Employees Provident Funds and Miscellaneous Provisions Act, 1952, the Compliance Wing of the Organisation need to ensure (1) (2)
(3)

Timely coverage of all coverable establishments. Timely allotment of Code Number for a covered establishment. Timely enrolment of all eligible employees to Provident Fund. Timely deduction and remittance of dues to the funds. Timely detection of default for recovery and penal action. Timely levy of damages. Timely grant of exemption. Timely inspection of establishments. Timely action on legal matters.

(4) (5) (6) (7) (8)

(9)

(10)

Infusing and sustaining hope, faith and conviction in the minds of subscriber-members. Set-up: The Headquarters Office of EPFO at Delhi is responsible for securing COMPLIANCE under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 which includes :

(a) (b)

conduct of survey for the purpose of inclusion of more industries and class of establishments under the purview of the Act; to propose amendments to the provisions of the Act for effective enforcement. to process the applications seeking exemption from the operation of the Scheme(s). to monitor, review and assist the regions in the matter of recovery machinery, default management, legal cases and Appellate Tribunal and to issue suitable guidelines and procedural aspects in regard to the implementation of the Act. to look into the grievances/complaints on Enforcement through squad of inspectors. The Headquarters Office shall obtain the requisite data on various enforcement matters for inclusion in the organisations Annual Report for its presentation to the Central Board of Trustees, Employees Provident Funds and placing it before the Parliament.

(c) to assist the Committee on exempted establishment. (d) (e)

(f)

2 The regions are headed by Regional Provident Fund Commissioner, Grade I, and he is assisted by the Regional Provident Fund Commissioners, Grade II, with definite assignments namely, Enforcement, Recovery, Legal, Exemption, etc. The Inspectorates are located wherever the concentration of establishments are there and manned by Enforcement Officers for effective field functioning. The inspectorate in certain selected areas is also designated as Service Centres to guide and assist the employers in complying with the provisions of the Act and Schemes and, in addition, render service to the subscribers in getting their benefits under the Schemes framed under the Act, expeditiously. The Assistant Provident Fund Commissioner and Enforcement Officers are also vested with the powers of enforcement to assist the Regional Provident Fund Commissioner in their respective sphere so as to ensure proper enforcement of Employees Provident Funds and Miscellaneous Provisions Act, 1952. Every Regional Office / Sub-Regional Office should set up an exclusive section for each of the following functions: (1).Compliance Section i) Intelligence circle functions(Applicability of the Act) ii) to handle unexempted establishments, including securing Compliance from Establishments, monitoring of Enforcement Officers and inspection of establishments, default management, enforcing penal provisions, etc. (2) Exemption Section - to process the exemption applications and monitor the performance of exempted funds. (3) Damages Section - to initiate action to levy and realise Penal Damages and interest under Section 7Q, wherever due. (4) Recovery Section - to initiate action to recover the arrear dues including arrear interest due under Section 7Q. (5) Legal Section - to handle Court cases, Appellate Tribunal and Writ Petitions. (6) Inspector - to perform the functions under Section 13 of the Act by the Enforcement Officers. Note: Considering the need, the above nature of work may be handled separately in each Section or combinedly in one or more Sections, set up to handle all the above matters. However, the procedure prescribed in respect of each nature of work should be strictly followed.

Default Management - Recovery of dues To fulfil the mission of the Organisation and the objectives of the Act and Schemes, the default management and the recovery of dues are the key factors. To achieve this, the steps to be taken by the Enforcement are (a) (b) Determine the dues under Section 7A of the Act. Realise Current Demand through the modes of recovery under Section 8F of the Act.

(c)

3 Issue Recovery Certificates to the Recovery Officer to realise the dues by attaching the movable/immovable properties and arresting the employer and his detention in prison. In the case of default of employees share of Provident Fund contributions, first information reports are to be filed with the Police authorities in terms of Section 405/409 of Indian Penal Code. Ensure the frequent visits by Enforcement Officer to the defaulting establishments. Defaulters should be brought to the notice of the employees Union and the employers Organisation. Furnish the list of defaulters to the Banks so as to insist clearance certificate on Provident Fund and other dues before considering sanction of loans/advances to the establishments. Furnish the list of defaulters to the Income Tax authorities so as to enable them to examine the question of allowing relief, etc. In genuine and deserving cases instalment facility may be allowed to defaulting employers to clear the dues. Recovery of interest under Section 7Q of the Act. Levy of damages on all belated payments in terms of Section 14B read with relevant portions of the Scheme/s. Approach the Executive Magistrate to bind the accused employers for good conduct under Section 110 of Code of Criminal Procedure, 1973. Prosecution of defaulters, invoking Section 14 of the Act. Wherever the punishment awarded by lower Courts are meagre and inadequate, appeals to be made to secure enhanced punishments. Display the list of ten highest defaulters with the names of the establishments and the amount in default through a Notice Board, prominently placed at the entrance of the Regional/Sub-Regional Offices/Inspectorates.

(d)

(e) (f) (g)

(h)
(i)

(j)
(k)

(l) (m) (n) (o)

4 Flow Chart of Compliance Machinery: Authorities empowered to enforce the Employees Provident Funds & Miscellaneous Provisions Act, 1952.
CENTRAL P.F.COMMISSIONER (Chief Executive)

Addl. CENTRAL P.F.COMMISSIONER (Compliance)

REGIONAL P.F.COMMISSIONER (Region)

Regional P.F.Commissioner (Sub-Regional Office)

Regional P.F.Commissioner (Compliance & Recovery)

Regional P.F.Commissioner (Exemption)

Regional P.F.Commissioner (Legal)

Assistant P.F.Commissioner (Compliance & Recovery)

Dist Office/Service Centres

Survey & Application of Act Monitoring Enforcement / Inspection Default Management Penal Action Recovery Proceedings Legal / Tribunal / Consumer Forum

Enforcement Officers

COMPLIANCE 2001 AN INTRODUCTION

Compliance 2001 programme was introduced in the year 2000-2001. The main objective of the programme is: what is claimed as establishments brought under the purview of the Act are in effect brought under Compliance fold: what is claimed as members become contributing members and in their accounts contribution realised and interest thereon gets credited and individual annual statement of account issued in fulfilment of the statutory obligation Strategy To achieve the above objective, the compliance (enforcement) wings of the field offices has been reoriented and restructured. All enforcement functions have been consolidated at the level of a Circle Officer (Assistant PF Commissioner) with appropriate complement of Enforcement Officers and support staff in each circle. Targets have been fixed for each Circle Officer in areas of detection of default, disposal of 7A cases, recovery and in enforcing compliance against the non-complying establishments. The purpose was to coordinate, focus and channelise the entire machinery and effort on delinquent employers so that members who are or claimed to be their employees are given the benefits under the Schemes as per their rights. Work distribution system in the compliance function area was restructured, streamlined and the concept of area inspectors abolished. The primary objective being to focus on all noncomplying establishments with proper accountability. A computer software was developed to cull out the progress achieved in converting an establishment from non-complying to a complying level and at the same time ensuring credit of money into the subscriber account. The above issues are discussed at length in the following chapters

CATEGORIZATION OF ESTABLISHMENTS
All the establishments covered and members serviced has been categorized on the following basis. Operative Establishments Establishments having at least one member with balances in his account. Inoperative Establishments Establishments which have no connected records for members in the members master database in the computer system or establishments which do not have even a single member with any balance in his account. Active Members Members having some balance in their account and in whose case contributions have been received at least once in the last three years. Inactive Members Members having some balance in their accounts but in whose case no contributions have been received at least once in the last three years. Non Existing Members Members in whose respect no records are available in the member master file viz. those members in whose case no contribution has ever been received.

5 The software classified the establishments and members into following three categories.

Category -1(Inoperative/Non Complying Establishments)

The expression refers to all the un-exempted Establishments covered on or prior to 31.03.2002 but has NO membership as on 31.03.2003. This may be either due to the noncompliance by the establishments from the date of coverage or due to the default in updation of accounts by the field office concerned from the year of coverage.

Category 2(Operative Establishments with stagnated compliance)

The expression covers all the un-exempted Establishments with membership but with stagnated compliance for the last three accounting years i.e., from 2000-2001 onwards and hence, annual accounts are NOT updated beyond 1999-2000.

Category 3(Operative Establishments with continued compliance)

The expression includes All the un-exempted establishments with membership where annual accounts are updated at least up to 2000-2001. All the un-exempted establishments covered during the period from 1.4.2002 to 31.3.2003 for which the annual updation is expected during the financial year 2003-2004.

Category 9(Closed/defunct/In-actionable) Establishments

The term refers to all the establishments which are certified to be defunct/closed/inactionable after due verification. These establishments are identified by the specified codes (101 to 109) fed in to the establishment master. 2

COMPLIANCE 2001 SET UP OF COMPLIANCE WING- PLAN OF ACTION AND IMPLEMENTATION

To fulfill the Mission of EPFO and to achieve its objectives, an effective and sound compliance machinery is essential. The compliance wing of an office covers the area of application of the Act to eligible establishments, entertaining voluntary coverage, securing compliance, grant of exemption, default management, enforcing penal provisions of the Act, levy of damages, monitoring performance of Enforcement Officers, Recovery, Tribunal and Legal matters and furnishing of authentic and accurate MIS data for ABP return. The Compliance Section is required to attend the following items of work so as to enforce the provisions of the EPF & MP Act and the schemes framed there under: 1. Formation of circle and intelligence circle. Attaching officers to each circle. The circle is headed by the Assistant Commissioner, who will be assisted by the Enforcement Officers for the field performance. The Assistant P.F. Commissioner will have a cross functional responsibility with reference to accounts as well as enforcement matters. The establishment falling in each circle should be maintained.

2.

6 3. Maintenance of centralized register for covered establishment, on close of each month to arrive at the actual number of live establishments dealt in the office. The Code Number Register in the section should also be maintained up to date. The establishments which are brought under the purview of the Act are required to be closely monitored at least for a period of 6 months to watch their compliance through CCTS reports. This is with a view to arrest the tendency on the part of newly covered establishments in committing default. The file relating to applicability kept in the Compliance Section should bear a fly leaf on the front inner cover to highlight the review made on the file by the Supervisors periodically. Maintenance of History sheet in respect of each establishment. A History Sheet is an effective tool and serves for monitoring. It should necessarily be maintained for each establishment in a Register Form so as to record the basic details of the establishments with reference to coverage data, Form 5A, Bank accounts, default position, penal/legal action initiated etc. Alternatively, the History Sheet may be maintained along with the Coverage File. Supply of guidelines to establishments seeking voluntary compliance. Scrutiny of proposal/voluntary compliance applications received from establishments. Issue of letter allotting the Code No. of establishments within three days, by fax and speed post. Allotment of EPFO business number to each establishment. To ensure disposal of application for allotment of code number, a register should be maintained in the prescribed manner. The allotment of code number to an establishment with full details should be fed to the computer so as to update the establishment master. On assigning code number, simultaneously the accounts group should also be earmarked so as to achieve the purpose and ensure compliance. While accepting the Demand Draft along with the application for allotment of code number, it is also necessary to collect the Form 9(Revised), 5,10, 12A up to the current month and also nomination forms of the members. The receipt of these documents should be entered into computer before its transmission to accounts branch. The coverage file should be reviewed and any wanting information/documents/clarification in regard to membership or the wages etc. should be obtained through correspondence and wherever required the establishment may be asked to appear for the enquiry under Section 7A and the dispute settled. The services of the Enforcement Officer should not be utilized for filing deposition, presenting the case during enquiry Under Section 7A, except in case of absolute necessity and with the prior permission of the Regional Commissioner concerned. Assisting the establishment in determining the dues to be deposited in different accounts through Demand Draft. Filing of separate challans for each month.

4.

5. 6. 7. 8. 9. 10. 11. 12.

13. 14.

15.

16.

17.

7 A register to watch the conduct of 7A enquiries tills the assessment of dues should be maintained. In addition separate register for current demand and arrear demand should be maintained so as to extract the details of the amount assessed, amount realised in each month. Preparation of Annexure A is the prime responsibility of Compliance Section. This should be prepared carefully and where the visit of the Enforcement Officer to the establishment is absolutely necessary and the defaulting establishments should necessarily be included in the Annexure A. In addition, the requirement of accounts branch, if any, should also be included. The Annexure A should be prepared preferably on weekly basis and provide the number of establishments at least 7 establishments per day. This will take care of the actual and effective inspection that can be conducted by the Enforcement Officer. The establishments listed in the Annexure A should be supported by an authority letter for each establishment under the signature of the Assistant Provident Fund Commissioner of the circle. No Enforcement Officer is expected to visit the establishment without the authority letter. There is no regular inspection of establishments by the Enforcement Officer. The determination of dues under Section 7A also depends upon the receipt of Form 12-A from the establishments. Wherever the default in submission of Form 12A is detected through CCTS Reports, the Enforcement Officer should be directed to procure the same. It is the duty of the Assistant Provident Fund Commissioner to procure 90 per cent of the Forms 12A due from the establishments, either on voluntary compliance or through the Enforcement Officer. Registers such as Recovery Register, Register of Prosecution, Register of Tribunal cases, Register of 406/409, Register of Writ Petitions, Register of BIFR cases, Register of Attachment/Release of Properties, Claim Petition Register, Register on 8F cases, Register on 110CrPC cases are to be kept and updated. Generation of reports on compliance from the computer through CCTS Software. Forwarding of letter and damages statements (including 7Q to the establishment). Issue of summons, assessment order etc. The CCTS report should be thoroughly scrutinized with the assistance of Enforcement Officer before its release. To ensure prompt action in collecting the Form 12A through Enforcement Officer, after 15 days of issue of 7A orders letter to banker should be sent under Sec.8F wherever due. To ensure filing of complaints under Sec.406/409 of IPC. Invoking the provisions of the Section 8B, issue of authority letters etc. Transfer of current demand to arrear demand on first April of each year. To assist the Assistant P.F. Commissioner in conducting minimum number (i.e.50) of 7A enquiries and also to assist the maintenance of DCB register at his level. Pursue Court cases and furnishing parawise comments promptly.

18.

19.

20. 21. 22. 23. 24. 25. 26. 27. 28. 29.

30.

To obtain the list of inoperative establishment and to follow it up through the Enforcement Officer for securing compliance.

8 31. . 32. 33. 34. The floppy on IEMS progress should be sent to Head Office every month Identifying the closed establishment in the Computer under 8B category. Furnishing of statistical data on various enforcement activities, submission of returns and reports. The Enforcement Officer is expected to visit the office on weekly basis and meet the Assistant Provident Fund Commissioner concerned and to submit the Annexure B and discuss the issues for follow up action. The Annexure B received from Assistant Provident Fund Commissioner with his remarks and directions, follow up action should be taken by the compliance section immediately. Tackling of defaulters: It should be the prime concern of the Compliance Section. All the defaulting establishment should be got inspected for the purpose of conduct of 7A enquiries. With reference to Forms 12A, (after due scrutiny and acceptance) on the day of enquiry the assessment order is to be finalised, irrespective of the fact that whether the employer appears or not. The Drill prescribed for the conduct of 7A enquiry, maintenance of DCB Register and watching of acknowledgement on 7A order etc. should be closely monitored by the Compliance Section. After 15 days from the date of issue of 7A order the file should be reviewed with reference to 7A register for follow up action. Action should be initiated under Section 8F and to direct the Enforcement Officer to lodge a complaint under Section 406/409 for defaulting employees share of provident fund contributions. Depending upon the gravity of the case all penal action should be initiated on due date and to determine whether the dues are realizable or unrealizable. Realisation of dues through Section 8F should be closely watched. Court cases and prosecution cases should be pursued closely. All legal cases should be reviewed every month. The data for ABP Return should be extracted only from the concerned registers kept in the Compliance Section. These registers should be closed on monthly basis under the signature of Assistant Provident Fund Commissioner. The cases that are pending with the EPF Tribunal and Consumer Forum etc. are to be examined for follow up action. All Court cases should be attended by the Enforcement Officer and the Report obtained for updating the History Sheet. At the end of each month a report from the Enforcement Officer is required to be obtained to determine the follow up action taken on the defaulters and realisation of current and arrear demand etc. Wherever the penal damages and interest under Section 7Q are to be realized the Enforcement Officer should be deputed and action initiated. Unless the compliance is secured by the Compliance Wing it may not be possible for the accounts branch to give compliance by issuing the Statement of Accounts etc on due dates. Thus the successful functioning of an office is solely depending upon the effective role of officials in the Compliance Wing.

35.

36.

37.

38.

ROLE OF ASSISTANT PF COMMISSIONER(Compliance)

The duties and functions of APFC(Compliance) will include the following: I. APFC will have cross functional responsibility in relation to establishment within his/her jurisdiction. II. Will be responsible for monitoring default and preparing monthly lists of defaulting establishments on the basis of information to be collected by him from the Accounts Division by establishing effective formal and informal channels of communication with this function. III. Take action on all cases falling within his/her jurisdiction as per list of inoperative establishments. IV. Issue letter to defaulting establishments within 15 days of default occurring and there after issuing two further follow up reminders. In case of continuing delinquency by the end of third month of default, proceedings under Section 7A to be initiated. V. Maintain the pendency register for 7A cases in prescribed format and also maintain a register for demand and collection to record 7A disposal and monitor the recovery of current dues. VI. Dispose off a minimum of 50 cases under Section 7A during one month. VII. Recover 90% of current demand during the current year. VIII. Assist hitherto delinquent employers to get back into the main stream of Voluntary compliance. IX. Assist and facilitate voluntary compliance X. Find ways and means of reducing representation and compliance cost for the employers.

ROLE OF ENFORCEMENT OFFICERS UNDER COMPLIANCE

Issue of Annexure A (copy enclosed) along with the authority letter, (duly signed by the Asst. Commissioner) to the EOs with reference to CCTS report, IEMS report, defaulters list, major defaulters, Defaulters current and arrear demand, non-submission of Form 12A, non-submission of Form 3A and 6A, Pending Court case etc. This should be sent for a week/15 days. The EO on his visit to the office on weekly day, the receipt of Annexure B along with the acknowledgement on the authority letter issued to the establishment should be collected and submitted to the Assistant Commissioner. It is desirable to collect the tour diary also from the EO, on weekly basis. To submit the Annexure B (copy enclosed) to the Assistant Commissioner on the day of EOs visit so as to provide necessary guidance to EOs for further follow up action. To review the performance of EO, a review report is to be obtained in the format suggested (enclosed) The response from employers on CCTS report should be carefully examined and necessary action to be taken. To display the top ten major defaulters of the office, duly updated every month and displayed in the office. Similarly the model employers list (numbering ten) should also be displayed and this should be communicated to the accounts group for extending speedy service and issue of PPO and other benefits on the day of superannuation of the PF members. The penal damages section should maintain the register for issue of notice with reference to CCTS report, conduct of enquiry, issue of levy order/exparte order, watching of compliance through schedule of receipts and to take follow up action with reference to current and arrear demand through Eos maintaining the summary register to show the

10 number of enquiries conducted, amount levied, amount realized etc. While levying damages the amount due towards 7Q reflected through CCTS report should also be conveyed to the employers. The amount of interest under Section 7Q with effect from 1.7.1997 should also be watched for its realization. A separate review should be under taken in respect of past cases, i.e. with effect from 1.7.97. To furnish the MIS/ABP(revised) return to the MIS section accurately. The dues towards pension contribution from the exempted establishment should not be clubbed with the amount due from the exempted establishment to the Board of Trustees. A proper monitoring should be kept on the exempted establishments on PF/Pension/EDLI duly maintaining a register. The monthly and annual report should be watched properly and follow up action to be taken. The clarification etc. sought for by the establishment should be dealt on priority. Action under Section 7A, 14B and other penal provisions should be initiated promptly in respect of exempted establishments. The intelligence wing of the enforcement should be geared up; the references received should be given due importance and priority. All applications under Section 1(4) should be scrutinised and forwarded to Head Office. To enable Regional Commissioner to have a supervisory check on 7A orders and other enforcement areas necessary assistance should be extended duly submitting the files for verification/scrutiny. All the exempted establishments should be inspected only at the level of Assistant Commissioner, no Enforcement Officer should be deputed for this work directly or to assist the Assistant Commissioner. There is a ban on issue of relaxation under Para 79 of EPF Scheme, an establishment seeking exemption should comply as an unexempted establishment till the establishment is notified, granting exemption. However, specific cases of intricate nature should be dealt as per the guidelines issued by the Head Office. To maintain the establishment files properly and to ensure updation of Form 5A in respect of each establishment. To assist the Eos in performing recovery action promptly. To maintain the DCB register for inspection charges preferably through computer. The work Compliance means and includes Compliance on the part of the employer in terms of payment of dues and submission of returns and Compliance on the part of EPFO in compilation of annual accounts and issuance of annual PF statement through Form 23 Since the progress on IEMS is monitored through Computer and special efforts should be made to secure compliance. The collection of Form 12A to the extent of 90% of the establishment is the responsibility of the Assistant Commissioner. The Enforcement Section should assist him in complying this direction of the Head Office and to meet the requirement, the service of the Enforcement Officer should be availed with positive result. The prompt submission of monthly and annual returns by the establishment is the responsibility of the Enforcement Officer and the Enforcement Section. Any omission in this regard cannot be categorised as employers fault, but the fault of Enforcement Section.

11

COMPUTERISED COMPLIANCE TRACKING SYSTEM C.C.T.S.

OBJECT AND SCOPE

Doubts were being expressed on the number of establishments under the purview of the EPF & MP Act 1952 and the membership therein reported by the Organisation. The reporting method being followed by the Organisation had largely been manual and prone to errors. There was no scientific tool to arrive at the correct statistics. It was against this background that a System Assisted Membership Audit Software was conceived and developed at the Head Quarters Office in 1999-2000 to arrive at the correct statistics in relation to the establishments covered by Employees Provident Fund Organisation and membership therein. An elaborate exercise was mounted to obtain the relevant databases from the field offices and the same were processed through the said software. The results thrown by the audit exercise compelled a thorough analysis of the reasons for the poor compliance status from the un-exempted establishments. The analysis broadly indicated that: There has been a steady deterioration over a period of years in the basic function of maintenance of DCB Register, which was key for early default detection and remedial action; this must have been the most significant factor which resulted in the current state of poor compliance. The Accounts Groups to whom the ownership of DCBR is give, were made responsible for the timely detection and communication of the defaults to the compliance wing on monthly basis; the duty which was honoured in exception rather than as a rule. Ideally, the compliance wing should not have been made dependent on the Accounts Groups for detection and communication of defaults. The fact that the computerization in the EPFO effectively disregarded this vital function, must have contributed to the situation, thus leaving enough scope for fraudulent practices.

Consequently, a DCBR Software package for computerised maintenance of DCB Register was developed in-house and was distributed to all the field offices in May 2000. The scope and functionality of the software was enhanced and CCTS Software Version 1.0 was distributed in October, 2000. To ensure its effective implementation, eight workshops were conducted on Zonal basis (two each at Calcutta and NATRSS, New Delhi and one each at ZTI, Chennai, Ahmedabad, Ujjain and Regional Office, Hyderabad) where the functionaries of the field offices from compliance and EDP wings were given sufficient exposure. During the last one year of implementation of CCTS, constructive feed back has been received from various field offices; Special mention should be made of the feed back from the officers and staff of Dy.Director(Vig.), South Zone, Hyderabad. The version 2.0 incorporates the essence of the feed back/suggestions received from the Officers and staff during the said eight workshops and also through direct communications. The suggestions which could not be incorporated in this version would be passed on to the SISL who are handling Re-invent EPF, India project. The Information Services Division of Head Quarters gratefully acknowledges the response of the staff and officers. The functionality of CCTS Version 2.0 broadly encompasses the following aspects. System assisted DCBR maintenance duly supported by dealing assistant wise monthly DCBR and establishment wise yearly DCBR. This function includes the basic audit function on monthly returns and remittances.

12 System assisted remittance monitoring where by the actual remittances received are judged against the expected remittances and the exceptions are reported. System assisted Compliance tracking duly supported by necessary monitoring reports to the compliance circles and Accounts Groups and also monthly communications to the defaulting employers. Establishing a scientific information cum monitoring tool both for the field offices as well for the Head Quarters Office (the functionality of erstwhile IEMS software has been merged into the CCTS Version 2.0) System Assisted Compliance Audit function in terms of Head Quarters letter No.E.III/18(9)2001/Compliance/2001 Dated 16.8.2001 and E.III/18(9)2001/ Compliance 2001 dated 31.8.2001. System Assisted preventive vigilance function in a limited sense (by generating exception statements/communications). 6

CCTS PREPARATORY ACTION

1) ADDRESS FIELDS OF MODULE 105, CAPS/CAMPS, 95 WITH PIN & DISTRICT FIELD IS UPDATED IN RESPECT OF EACH ESTABLISHMENT. 2) CORRECT CIRCLE NO. IS GIVEN MODULE 115 3) INOPERATIVE ESTABLISHEMNTS ARE ENTERED AS 88(CIRCLE NO.) 4) RATE OF CONTRIBUTION IS CORRECTLY FILLED IN. 5) EXEMPTION STATUS IS CORRECT OF EACH ESTABLISHEMNT UNDER ESTABLISHMENT CATEGORY. 6) D.O.C. IS CORRECTLY ENTERED IN MODULE 105. 7) NAME/DESIGNATION/TELEPHONE NO. OF ASSESSING OFFICER ENTERED IN MODULE 12O. 8) INACTIONABLE ESTABLISHMENT STATUS UPDATED IN MODULE 110 WITH REFERENCE TO CORRECT CODE.

S.NO. CAT-I ESTABLISHMENTS WHERE NO ACTION LIES 1. ESTABLISHMENTS CERTIFIED AS CLOSED AFTER DUE VERIFICATION

CODE 101

13 2. 3. 4. ESTABLISHMENTS ALREADY DE-COVERED IN THE 102 PAST. ESTABLISHEMENTS GONE OUT OF THE PURVIEW OF THE ACT SUBSEQUENT TO THE COVERAGE DUMMY ESTABLISHMENTS CREATED FOR PRACTICAL SITUATIONS INCLUDING RECORDS WHICH ARE CREATED BY MISTAKE /DATA ENTRY ERRORS. ESTABLISHEMENTS EXCLUDED UNDER SECTION 16105 ESTABLISHEMENTS WITH ALL THE ACCOUNTS ALREADY SETTLED AND NO LONGER IN EXISTENCE ESTABLISHMENTS PERTAINING TO OTHER FIELD OFFICES OF THE REGION. SECTION 2A ESTABLISHMENTS (BRANCH ESTABLISHMENTS) IN RESPECT OF WHICH COMPLIANCE IS REPORTED TO DIFFERENT FIELD OFFICE ESTABLISHMENTS WHERE APPLICATION OF THE ACT HAS BEEN JUDICIALLY STAYED CORRECTNESS OF DATA ENTRY IN CRAS - 100% SUPPLY WORK LOAD TO DEALING ASSITANT IN ACCOUNTS & COMPLIANCE CIRCLE THROUGH MODULE 810 ACCOUNTABILITY FOR DATA ENTRY ERRORS D.E.O./L.D.C. 106 107 108 103 104

5. 6. 7. 8.

9. 10. 11. 12.

109

ACTIVITY SEQUANCE II (REGULAR/RECURRING TASKS) ACTIVITY SEQUANCE III (PERFORMANCE MANAGEMENT (RO & HQ) - REPORTS) ACTIVITY SEQUANCE IV COMPLIANCE AUDIT OPERATIONS ACTIVITY SEQUANCE V FUNCTIONAL RESPONSIBILITIES IN EDP ACTIVITY SEQUANCE VI MODULE OPERATIONS IN EDP CENTRES.

CCTS SALIENT FEATURES

1) DEALING ASSISTANT-WISE MONTHLY DCBR.

14 2) 3) 4) 5) 6) 7) 8) 9) ESTABLISHEMNT-WISE YEARLY DCBR. AUDIT FUNCTIONS ON MONTHLY RETURNS AND REMITTANCES MONITORING OF ACTUAL REMITTANCES WITH REFERENCE TO EXPECTED REMITTANCES EXCEPTIONS ARE REPORTED. COMPLIANCE TRACKING THROUGH REPORTS TO COMPLIANCE CIRCLES AND ACCOUNTS GROUPS/SECTION (APRIL TO CURRENT MONTH) COMMUNICATION (SOFT NOTICE) TO DEFAULTING EMPLOYERS BUILT IN IEMS. (MODULE 850) SCIENTIFIC INFORMATION CUM MONITORING REPORTS TO REGIONAL OFFICE/HEADQUARTERS SUMMARY. PREVENTIVE VIGILANCE FUNCTION, EXCEPTION STAFF/COMMUNICATION IN A LIMITED SENSE THROUGH

10) GENERATION OF NOTICES ON DUES UNDER SECTION 7Q & 14B 10A) GENERATION OF NOTICES ON 7A/14B 11) TRACKING OF COMPLIANCE OF 100 MAJOR ESTABLISHMENTS OF EACH OFFICE. 12) MONITORING PAYMENTS AGAINST DUES UNDER SECTION 7A/7Q/14B 13) PERFORMANCE MEASUREMENT AND RATING OF EACH COMPLIANCE CIRCLE. 14) DA WISE STATISTICAL REPORTS AS ON 1.4.2001 FOR ACCURATE REPORTING AND MONITORING. 15) MONITORING OF CATEGORY 3 ESTABLISHMENTS. 16) PERFORMANCE MEASUREMENT REPORTS FOR BOTH THE LOCAL OFFICERS AND HEADQUARTERS ANNUAL ACCOUNTS, CLAIM DISPOSAL AND COMPLIANCE 17) SEGREGATION OF CLOSED/DEFAULT ESTABLISHMENT (88). 18) FORM 5/10 DATA COLLECTED THROUGH MODULE 110. 19) TRANSFER OF PAYMENT DATA TO CAMPS, 1995 WITHDRAWALS STATEMENT 20) ESTABLISHMENT STATUS ON EACH ESTABLISHMENT ANYTIME FOR 7A/14B 21) TO LOCATE CODE NO. OF ESTABLISHMENT WITH REFERENCE TO NAME OF ESTABLISHMENT. 22) IEMS INTEGRATED WITH CCTS.

15 8

COMPLIANCE & DEFAULT CODES

CODE
FULL COMPLIANCE 1 DEFAULT IN RETURNS SUBMISSION AND ALSO IN PAYMENT 2 DEFAULT IN RETURN PAYMENT IS AFTER DUE DATE DEFAULT IN RETURN SUBMISSION ONLY DEFAULT IN PAYMENT ONLY PART PAYMENT OF DUES WITHIN DUE DATE PART PAYMENT OF DUES AFTER DUE DATE 7 DATE NR FULL PAYMENT OF DUES BUT AFTER DUE SUBMISSION AND

DEFAULT

NOT RELEVANT (SIGNIFIES THE RECEIPT OF DUES PERTAINING TO THE PREVIOUS/SUBSEQUENT PERIOD DURING THE MONTH) NOT FOUND IN THE ESTMSTR. POSSIBLE DATA ENTRY ERROR IN FORM 12A /CHALLAN /ESTMSTR **********************

NF

WHEN TO GENERATE MONTHLY CCTS REPORT? CCTS Report generated in the month of August i.e. dues and remittances relating to the month of June. The Input Documents for CCTS: 1) Remittance details through CRAS. 2) Monthly dues through Form-12-A/Form-6 (PS)/Form-4 (IF)/Annexure from PF Exempted Establishments. Input-1: Details of Remittances : The due date for remittances of EPF dues ----------- 15th of the following month. i.e. for the month of June it is payable on15th July (within the grace period of 20th July). The remittances made in a base branch, for example on 20th is expected to reach the respective link branch by 22nd / 23rd July.

16 The scroll duplicate challan and Bank Statements are expected to be sent by State Bank of India to the Regional Provident Fund Commissioner before 30th/31st. The duplicate challans received in cash is processed and sent to EDP for data entry for the purpose of CRAS. After reconciling the CRAS with the Bank Statement the CRAS data is ready for use as input for CCTS. Thus by second/third of August the input for CCTS is already stored. Input-2: Details of dues: The due date for receipt of monthly dues details from employer is 25th of the following month i.e. for the month of June, 25th July-which are normally expected to reach by 31st July/1st of August. These documents received in Tappal Section are sent to EDP for data entry and thus the input data is completed by 4th of August. The CCTS report for the wage month of June, generated on 5th of August is expected to reflect the true picture to some extent. If the CCTS report is generated prior to this date it may show the prompt employers as defaulters and the consequence result. Before generating the CCTS, the job pending in EDP towards input data should be verified and not to follow the date as a matter of routine.

CCTS INPUT AND OUTPUT MONITORING REPORTS

IEMS SOFTWARE: The latest version of the IEMS Software is being released by the Information Services Division to provide for monitoring category-III establishments, I.S. Division vide their letter No. CC-17 (2)2000/SWD/5229 dated 26.6.2001 have separately issued detailed instructions regarding certain category of inoperative establishments which are no longer in existence and which can be practically removed from the work load shown for each office. In this connection, each office/regions were requested to send the floppies furnishing the particulars relating to the category code of the inoperative establishments in category-I, which the offices sought to remove from their workload in IEMS programme. Even each floppy is to be accompanied by a hard copy of the contents of the floppy and a signed declaration in writing by the officer-in-charge with the following words:I have personally verified all available records pertaining to those inoperative establishments which are either no longer in existence or are not coverable under the Act as per the

17 categories mentioned in the Head Office letter No. CC-17(2)2000/SWD/5229 dated 26.6.2001 and only those establishments are included in the floppy which is being sent to Head Office. A copy of the print out of the floppy , which is being sent to Central Office should be kept as office copy with the officer-in-charge along with a hard copy of this declaration. Based on the certificate issued by each of the officers in charge of the offices in the regions, RPFCs of the regions may also submit a certificate in writing to the following effect:All efforts have been made to incorporate only those inoperative establishments which are no longer in existence or are not coverable under the Act statutorily while recommending for its removal from the database to the Head Office as per the categories of establishments mentioned in Head Office letter No.CC17(2)2000/SWD/5229 dated 26.6.2001. Officers-in-charge of the SROs/SAOs of this region have duly certified this fact in respect of the data furnished pertaining to their offices. RPFCs Incharge of the regions are requested to ensure that a copy of the certificate submitted to each of the Officer-in-charge of SROs/SAOs is kept with them for their records, for future reference. CCTS PROGRAMME The new versions of CCTS is being released shortly to be loaded on to the computer and implemented by all the offices of the organisation. The procedure to be followed in implementing the CCTS programme effectively is laid down below:1) Every month, the CCTS programme shall be operated between 7th and 10th and the printouts taken. The following printouts are to be taken (i) Letters to defaulting employers, (ii) Letters to employers who have not submitted Form 12, (iii) Letters to employers where there is significant drop in membership or in remittance. All the above categories of letters are to be sent to the respective employers every month. For this purpose each office of the organisation may make arrangements with the post office for arranging the dispatch of bulk mail of notices/letters generated under CCTS. Department of Post run a scheme called Business Post, which may be used in this regard. In small SROs or those SROs where compliance from the establishments are reasonably upto date and as a consequence, the notices generated are comparatively less, they can use their normal dispatch section to dispatch the notices to the employers. In order to facilitate easy dispatch of the notices, the CCTS programme will generate the address of the employer at the end of the notices. Dispatch Section need to fold the notices in such a way that the address portion alone is visible outside and dispatch it under book post after the stapling together the remaining portion. By this method there should not be any necessity for putting the notices in envelopes and writing the addresses manually. 2) Assistant Provident Fund Commissioner-in-charge of the circles should monitor this activity of dispatch of notices pertaining to their circles every month. 3) Wherever the notices generated are very large in number especially in metro areas and other major industrial centres, the offices can make an arrangement for dispatching the notices through bulk mail, since the post offices undertake to do this job in many towns and cities by charging a specific fee for each activity. While making arrangements with the post offices, they may be informed that these notices need not be put into envelopes and there is need for writing of addresses since the address portion will be printed at the bottom of the notices and the notices need to be folded in such a way that the address portion is easily visible outside and staple together the letter and send it by book post. The number of such notices handed over to the post office for bulk mail may be entered in a register for cross checking later when the post office claims the bills for bulk dispatch.

18 When an employer who has received such a notice for non remittance of dues reports that he has already made the remittance and furnishes the date of remittance of photocopy of challans such letters will be sent to the Cash Section where one of the clerical staff can be instructed to verify the cash book to check up whether the remittances mentioned by the employer are in fact received by the Organisation and credited by the Employees Provident Fund Organisations accounts. In case any discrepancy is found the cash section should enter the details of remittances furnished by the employer such as the amount remitted account number wise, date of remittance, bank name & branch in which the amount is remitted etc. in a register called CCTS follow up Register and follow it up with the bank to locate the payment. The CCTS Programme will also generate a separate list of those cases where action under Section 7A is to be initiated compliance circle wise. It would be the responsibility of the Assistant Provident Fund Commissioner-in-charge of the circle to interact with the EDP Section and obtain such a list by 10th of every month. The code number and name of the establishment and the period for which 7A has been suggested by the CCTS programme should be incorporated in the Pendency Register of Inquiries under Section 7A/14B. The Assistant Provident Fund Commissioner-in-charge of the compliance section should within a week issue 7A summons to the employer. In the summons issued to such defaulters, the period for which inquiry is launched may be mentioned as From ______________ onwards. Such inquiries should be completed as expeditiously as possible and in any case within a period of three months when the assessment orders are issued due up to the previous month or the month prior to that should be assessed without waiting to issue another notice for the subsequent months. If nobody comes up on the appointed, the assessing officer should decide the case immediately and after the issue of orders under Section 7A, the entry pertaining to the establishment should be rounded off indicating the date of issue of speaking order. The Regional Provident Fund Commissioner-in-charge of the Compliance & Recovery in Regional Offices and the Officer-in-charge of SRO/SAO will be responsible for the successful implementation of the CCTS Software. Regional Provident Fund Commissioner-in-charge of the Compliance and Recovery in the region may, if necessary visit the SRO/SAO periodically and review the implementation of the CCTS programme. Alternately, the implementation of the CCTS programme should also be reviewed during the O & M meetings conducted by the Regional Provident Fund Commissioner-in-charge of the regions. The performance appraisal of Regional Provident Fund Commissioners-in-charge of Compliance and Recovery as well as that of the Assistant Provident Fund Commissioners-in-charge of the circles will depend on their performance in the matter of implementation of CCTS, disposal of 7A and 14B inquiries as the case may be.

10
DETECTION OF DEFAULTERS THROUGH CCTS ROLE OF COMPLIANCE CIRCLE.

19 As per the provisions contained in Employees Provident Fund Scheme 1952, every employer is required to remit the PF dues to the Fund within 15 days of the close of month. Similarly he is required to forward the corresponding monthly returns on or before 25th of the following month. The role of Compliance Circle in detecting the defaulters list is based on both payments as well as submission of monthly returns. It may be possible that there may be an occasion to receive the challans after the due date even though he has remitted in time and so is the case in the case of receipt of returns. The emphasis here is that Defaulters List should not be prepared on the 1 st of every month but after the due date and to assess the actual defaulters considering the fact of delay in receipt of challans and returns. The Compliance Circle must ensure the actual date of remittance and the receipt of return before finalizing or detecting the actual defaulters. 11

APPLICABILITY
Application of the Act
Employees Provident Funds and Miscellaneous Provisions Act, 1952 extend to whole of India except Jammu and Kashmir. The Act has been extended to the State of Sikkim with effect from 1st November, 1995. The Act originally applied to factories in the Scheduled Industries where fifty or more persons were employed. By an amendment, viz., the Employees Provident Funds (Amendment) Act, 1960, this was made applicable to factories employing twenty or more persons. This amendment came into force with effect from 31.12.1960. The Employees Provident Funds Scheme, 1952, had however been made applicable to newspaper establishments as defined in Section 2 of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955, employing twenty or more persons with effect from the 31st December, 1956. By virtue of amendment to Section 24 of the Cine workers and Cinema Theatre Workers (Regulation and Employment) Act (fifty of 1981), the cinema theatre employing five or more workers are brought under the purview of the Act with effect from 1.10.1984. Provisions of the Act Section 1(3) and Section 16 have a bearing on the application of the Act to an establishment. As per the said provisions of the Act, the Employees Provident Funds and Miscellaneous Provisions Act, 1952 applies to an establishment on its own force. This does not depend upon the vigilance of the department or will of the employer to make the workmen as members of the Scheme. The application of the Act to an establishment depends on the following factors: (a) The establishment should be factory engaged in any one of the Industries specified in Schedule I of the Act (or) the establishment should fall under the class of establishments as notified by the Central Government under Section 1(3)(b) of the Act.

20 (b) The employment strength should be twenty or more persons. However, in the case of Cinema Theatres, the requisite employment strength is only five. (c) Any establishment which fulfils the above criteria should be examined so as to ensure that the provisions of Section 16 of the Act does not apply to such establishment. (d) An establishment which is eligible on fulfilling the above conditions, should also be ensured that the same does not fall under the class of establishments which are notified as exempted from the operation of the Act under Section 16(2) and the notification is still in force. Prior to amendment to the Act in August, 1988, the Act provided for the infancy period of three years in respect of establishments employing fifty or more and five years in respect of establishments employing twenty or more persons but less than fifty persons. This provision has been further amended with effect from 1.8.1988 to provide uniform infancy period of three years from the date of set up to all newly set up establishments irrespective of employment strength. The provision relating infancy period has been deleted with effect from 22.9.1997. Thus the Act applies to every establishment specified under Section 1(3)(a) or 1(3)(b) from the very date the employment strength of an establishment reaches twenty. In respect of establishments falling under Section 1(3)(a), the very fact of employment of twenty persons for accomplishing the object of manufacturing process is sufficient to extend the provisions of the Act from the date on which the employment strength reaches twenty, irrespective of the fact that the actual production commenced or not. Any establishment set up prior to 22.9.1997 and not completed the infancy period till then, such establishment is required to implement the Act/Schemes with effect from 22.9.1997, subject to fulfilment of conditions referred to above. Voluntary coverage under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 . [Section 1(4)] Any establishment which is not coverable either under Section 1(3)(a) or under Section 1(3) (b) of the Act, if the majority of employees of the establishment and employer have jointly agreed that the provisions of the Act should be made applicable to the establishment, the Central Provident Fund Commissioner may apply the provisions of the Act to such establishment from the date of such agreement or from any subsequent date specified in such agreement. Section 1(4) (1) It is not necessary that the establishment in respect of which a notification is proposed to be issued should be one in the Scheduled head of industries or be one of the class of establishment notified under Section 1(3)(b). The establishment may be any establishment (2) In the case of change of ownership of an establishment, which was covered under the Act by a notification issued under Section 1(4), the new employer is bound to continue to comply with the provisions of the Scheme and his written consent is not required afresh. The new employer cannot withdraw the consent given at the time of initial coverage of the establishment. (3) If any employer comes forward with proper reason and request for withdrawal of application made for extension of that Act, such request can be acceded to, if the notification is not issued under Section 1(4) of the Act. (4) The establishments brought under the purview of the Act by notification under Section 1(4) of the Act, after coverage, would be treated on par with the establishments covered under Section 1(3) thereof.

21 Section 1(5) (1) An establishment to which the Act applies shall continue to be covered by the Act irrespective of the number of employees, any time, falls below twenty. Even if there are no employees and so long as the establishment is in existence, minimum administrative charges under EPF/EDLI Schemes shall be remitted by submitting NIL returns. Partitioned Establishment Sub-section (5) of Section 1 of the Act does not prevent the disruption of an establishment and breaking up thereof into new and separate establishments either expressly or by implication. Where an establishment has been disintegrated and three separate establishments have come into existence by a process of partition and otherwise the original establishment has ceased to exist and that sub-section (5) of Section 1 does not apply. The applicability of the Act in such a case depends not on the number of persons employed by the original establishment but on number of persons employed by each of the establishments formed by the partition of the original establishment. The questions to be considered in such a case are (1) is the partition real and bona fide? (2) Did it disrupt the integrity of the establishment and create three separate establishments? (3) And does the separated establishments concerned employ less than twenty persons? If the answers to the three questions are in the affirmative, the Act will not apply and the establishment will not be liable thereunder Coverage of establishments by virtue of having a Common Provident Fund with another establishment. [Section 3] Where immediately before the Act applicable to an establishment, there, is in existence a Provident Fund, which is common to the employees in that establishment (which is coverable) and employees in any other establishment (which is not coverable) the Central Government may by notification in the gazette extend the Act to such establishment which is not otherwise coverable under the Act, in accordance with the provisions of Section 3 of the Act. Branches and departments of an establishment should be clubbed together for the purpose of determining the employment strength. [Section 2A] In accordance with Section 2A of the Act, where an establishment consists of different departments or has branches, whether situate in the same place or different places, all such departments/branches should be treated as part and parcel of the main establishment for the purpose of application of the provisions of the Act. Scope of Section 16(1) of the Act. By the Amendment Act 33 of 1988, Section 16(1) in the Employees Provident Fund and Miscellaneous Provisions Act, 1952 was amended to exclude certain categories of the establishments from the purview of the Act. The establishment registered under Cooperative Societies Act, 1912 employing less than 50 persons and working without the aid of the power is excluded from the purview of the Act under Sec.16(1) Clause (a) of the Act. It was not the intention of the Government to automatically exclude all the establishments falling under the categories mentioned in clause (b) or (c) of sub-section (1) of Section 16 of the Act. Such of the establishments which qualify for exclusion under Section 16(1)(b) or 16(1)(c) as have not reported any compliance from the date of their coverage shall be segregated and left out of the purview of the Act with effect from 1.8.1988. Those establishments which have reported partial compliance or have been disputing the coverage under the Act should also be segregated and allowed to go out of the purview of the Act. Those establishments which have been reporting compliance regularly may be continued to be covered under the Act notwithstanding the fact that they are qualified for exclusion under Section

22 16(1)(b) or 16(1)(c) of the Act and their cases of coverage may be considered separately for regularisation under Section 1(4) of the Act. Those establishments which employ large number of casual/contingent staff who are not entitled to the benefit of Provident Fund or Pension will also continue to be covered under the Act irrespective of the fact that the regular employees of these establishments are entitled to the benefit of Provident Fund / Pension.
ALLOTMENT OF CODE NUMBERS VOLUNTARY COMPLIANCEBY THE EMPLOYER

REVISED PROCEDURE Over the years the process of allotment of code numbers to establishment by the officers of the EPF Organisation has become major area of concern to the law abiding employers. It should be noted the allotment of code number to an establishment is only to identify the establishments. In fact the act takes its own course applying the provisions to an establishment on the date in which it fulfills the condition. Keeping this in view, the revised instructions in the matter of issuance of code number are adopted. 1. The important condition of coverage is based on the nature of industry in which engaged or the activity of the establishment. 2. No. of employees employed therein. 3. Date of set up. In case the above three conditions are fulfilled, the establishment should be brought under the purview of the Act, for which the following are the details necessary. 1. Name and address of the establishment. 2. Nature of business activity/manufacturing activity 3. Date of set up of the business/factory 4. Employment Strength 5. Legal status of the establishment i.e. whether Public/Private Ltd. Co., Partnership, Society Proprietorship etc. Copies of the Partnership deed Articles of Association be provided. 6. Details of branches and Head Office of the establishment, if any including addresses along with details of Bank A/c(s) maintained. 7. Telephone No. of the employer (Office and Residence) Out of the above particulars, we may require documentary proof regarding date of set up of the establishment. This could be any one of the following categories like copy of the first Sales Invoice, proof regarding date of trial production, Incorporation Certificate issued by the registrar of the Companies, Commencement of business by the Registrar of Companies, Registration Certificate issued by the Registrar of Co-operative Society or Registration Certificate issued by Registrar of Societies, Small Scale Industry Registration Certificate, Copy of the first assessment by the Sales Tax Authorities, Copy of the first assessment by the Income Tax Authorities, Copy of the Registration if any issued by the Reserve Bank of India or any other authorities under any other statute, enactment etc. In the case of certain types of establishments especially manufacturing concerns, there may be a time gap after incorporation of the company, construction of factory, erection of machinery and actual manufacturing or trial production. However, if the employer comes forward with a request for coverage it maybe accepted. The Proforma for furnishing the information for coverage by an employer has been revised, keeping in view the changed business environment and to make the process of registration simple and easy both for employer as well as for the Employees Provident Fund Organisation. Apart from the above, the crucial information which has a bearing on coverage is the employment strength. The employers may be asked to furnish the employment strength month wise, if it is available with them right from the date of set up to the month in which application for registration is made. (In case of belated registration) However, this can be done later after the

23 coverage also and the date of coverage can at any time be shifted back provided we have sufficient evidence and other material with us to sustain our decision. Therefore, under this pretext no coverage should be delayed. Requests for coverage submitted in person in the reception counter should be entered in a separate register. The date of receipt and the serial no. in the register should be affixed with a rubber stamp in the Proforma submitted by the employer and the same serial no. and date stamp should be affixed in a receipt to be given to the employer or his representative who brings the application to our office. The same serial no. be sent to the APFC in-charge or the Compliance circle the same day or the next day morning. It would be the responsibility of the APFC in charge of the circle to allot a Code No. to the establishment immediately on receipt of the minimum documentation as aforementioned and in any case within three working days of receipt of the particulars for coverage from an employer along with a demand draft for payment of the first dues. The letter allotting the Code numbers will be signed by the Assistant Provident Fund Commissioner. It would be the responsibility of the APFC who signs the letter to ensure that the details of the establishment to whom the code number is allotted is properly entered in the code number register under his signature. The details of the newly covered establishment should immediately be entered in the data base of the computer in Employer Master. The Demand Draft/Pay order received should be sent to the cash section immediately denoting the name and Code No. allotted to the establishment in the challans, by the APFC, the same day itself. Escalation Plan In case the Code Numbers are not allotted by the APFC in charge of the circle within three working days of the receipt of the application in the office the number thereafter, will be allotted only by Regional Provident Fund Commissioner(II) in charge of Compliance. The explanation of the APFC concerned in this regard should be obtained forthwith and the reasons for non allotment of Code Number by the APFC proved in details. It would then be the responsibility of the Regional Provident Fund Commissioner in charge of the Compliance to ensure that the Code Number allotted is entered in the data base in the Employer Master. He should also sign the code number Register, after supplying the details. In case the Regional Provident Fund Commissioner(II) in charge of Enforcement do not allot the code number within another three days i.e. within 4th day to day of the submission of the application, he is not authorised to issue the code no., thereafter. The file would then be handled only by Regional Provident Fund Commissioner(I) who should allot the code number within another 3 days i.e. within 9 days of the receipt of application. In case, this could not be done the number be allotted only by the Additional CPFC in charge of the Zone with in three days. In that event, the explanation of the APFC/RPFC(II) and RPFC(I) shall also be obtained by the Addl. CPFC. Regional Provident Fund Commissioner in charge of the region as well as inspecting officers from Head Office will periodically check up the code number allotment register to ensure that the numbering process is not delayed unduly. Branches Under Section 2A In the case of establishments having branches in more than one State specially in the case of manufacturing units it has been noticed that the present provisions for calling for No Objection Certificate from the region where Head Office is situated before allotment of Code No. to the branch unit is posing a lot of difficulties and delay in issue of Code No. As a result, even law abiding employers are finding it difficult to comply under the provisions of the Act with the Office of the Employees Provident Fund Organisation where their branch is situated until a formal number is

24 allotted. It should be noted that hereafter when an employer comes forward with a request to allot a number for its branch unit falling under the jurisdiction of SROs and ROs, the Code Number should be allotted promptly without waiting for any No Objection Certificate from the region where the Head Office is situated. On allotment of the Code No., a letter should be sent to the Regional Provident Fund Commissioner in charge of the region where Head Office of the establishment is situated for his information.
The employees who have been allotted in such numbers at their request should be directed to comply in respect of such branch units in the SRO/RO in whose jurisdiction it is situated especially in the matter of compliance under Pension Scheme and under EDLI. In the case of establishment having their own Provident Fund Trust which has been either relaxed or exempted under the provisions of the Scheme or the Act, the employer may be allowed to continue to contribute to the exempted or relaxed Trust as far as Provident Fund Contributions are concerned. They may however, be advised to pay Inspection Charges/Administration Charges under Provident Fund and EDLI Scheme and Contribution under Pension Scheme and EDLI Scheme locally in respect of the employees employed therein. However, if the employer has taken a Group Insurance Policy covering all the employees and all the branches centrally in the Head Office which has been relaxed or exempted, the branch unit need to pay only the Inspection Charges under EDLI Scheme under the Code No. allotted locally by the SRO/RO. In respect of those establishments having only a few employees of say less than 10 employees in their branches and want to contribute in the region where their Head Office is situated for administrative convenience, it should not be objected to. However, such establishments also may be advised about the advantages of complying locally. The issue regarding allotment of code numbers to contractors is currently being examined by the Labour Ministry. Necessary instructions in this regard will be issued separately. The above process of allotment of code nos. should be followed whether the establishment is coverable under Section 1(3)(a),1(3)(b) or under Section 1(4) of the Act. The Code number register should be maintained in the format for coverage to be submitted by the employer except against Serial No.6, the schedule head or class of establishments notified. Immediately on allotment of the code No. one of the Eos should be sent to the establishment preferably within a month with a view to educate and guide the employer in filing the initial returns properly. The EO could utilize the occasion to find out whether the establishment is coverable from a date earlier than the date of present coverage. The software being developed for detection of the default on month to month basis will list such of those new establishments who have not yet commenced remittances within a month of allotment of Code No. It would be the responsibility of the Assessing Officer in charge of the circle to send a politely worded letter to such establishments advising them to commence compliance immediately and to guide the employer, in case, if they raise any doubts as to how to go about in fulfilling the requirements of compliance under the Act. No provisional Code No. should hereafter be allotted under any circumstances. In case, it transpires that the information furnished by the employers in the proforma for coverage is wrong the date of coverage can be shifted to a retrospective date and it would be at the risk and liability of the employer

Proforma for Coverage (to be submitted by an employer alongwith one or more of the documents mentioned below for obtaining Code Nos. 1. Name of the establishment/factory and address 2. Details of Head Office and branches with address 3. Details of Code No. if any allotted to the Head Office. 4. Date of Incorporation/set up(please furnish any one of the documents mentioned overleaf in support of the proof of date of set up of the estt./factory. 5. Employment strength

25 (i) At present : (ii) Month wise employment, strength from the date of set up may be furnished in a separate statement : 6. Nature of business activity/manufacturing activity: 7. Details of legal set up of the estt.(Please mention Whether it is an incorporated private or public limited Company, society, partnership or proprietory concern) : 8. Details of the employers/ownership particulars etc. (Names, Desig., and addresses of Managing Director, Directors, Partners, Secretary etc to be furnished) : 9. Wages disbursed for the month : 10. Details of Bankers :(including Bank branches & Account Number(s). 11. Income Tax Permanent A/c No. 12. Details of employees are furnished below: -------------------------------------------------------------------------------------------------------S.No. Name of the employee 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Fathers Name DoJ Wages (Basic +DA) &cash value of food concession)

--------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------(in case of you have more than 21 employees the above information in respect of the other employees may be added in a separate sheet of paper in the same format continuing the serial number). 13. Details of bank draft amounting to the contribution and administrative charges paid in respect of the above employees.(Rate of contribution at present is 12% by employer and employees + 0.5% towards EDLI contribution and 0.01% towards administrative charges) Name of the Bank & Branch

Draft No. & Date Amount

26 VERIFICATION It is verified that date is furnished above are correct to the best of our knowledge and belief. It is clearly understood that we are liable for coverage from a date antecedent to the date of set up furnished above and other legal consequences in the event of furnishing of false information. (Signature) Employer Essential Document(s) to be submitted (for other than Proprietory Concern) 1. 2. 3. 4. 5. 6. A copy of memorandum and Articles of Association and the certificate of incorporation issued by the Registrar of Companies, in the case of Public and Private Ltd., companies. A copy of partnership deed in the case of partnerships. A copy of Registration Certificate issued by the Registrar of Co-operative societies. A copy of Registration Certificate issued by the Registrar in the case of societies registered under Societies Registration Act alongwith a copy of the objects and Rules of the society. Partition deeds creating HUF Any agreement or other legal documents in the case of Association of persons as defined in Income Tax Act. A list of documents which can be submitted as a proof of date of set up (any one of these documents has to be submitted)
1.

2.
3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

First Sales Invoice Any proof regarding date of trail production Incorporation Certificate issued by the Registrar of Companies together with the report of the Managing Director to the Shareholders in the Annual Report. Commencement of Business Certificate issue by the Registrar of companies. Certificate of Registration issued by the Registrar of Co-operative Societies. Certificate of Registration issued under Societies Registration Act. Certificate issued by Reserve Bank of India registering newly set up and on banking financial companies. License issued by the health Authorities. License/permission issued by the Municipal/Corporation Authorities. Permission/approval granted by the appropriate State Government. Certificate issued by the Fire Authorities in the case of establishments coming under Explosives Act. First assessment order issued by the Sales Tax Authorities. First assessment order issued by the Income Tax Authorities. Certificate issued by the Small Scale Industries Authorities registering the establishment. Reports/returns to Central Excise Authorities. Sanction/connection of power like H.T. Connection, L.T. Connection etc. Any other Certificate issued by any authority under any law for the time being in force prior to the commencement of business activity/manufacturing activity. The above list is not exhaustive and in only illustrative. Any one or more of the above documents may be submitted alongwith your application for allotment of a Code Number.

COVERAGE OF CONTRACTORS EMPLOYEES:

The Ministry of Labour have now taken a view that the Employees Provident Fund Organisation may start allotting separate code (Identification Numbers) to employers rendering services on contract basis and having in their employment 20 or more persons or less than 20 persons, as the case may be, may

27
be allotted separate code numbers provided they are identifiable entities and have a permanent Account Number from the Income Tax Department or are registered as a shop. In the event of such employers failing to discharge their obligation, compliance will continue to be ensured through the principal employers. It may be mentioned that the option available to the Organisation to get compliance from the principal employers in relation to the contract employees has not been diluted. What is intended is to allow employers who do their work on contract or provide services on contract basis but are businesses in their own right, the facility of being registered with the EPF, as an employer with a separate code number. COVERAGE OF AIDED SCHOOLS/COLLEGES AND THE COMPLIANCE: The aided educational institutions of the State Government has framed Provident Fund and/or Pension Schemes/rules for most of the employees of these schools/colleges leaving only a small set of employees uncovered from such schemes. The employees covered under such scheme shall be excluded from the purview of the Act and the rest of the employees should continue to be covered under the statutory Act/Scheme.

12

INQUIRY UNDER SECTION 7A

In order to determine the money dues from any employer and to decide the dispute arising out of the applicability of the Act an inquiry under Section 7A can be conducted and the employer must be given a reasonable opportunity to represent his side. The Central Provident Fund Commissioner, any Addl. Central PF Commissioner, any Deputy Provident Fund Commissioner, any Regional PF Commissioner, or any Assistant PF Commissioner may by order conduct the inquiry for the above said purposes. On conclusion of the inquiry under Section 7A a well reasoned Speaking Order should be issued with clarity and precision in as much as issues involved are identified and specified and the arguments put forth by the employers are analysed and decided. An order so passed should have the basic ingredients of the Speaking Order and it should not allow scope for adverse view by any of the judicial forums. For systematic and uniform approach and in order to remove ambiguity the following procedures need to be followed during the inquiry under Section 7A. 7A Inquiries Where the returns in Form 12A have been received it is not necessary to conduct inquiry under Section 7A for quantification of dues. Action under Section 8B and 8F can be taken against such establishments. Immediately on detecting a default a politely worded letter to each defaulter should be issued requesting and reminding the employer to remit the dues. If no response is received or no remittance is received from the employer, a second reminder should be issued to the employer. Both these letters shall be signed and issued by the Assistant P.F.Commissioner in-charge of Enforcement pertaining to that establishment.

28 If no remittance is recorded by the end of the second month a show cause notice should be issued to the defaulter initiating 7A inquiry. The details of initiation and disposal of case shall be maintained the Pendency Register. All pending cases of 7A may be assigned to Assistant Provident Fund Commissioners who shall enter all cases in the separate register. 7A authorities should exercise their authority while determining the dues to quantify the correct amount. The amount assessed must be realistic and usually based on necessary documents. For achieving the above object, the assessing authorities have been provided ample powers under Section 7A for enforcing the attendance of person and examining him on oath, requiring discovery and production of documents, receiving evidence in affidavit and thereafter commissions for the examination of witnesses. These powers must be exercised in a proper way according to the demand of situation for compelling the attendance of concerned person and for procurement of documents. The assessing officers are having powers to issue a warrant of arrest, attach and sell property of the person who refuses to comply with the direction of summons, impose fine not exceeding Rs.500/- and to order him to furnish security for his appearance and in default commit him to civil prison. All these powers are provided in the corresponding provisions of the Code of Civil Procedure. The summary of the hearing must be recorded for every date of hearing with details of documents filed/statement recorded. The compliance position of direction of previous hearing if any must also be recorded on order sheets. While conducting the inquiries it has to be borne in mind that the quasi-judicial authority under Section 7A acts on behalf of the department based on the records available and is expected to pass a judicious order as per the provisions of Law. Since it is not a trial hence no representation from department is required. Calling the enforcement officers for giving deposition/presenting the case before the APFCs/ RPFCs is not sound practice and must be stopped forthwith. The assessing officers are quasi judicial authority-Hence the principles of natural justice must be followed strictly in each and every case. The essence of natural justice is to afford reasonable opportunity to the Employer to present/defend his case and also to afford an opportunity to him to peruse the documents, if any, procured from other sources by the Organisation. The assessing officer must keep himself in touch with the relevant law including some Labour law Journal. The reading of judgements of Honble High Courts and Supreme Court will develop the skill of examining and analysing the issues. Documents collected from sources other than from the employer are to be made available for the perusal of the employer or his counsel at the time of inquiry. The report of the enforcement officer may also be allowed to be perused by the employer or his representative at the time of inquiry in order to satisfy the principles of natural justice. The Assessing Officer should go through the books of accounts for correctness of the details furnished and also detect any amount due from the employer that has escaped notice including instances of non enrolment of members or delayed enrolment of members.

29 It shall be ensured that the person responsible for the affairs of the establishments/owners of the establishment or a representative duly authorised by the establishment/employer only represents the establishment. The contentions made in writing and oral submission must be considered and properly dealt with in the order. Any judgement relied upon must be quoted with proper citation. While issuing orders under Section7A care should be taken to ensure that it is a speaking order. The preliminary part of the order should contain the background of the case, details of initiation of the proceedings, adjournments, if any, with the reasons etc. Details of responsible persons who attended inquiry shall invariably be noted in the order. The 7A order must quantify, the amount of interest payable under Section 7Q from the due date till the date of order with further remarks that interest will continue to accrue under Section 7Q till the date of payment. The order under Section 7A must be passed on the last date of hearing as far as possible. In no case it should be reserved for order without specifying the date and the order must be passed on the fixed date. On completion of the inquiry the details of assessments will be duly recorded under the signature of Assessing Officer in the Demand and Collection Register Column No. 1 to 9 shall be recorded on Left Hand Side of Register while 10 to 14 shall be recorded on Right Hand Side of Register. It will be the responsibility of the Assessing Officer to exercise powers under Section 8F and recover the entire assessed dues as expeditiously as possible after the assessment is over and in any case before the end of the financial year. Assessing officers will also maintain all above register with up to date entries therein. The mode of payment and date of realisation shall be recorded under the dated signature of the assessing officer in the register. At the end of the financial year, recovery certificates shall be prepared, for any Current Demand pending realisation, recording the reasons for non-realisation, and forwarded to the Recovery Officer before 5th of April. However, in exceptional cases for realisation of the Current Demand, a special recovery certificate, mentioning the reasons for issuing an out of turn recovery certificate to the recovery officer after obtaining concurrence from RPFC-II in case the Assessing Officer is Assistant Provident Fund Commissioner and RPFC-I where the Assessing Officer is Regional Provident Fund Commissioner - Gr.II may be issued.

ROLE OF APFC UNDER DEFAULT MANAGEMENT Responsibility of Assessing Officers and default management. The Central Office has formulated various strategies on default management and prescribed various control registers in managing the default of current as well as arrear demand which are to be scrupulously adopted.

30 The demands raised as a result of orders under Section 7A will be categorized as current demand. This definition will apply to both exempted/unexempted establishments. Current Demand. The responsibility to realize the current demand is that of the officer passing order under Section 7A/14B, i.e., the officer having jurisdiction over the case in this regard. The target for recovery of current demand is 100% of realizable demand raised during the financial year, i.e., from 1st April to 31st March. Assessing Officers are to open separate control registers for keeping control over cases initiated under Section 7A/14B and a register for controlling the work relating to realisation of current demand. Regional Provident Fund Commissioners shall review the control registers on a monthly basis and suitably instruct, guide an control the pendency position with each Assessing Officer as well as work relating to recovery of current demand. The two control registers, viz., 1. Blue Book for controlling pendency and disposal of actions under Section 7A; and 2. Red Bookfor controlling the creation and recovery of current demands, should be maintained upto date on a day to day basis and the same should be subject to surprise check by supervisory officers at the level of Regional Provident Fund Commissioner-I and Regional Provident Fund Commissioner-II. Performance of Assessing Officers in the speed of disposal of 7A actions as well as the realisation of current demands raised is to be kept under constant review by supervisory officer at the level of region/central office in order to evaluate the overall performance and record in Annual Confidential Reports, as well as consider the suitability of such officers for enforcement work. The Assessing Officers should establish effective linkages with the accounts wing in relation to cases under their jurisdiction for timely identification of default cases for initiation of action under Section 7A and to receive/verify feed back on realisation of the demand raised. On last date of the financial year, all the Assessing Officers should take stock of the cases where current demand (realizable and unrealizable) has remained outstanding and initiate recovery action on the last day of the financial year. It may be understood that normally no recovery certificates are to be issued by the Assessing Officers during the currency of the financial year and the certificates are to be issued on the last day of the financial year itself. Only in exceptional cases after recording reasons in writing in the appropriate file, the Assessing Officer may issue a recovery certificate even in relation to current demand if that will expedite the recovery of the current demand. It may be clearly understood that this would not shift the responsibility for realisation of current demand to the Recovery Officer. The Assessing Officer will continue to be responsible for such demand and will continue to reflect it in their position of outstanding demand upto the close of the financial year. This concession is made only so as to make the additional resources and powers of Recovery Officer available to the assessing officer. It goes without saying that in all such cases, the assessing officer will give close personal support to the Recovery Officer in terms of information/intelligence relating to the defaulter as well as with supporting manpower for effecting the recovery.

31 In all such exceptional cases, certificate is to be issued only after obtaining clearance of the Regional Provident Fund Commissioner-I. As far as the Recovery Officer is concerned, he is required to act in relation to current demand only if the assessing officer is providing close support both in terms of intelligence as well as manpower for effecting the recovery. Particulars about such current demands where certificate has been received will be kept by the Recovery Officer in a separate register which will be closed at the end of the financial year when the unrealized demand stands transferred to arrear demand. Arrear Demand. All demand that has remained unrealized, both realizable and unrealizable, during the financial year, be categorized as arrear demand on commencement of the next financial year. It includes arrears of contributions, interest under Section 7Q and damages under section 14B, for both exempted and unexempted establishments. All demands which fall within the definition of arrear demand, whether reported or not, should be accounted for by the respective assessing officer and a certificate in relation to these issued to the Recovery Officer so that 100% of the arrear demand stands covered by Recovery Certificates and the Recovery Officer stands fully vested with jurisdiction over the entire arrear demand in each region. All Recovery Officers should update their control registers for the management of arrear recovery demand. The Regional Commissioner(I) should personally satisfy himself that the registers are upto date and ensure that all the arrear demand in the region stands covered by certificates. Recovery of arrear demand also remain the overall responsibility of assessing officer in relation to cases under their jurisdiction. Of course, the ultimate responsibility for default management, current as well as arrear demand, in the region rests with the Regional Provident Fund Commissioner-I. Hence, it is expected that all assessing officers under the close supervision and control of Regional Provident Fund Commissioner-I will be giving the necessary support in terms of intelligence and information to the Recovery Officer in relation to arrear demand related to them so that the Recovery Officer can function effectively and help liquidate the arrear demand. Thus the ultimate analysis will only improve the default management of the assessing officers in relation to their respective jurisdiction. The whole purpose of broad banding the apparatus for recovery work is to establish and effective and aggressive default management regime. It is in this context that the policy should be constantly reviewed so that exercise of quasi judicial powers and accountability are effectively integrated and performance of the Enforcement Wing is kept under constant scrutiny and review. The Blue/Red Book should be closed every month and summary extracted for reporting in monthly CAP return duly reconciled with the information contained in the Register of defaulting establishments maintained by the Enforcement Section.

Regional Provident Fund Commissioner and Assistant Provident Fund Commissioner as Assessing and Recovery Officers: As the Regional Provident Fund Commissioner and Assistant Provident Fund Commissioner have been notified as Recovery Officers, they should take action under Section 8F and also under Section 8B and 8G for the recovery of arrear dues assessed by them for the current demand and also for the arrear demand. Need for timely action.

32 As the EDP Section will generate the list of defaulters every month, immediately after generation of Schedule of Receipts by using the software, Computerised Receipt Accounting System (CRAS), there will not be any difficulty in identifying the defaulters. Where the CRAS is not put into operation, it should be put into operation immediately. In addition, the Enforcement Officer is required to inspect the defaulting establishments every month and to send a special report. The action against the defaulter should be initiated in the month following the month in which contributions, administrative charges, etc., due for payment by the establishment and the show cause notice under Section 7A of the Act should be issued at the latest by the end of that month. If the action is initiated every month it will be easier to recover the amount. If the establishment is allowed to accumulate the arrears and take action after several months, it will be difficult to recover the amount from the defaulter, as a defaulter who is not in position to pay the dues for a month, will not definitely be in a position to pay the dues for several months. If the timely action is not taken against the defaulter every month, as stated above, it should be viewed seriously and the responsibility for such delay should be fixed and the disciplinary action should be initiated against them. In order to have continuous and effective monitoring of default, the following procedure is prescribed: A separate file will be maintained in respect of each defaulting establishment having an arrear of rupees one lakh and above. These files will have folder with points for quick review and monitoring. These will be maintained by Regional Provident Fund Commissioner (Gr.I), Regional Provident Fund Commissioner (Enforcement and Recovery), Assistant Provident Fund Commissioner (Enforcement and Recovery) etc., based on quantum of default. The establishment of having default of rupees ten lakh and above will be reviewed and monitored by Regional Provident Fund Commissioner in charge of the Region every month. Review of establishment having default of rupees five to ten lakh will be done by Regional Provident Fund Commissioner (Enforcement and Recovery) or Officer-in-charge, Sub- Regional Office and Assistant Provident Fund Commissioner (Enforcement & Recovery), respectively. This will be in addition to overall responsibility of review of the entire work of recovery. Review can be on points as to whether: (a) Regular inspections of defaulting establishments have been made by the inspecting officers. (b) All actions as required under Section 8B to 8F of the Act have been taken. (c) Prosecution cases under Section 14 of the Act have been filed and followed up vigorously. (d) Action under Section 406/409 IPC has been taken. The Regional Provident Fund Commissioner (Enforcement & Recovery) should review the performance of each Assistant Provident Fund Commissioner (Enforcement & Recovery) every month. Recovery has to ensure that all effective steps have been taken for recovery of arrears in respect of each Recovery Certificates. If any administrative restrictions and directions had been issued from Central Office, restraining recovery process, such directions are hereby withdrawn with immediate effect. An accurate and authentic defaulters list with position as on first April, every year should be prepared and updated every month. The ten biggest defaulters for particular year with position as on first April of each year (both under exemption and unexempted sector) be identified. Strong action for recovery be taken. Names of these 10 biggest defaulters be prominently written on wall in Regional and SubRegional Offices at the prominent entry place. The progress report of recovery in respect of these ten establishments of the Region need to be submitted every month to Central Office separately along with status and efforts made for recovery.

(1)

(2) (3)

(4)

(5) (6)

(7) (8)

33
Name & Address of the establishment Code Number Total amount in default Default since

(9) Besides above, penal action as provided under Section 14 of the Employees Provident Funds & Miscellaneous Provisions Act, 1952 be taken against the defaulting employers. (10)Action under Section 406/409 of the Indian Penal Code for non payment of employees share of contributions deducted from the wages of the employees should also be taken vigorously excepting in case of Public Sector Undertakings of Central and State Governments. (11)It must be ensured that action as above is taken in case of all defaulting establishments. Regional Provident Fund Commissioner (Enforcement & Recovery) will send weekly report to Regional Commissioner (Recovery), Head Office on the format prescribed. ENQUIRY UNDER SECTION 7A OF THE ACT - REVIEW: Section 7A is attracted only when the employers fail in their legal obligation to remit contribution. In such cases the Regional PF Commissioner / Assistant PF Commissioner authorised for conducting enquiry will initiate enquiry under Section 7A of the Act to decide the applicability of the Act to the Establishment and to determine the dues payable by the Employer. The Enquiry is deemed to be a judicial enquiry within the meaning of Sections 193 and 228 of Code of Civil Procedure and for the purpose of Section 196 of Indian Penal Code. Sub-section 3, of Section 7A of the Act provides for reasonable opportunity to be given to the employer of representing his case. The Commissioner is authorised to enforce attendance in person and also to examine any person on oath. He has the power of requiring the discovery and production of documents. If, at any stage of conducting an enquiry into the amount due from any employer, a question is raised that the said employer is not liable to pay the amounts, then it is for the Commissioner to decide first the liability of the employer to pay the amount before he determines the amounts due from the employer. Sub-Section 3A of Section 7A provides that where the employer and employee or any other person required to attend the enquiry fails to attend such enquiry without any valid reason or fails to produce any document, the Commissioner may cause an order (ex-parte) deciding the applicability of the Act or determining the amount due from the employer on the basis of evidences adduced and the records available. Any employer / person aggrieved by an order issued under Section 7A(1) of the Act, if he desires may prefer an appeal for Review of such order a). within 3 months from the date of communication of an ex-parte order issued under Section 7A (1) of the Act -- (Section 7A(4) of the Act). b). within 45 days from the date of issue of order under section 7A(1) of the Act (Section 7B(1) of the Act).

34 The employer should exhaust all the available sources of appeal provided under the EPF & MP Act 1952 and the Schemes framed there under to get their grievances redressed before he resorts to highest judicial courts. There is provision to prefer an appeal against any order issued under the Act in the order of preference indicated below. 1. To the Commissioner, who issued the Order. 2. To the Presiding Officer of EPF Tribunal constituted under Section 7(I) of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 with regard to any matters referred to therein. The EPF tribunal shall be deemed to be a Civil Court for all purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974) Section 7 -O 1. No appeal by the employer shall be entertained by a Tribunal unless he has deposited with it seventy-five percent of the amount due from him as determined by an officer referred to in Section 7-A. Provided that the Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section. An aggrieved employee may prefer an application before the EPF Tribunal to the address given below: THE REGISTRAR, EPF APPEALLATE TRIBUNAL, 7TH FLOOR, SKYLARK BUILDING, 60, NEHRU PLACE, NEW DELHI 110 019. DISPUTE REGARDING ELIGIBILITY FOR MEMBERSHIP OF THE FUND; If any question arises whether an employee is entitled or required to become or continue as a member, or as regards the date from which he is so entitled or required to become member, the Regional P.F. Commissioner should conduct an inquiry under Section 26 B of the EPFS, 1952 and decide the case. The decision of the Regional P.F. Commissioner shall be final. The controversy envisaged by Para 26 B relates to a dispute between the employer and in respect of particular employees in a establishment, which is governed by the Scheme or the Act. This paragraph has no reference to dispute arising between the Provident Fund Commissioner and the Employer with regard tp the direction of the commissioner to the employer to pay the amount due under the Act. As dispute is to resolved after hearing both the employer and the employees, the Regional P.F Commissioner should issue notices to the employer and employee concerned and he should pass orders only after hearing both the employer and employees. Further, even if the employer remind exparte, notice is necessary to the employee before determination of the eligibility under Para 26 B. If the employer or employee or both did not attend the inquiry, he may decide the eligibility for membership of the employee on the basis of evidence adduced during such enquiry and other documents available on record.

ASSESSMENT OF DUES UNDER SECTION 7A AND 14B OF THE ACT. When the Compliance 01 program was introduced during 2001 detailed instructions were issued to all the field formations to scrupulously follow certain norms for accountability and

35 transparency in quantification of dues under the Act. They were also required to maintain the basic books of accounts and furnish the information to the Recovery Officer as per the existing instructions. The Circle Officer was made the centre point of compliance in all matters regarding to arrear management including recovery up to the end of the financial year. Specific work norms were fixed for the Assessing Officers as well. However, it is a matter of record that many regions do not adhere to these instructions strictly with the result the arrears mount up which are not brought to the books of accounts. Directions were also issued making it imperative on the part of the supervisory officers like RPFC-II and RPFC-I to scrutinize the assessment orders, at least eight orders of each Assessing Officer every month. Out of the eight orders, four were to be selected by the supervisory officer whereas four were to be submitted by the Assessing Officer as per his choice. This should be communicated to the Head Office for every month before 10th of the subsequent month. Except from a very few regions, such information is not received in the Head Office, which has been viewed seriously by the Central Provident Fund Commissioner. [vide H.O. Letter No.RRC/28(3)2003/7A-14B/68533 dated 9.12.2003] 13

DEFAULT MANAGEMENT
PENAL PROVISIONS

Introduction
The Employees Provident Funds and Miscellaneous Provisions Act, 1952 is a piece of social security legislation. Every legislation which is put on statute book is meant to be implemented. It therefore invariably provides for the consequences which would follow, if any, of its provisions are violated. Such provisions are called penal provisions. The Employees Provident Funds and Miscellaneous Provisions Act, 1952 also contains penal provisions which were amended in the year 1973 and 1988 so as to make it more stringent and thereby to ensure its proper implementation. With a view to ensure expedite action of invoking the penal provisions, the power to prosecute (which was initially vested with Central and respective State Governments) was delegated, effective from 1.11.1973, to Central Provident Fund Commissioner and Regional Provident Fund Commissioners. The penal action should be initiated promptly by the Compliance Sections, in the following contingencies: Non-payment of dues (part or full) assessed under Section 7A of the Act; non-submission of statutory return as reported through the defaulters list / CCTS Report and defaulters list of annual returns in Form 3A and 6A or Form 7 & 8 and the Enforcement Officers report; non-transfer of past accumulation dues; contravention or non-compliance on any provisions of the Act/Schemes, both by exempted and Unexempted establishments; for giving false statement and false representation with a view to avoid any payment. The Penal provisions should be invoked through, a) Filing prosecution, b) filing complaint with the police for criminal breach of trust, and

c)

36 filing application under Section 110 of The Code of Criminal Procedure, 1973.

OFFENCES UNDER THE EPF & MP ACT AND THE SCHEMES THEREUNDER: SECTION 14 PENAL PROVISIONS: Provisions of Section 14 have been made stringent with the new amendments, which have come into force with effect from 1.8.1988. The gist of the various penal provisions and the amendments introduced and the enhanced punishments prescribed are given below: (1) Section 14(1) : Punishment for making a false statement or representation or for causing to be made any such false statement or representation with a view to avoid any payment under the act and the three Schemes is imprisonment up to one year or with fine of Rs.5000/- or with both. Section 14(1A) : a) Punishment for non-payment of provident fund contributions: b) for non-payment of inspection charges in the case of exempted establishments under Section 17(3): c) for non-payment of administrative charges under Employees Provident Fund Scheme in Account No.2 is imprisonment up to 3 years but it shall not be less than one year and fine of Rs.10,000/- in the case of default in payment of employees contribution which has been deducted by the employer from the employees wages and in other cases, it shall not be less than six months, and a fine of Rs.5,000/-. The Court is empowered to impose a sentence of imprisonment for a lesser term for adequate and special reasons to be recorded in the judgement. It may be noted that the Courts power to impose a fine in lieu of imprisonment has been taken away by this new amendment. Under this section the Courts are bound to give minimum fine of Rs.10,000/- irrespective of the amount in default in case there is any default in payment of employees contribution deducted from their wages and offences are proved. In case the Court wants to give a lesser punishment, the court has to record specifically the special reasons or other adequate reasons for which it considers it necessary to impose a lesser sentence and such lesser sentence can be given only in respect of imprisonment and not in the quantum of fine. Section 14(1B): a) Punishment for non-payment of Employees Deposit Linked Insurance contributions b) for non-payment of Employees Deposit Linked Insurance administrative charges c) for non payment of Employees Deposit Linked Insurance Inspection charges is imprisonment up to one year but the court shall award a minimum imprisonment of six months and a fine up to Rs.5000/- for the offences under this section. However, here also the Court has got discretionary powers to award a lesser sentence of imprisonment for adequate and special reasons to be recorded in the judgment. Section 14(2) : This is an enabling provision which enables the Government of India while framing the Schemes to incorporate suitable provisions for punishments for any offences. The ambit of this section is quite wide in as much as it provides for punishment to any person who defaults in complying with any of the provisions contained in the three schemes. Thus, not only the default in payment of contribution but also the non submission of returns or any other requirements under the Schemes can be brought under the purview of this section read with the relevant sub clause of Para 76 of the EPF Scheme. Punishment provided under this Section is imprisonment up to one year or with fine which may extend up to Rs.4000/- or with both. (5) Section 14(2A) : In the case of exempted establishments if they are not complying with any of the provisions of the Act or any of the conditions subject to which exemption was granted under Section 17 they can be prosecuted under this Section. Punishment provided is imprisonment upto six months but shall not be less than one month and shall also be liable to pay a fine upto Rs.5000/-. There is no discretion for the Court under this section to award lesser sentence if the accused is guilty.

(2)

(3)

(4)

(6)

37 Section 14AA : Under this Section those who have been convicted previously for any offence under the Act and the three schemes are liable for enhanced punishment. Punishment is imprisonment upto five years but which shall not be less than two years and shall also be liable to a fine of Rs.25000/-. Unlike in Section 14(1A) or in Section 14(1B) there is no discretion for the Court under this section to impose a lesser sentence of imprisonment and the Courts are bound to give a minimum sentence of imprisonment for two years and a fine of Rs.25,000/-

OFFENCES UNDER EMPLOYEES PROVIDENT FUNDS SCHEME: Paragraph 76 of the Scheme enumerates the following offences: a) Deduction from wages/salary of a member the whole or any part of the employers contribution; b) Failure to submit any return of contribution/statement or submission of a false return/statement/document; c) Obstruction of an Inspector or an Officer in discharge of his duties; d) Non-compliance with any other requirement of the EPF Scheme. OFFENCES UNDER EMPLOYEES FAMILY PENSION SCHEME: i) Non-remittance of Family Pension contribution to Account No.10 at the State Bank of India; ii) Non-submission of various returns prescribed under paragraphs 13,15 and 16 etc. OFFENCES UNDER EMPLOYEES DEPOSIT LINKED INSURANCE SCHEME: i) Non-remittance of Employees Deposit Linked Insurance contribution as per Para 8 of the Scheme. ii) Non-submission of various returns prescribed under Para 10 of the Scheme. NON-PAYMENT OF EMPLOYEES SHARE OF CONTRIBUTION- ACTION (OFFENCE) UNDER 406, 409 IPC Criminal Breach of Trust
The Explanation-1 below Section 405 of Indian Penal Code provides that -

A person being an employer of an establishment whether exempted under Section 17 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, or not, who deducts the employees contribution from the wages payable to the employees for credit to a Provident Fund or Family Pension Fund shall be deemed to have been entrusted with the amount of contribution so deducted by him and if he makes default in the payment of such contributions so deducted to the said fund in violation of the said law, shall be deemed to have been dishonestly used the amount of said contributions in violations of directions of law as aforesaid
Thus where an employer after deducting the employees share from their wages fails to remit the contributions so deducted within a specified time, he shall be deemed to have committed an offence of criminal breach of trust as explained in Section 405 of the Indian Penal Code, which is punishable under Section 406 and 409 of the Indian Penal Code. The Enforcement Officers need not wait for the sanction of the Regional Provident Fund Commissioner for prosecution of the accused for the above offence. Before initiatiing action, it should be ensured that the wages for the relevant period of default of employees share, is paid to the members. They may lodge a complaint (FIR) direct with the police authorities within whose jurisdiction the offence of criminal breach of trust is alleged to have been committed by the accused employer after collecting all basic documentary evidence such as Form 12A salary registers, etc., so as to build up a strong case against the accused. Case filed under this provision cannot be withdrawn by the Employees Provident Fund Organisation. A special feature on cognizable offence under section 47 of Cr. PC is that a police can arrest a person concerned in such offence without a warrant from the Magistrate.

38 SECURITY FOR GOOD BEHAVIOUR FROM HABITUAL OFFENDER Section 110 CrPC, 1973 For punishing the erring employer and to get compliance from him an enforcement officer can take the recourse of the provisions of Section 110 CrPC,1973, which provides as under: When an Executive Magistrate receives the information that there is within his local jurisdiction a person who habitually commits, or attempts to commit, or abets the commission of any offence under the Employees Provident Funds and Family Pension Act, 1952 (Section 110 (f)(i)(c) of CrPC) Such Magistrate may in the manner provided require such person to show cause why he should not ordered to execute a bond, which secures for his good for such period, not exceeding 3 years as a Magistrate thinks fit. Accordingly a good behaviour bond can be obtained from the erring employers. Section 138 Negotiable Instrument Act. Normally, the employers of the covered establishments are advised to make remittance into State Bank of India through cheque alongwith the prescribed single challan. Out of such cheques some are dishonoured due to insufficient fund available at the bank. When a cheque is dishonoured and the intimation is received from the bank, immediate necessary action need to be taken to realize the amount. Assistant Commissioner, in charge of enforcement section should issue a show cause notice to the employer informing him the ill fate of the cheque and require the employer to pay the amount due by DD. The said notice has to be issued to the employer within 15 days of the receipt of the dishonour intimation from the bank. In case of non-adhering to the direction given in the notice a prosecution complaint need to be filed before the first class magistrate court within one month after the notice period. It should be noted the issue of the notice within 15 days is mandatory. The forms prescribed under the Negotiable Instruments Act are required to be followed. RETURN OF OWNERSHIP IN FORM 5A (REVISED) IMPORTANCE The Return of Ownership of the factory/establishment in Form 5A to be filed by the employer under paragraph 36-A of the EPF Scheme is a starting point in the implementation by a covered unit. Its importance as a basic document need not be emphasised. The Provident Fund Inspectors are well advised to collect this return (in duplicate) from the Occupier/Managing Director/Proprietor/Managing Partner/Secretary or other responsible Officer of the factory/establishment at the time of investigation for coverage and forward one copy (in original) of the same to the Regional Office alongwith the Inquiry Report and the other copy may be retained by them on their file for future reference. Under Compliance Programme, the intelligence section which handles issue of code number should ensure receipt of Form 5A alongwith other prescribed returns. Care should be taken to get the correct entries entered in the form so that only those persons responsible for the affairs of the factory/establishment are brought on record. The Provident Fund Inspectors should also keep a close watch over subsequent changes in the managerial set up so that as and when changes take place, they have to get fresh declaration of ownership in duplicate for record. While launching/recommending prosecution of the employer only such persons who are responsible for the commission of the offence shall be impleaded in the recommendation such as Secretary/Managing Director/Director in the case of a company, Partners/Managing Partners in the case of a Partnership firm, Manager in the case of factory, Sole proprietor in the case of a Proprietory concern and the Head of the Department in the case of Departmentally run establishment. EOs are advised to make it a point to call on the person or persons shown in Form 5A at the time of every visit and to bring the observations in Part II of Inspection Report. PRELIMINARIES FOR INITIATING PROSECUTION:

i.

ii.

iii. iv.

39 On detection of a default in remittance or submission of returns for a period exceeding two months, a report in the prescribed form has to be sent to the Regional P.F. Commissioner concerned for obtaining sanction of prosecution under Section 14AC of the Act after issuing a show cause notice to the accused employer for default. On receipt of sanction of prosecution and after the amount is determined under Section 7A of the Act, a written complaint should be filed by the Provident Fund Inspector in the competent Court of Law within 7 days of such receipt of sanction alongwith such documents as copies of Form 5A submitted by the employer, of notification issued under Section 14AC of the Act delegating the powers of sanction to the Regional commissioner, of sanction order and a copy of the show causes notice issued on the accused employer. A list of documents/witnesses which/who are to be cited/summoned in the course of the prosecution should also be filed alongwith the complaint. The complaint to be filed by the Inspector under Section 200 of CrPC. need not however bear the Court Fee Stamp as he is exempted from Court Fee Stamps as a Public Servant.

NOTE:a) Under Section 25 of the Cr.P.C.1973, all the Inspectors appointed under Sec.13 (1) of the Act, have been appointed as Assistant Public Prosecutors for purpose of conducting EPF cases in the Courts of Magistrates. b) A set proforma prescribed for preparing the complaint may be used by the Complainant Inspector with suitable changes wherever required for preparing and complaint; c) Sanction, once given, should under no circumstances be returned or withdrawn even when the accused employer makes good the default by subsequent remittance and returns. d) In cases of habitual defaulters, special prayer should be made before the Court for awarding the maximum punishment including imprisonment prescribed under the Act. e) Alongwith every complaint under Section 14AA, a certified copy of the previous judgement should be attached. JOINDER OF CHARGES: The Inspectors are well advised to file separate complaints before the Court in respect of not more than 3 offences of the same kind committed within a span of 12 months as required under 218 and 219 of CrPC. Each of the following is a separate offence for the purpose of Section 218 of CrPC Misjoinder of charges would run the risk of dismissal of the complaint. i. Non-remittance of PF or Pension or E.D.L.I. contribution for each month is a separate offence. ii. Non-remittance of inspection charges or Administrative charges for each month is a separate offence iii. Non-submission of monthly returns/annual returns/contribution card/nomination /declaration /initial return in Form 9 (EPF) or in Form 3(PS) etc., is a separate offence. 1) 2) 3) It may be noted that separate complaints should be filed in respect of Provident Fund Inspection charges and Adm. Charges (14-1A) Deposit Linked Insurance Fund (14-1B) Under Sec.14AA in case of repeated offences of all the above cases. If any of the above complaints are filed jointly, Provident Fund Inspector runs the risk of Misjoinder of charges. PERSONS LIABLE TO BE IMPLEADED IN THE COMPLAINT The following persons are liable for offences under the Act and the various schemes framed there under. As such they may be impleaded in the complaint filed before the Court. i. Where the accused is a company,

40 a) The Company itself, b) Every director/Managing Director/Manager/Secretary or other responsible officer of the Company; ii. Where the accused is a partnership firm; a) The firm itself, b) Every Partner including the Managing Partner. c) Manager or other occupier of the Factory/establishment iii. Where the accused is a Proprietory Concern. a) The Proprietor himself; iv. Where the accused is a departmentally run Government or Semi Government under taking; a) The Heads of Departments; It may however be noted that while prosecuting official Receiver/Liquidator of a Company/Firm being wound up/closed, prior sanction of the Court by which such Liquidator/Receiver was appointed may be obtained. Where an offence is committed by a Company and it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other officer of the Company, such Director or Manager or Secretary or other officers shall be deemed to be guilty of the offence and are liable to be proceeded against and convicted. Law therefore presumes that all such persons are guilty of the offence committed by the Company. Burden is however upon such persons to prove that the offence was committed without their knowledge or that they exercised due diligence to prevent the commission of the offence. Company, for the purpose of Section 14 of the Act, includes partnership firm (see citation: State Vs. Bhadami 1959 Cr. L.J. Page 68) LIMITATION OF TIME FOR PROSECUTION OF THE ACCUSED EMPLOYER (Please see Section 468 (B) There was a conflict of judicial opinion in the matter whether the offences prescribed under this Act are continuing offences or are barred by limitation prescribed under Section 468 of the Code of Criminal Procedure 1973. The Madras High Court has laid down in M/s. Premier studs and chaplets Co., and others Vs. State (56 FJR 611) that the duty to pay the contribution or to submit the return still remains and continues till the contributions are made or the returns submitted. Therefore a failure to pay the contribution or to submit the return is a continuing breach of duty which continues till it is performed and the non performance of such a duty from day-to-day is a continuing wrong. Therefore, the offences under this Act will come under the ambit of Section 472 of Code of Criminal Procedure which defines a continuing offence. The Section 472 states as follows:- In the case of a continuing offence, a fresh period of limitation shall begin to run at every moment of the time during which the offence continues. The matter has however been set at rest by the Supreme Court ins their judgement dated 17.9.1984 in Criminal Appeal No.372 of 1984 in Provident Fund Inspector, Chandigarh, Vs. M/s. Delhi Faridabad Textile Mills case wherein it has been held that refusal to pay Provident Fund and to submit returns is a continuous offence and every day the breach continues a fresh cause of action arises. The field officers however, should launch prosecution proceedings against erring employers promptly. THE PROVIDENT FUND INSPECTOR AS A PUBLIC SERVANT The Provident Fund Inspector appointed under Sec.13 of Act is a public servant within the meaning of Sec.21 of the Indian Penal Code. RIGHTS OF PUBLIC SERVANT As a public servant he enjoys certain rights and privileges and incurs certain liabilities under the law. His rights and privileges may be enumerated as follows:-

41 i) Obstructing a public servant in the discharge of his duties is an offence under Section 186 of the I.P.C. Similar provisions exist in Para 76(6) of EPF Scheme; ii) Assaulting a public servant while discharging his duties are offences under the following heads; a) Voluntarily causing grievous hurt Sec.333 IPC b) Voluntarily causing hurt Sec. 332 IPC c) Assault under Sec. 353 IPC d) Giving false information to a public servant in order to cause him to take action against any other person is an offence Sec. 182 IPC e) Personal appearance at the time of filing the complaint under Sec.200 CrPC. may be exempted at the discretion of the Magistrate; f) The complaint filed by the Inspector is exempted from Court fee rules The following are the liability of a Public Servant i) Taking gratification other than legal remuneration in respect of his official act is an offence under Sec.161 IPC; ii) Obtaining valuable things without any consideration from person concerned in a proceeding is an offence under Section 165 IPC. PROCEDURAL LAW 1. There are two types of cases, summons and warrants case (Sec.4(c)) CrPC. Warrant case means a case relating to an offence punishable with imprisonment exceeding two years. Summons case is a case relating to an offence punishable with imprisonment of two years or less. Offence under Sec.406 of IPC is punishable with imprisonment of three years. It is therefore triable as a warrant case. 2. There are two types of offences: Cognizable (Section 2(c) CrPC.) and non-cognizable (Section 4(c) CrPC.) Cognizable offence is an offence for which a police officer can arrest an offender without a warrant. Non-cognizable offence is one in which a police officer cannot so arrest. Offences under EPF Act and Scheme are non-cognizable offences except the contributions by the employer (Sec.14 AB) offence under Sec.406 of IPC is a cognizable offence. 3. Offences under EPF Act and Scheme framed there under are not compoundable (Schedule II CrPC) Offence under Sec.406 of IPC is compoundable only when it relates to Rs.250/- or less (Schedule II CrPC) NATURE OF CASES UNDER THE ACT AND THE SCHEME The offences under the Act and the Scheme for which the accused employers are charged with belong to the class of cases which are called summons cases. The Court on receipt of complaint under Section 200 CrPC will issue a process for appearance of the accused before the Court for answering the charge through the police officers. The summons issued through the Police officers for service on the accused are at times returned to the Court without service for various reasons. The Court, in that event, may as the complainant to get the summons served on the accused. When an Inspector is asked to serve summons on the accused, he has to adopt the following course of action for service summons. i) It should be served on the person summoned by personal service by delivering the duplicate of the summon after getting the receipt signed on the back of the other copy. ii) Where the person summoned cannot be found, the summons may be served by leaving a duplicate copy with one of the adult members of his family residing with him and the persons who receives the summon may acknowledge its receipt by signing on the back of the other copy.

42 iii) Where both the above modes of service fail, the Inspector shall affix one of the duplicate of the summons to some conspicuous part of the house in which the person summoned ordinarily resides. iv) Where the person summoned is a Corporation, service of summons may be affected by serving it on the Secretary/Local manager or other principal officer of the Corporation or by letter sent by registered post addressed to the Chief Officer of the Corporation When all the modes of service fail even after exercising due diligence, a prayer may be made to the Court for issue of warrant (bailable on non-bailable) for arrest of the accused under Section 70 CrPC. The warrant of arrest is sent through Police Officer. Some times, even warrant of arrest would fail to get the appearance of the accused. In such cases the complainant should make a strong prayer before the Court for issue of proclamation against the accused and attachment of the properties belonging to him under Section 82 and 83 CrPC. No. of offences in one trial Section 218 CrPC. states that for every offence there should be a separate trial. Sec.219 CrPC is an exception to this general rule. Under Sec.219 three offences of the same kind committed within 12 months can be tried together. Non-payment of contributions for each month is an offence. Therefore, there can be one trial for non-payment of contributions, Administration Charges and for not sending returns for any one month can be tried together under each Scheme separately. Conduct of trial 1. Offence under EPF & MP Act and Scheme are triable as summons case or warrant case depending upon the period of imprisonment prescribed. 2. Summons cases are triable in accordance with Chapter XX of the CrPC The procedure is as under:a) When an accused appears before a Court and the case is taken up for hearing a plea of the accused whether he pleads guilty or not to the charge to be taken (Sec.251) b) If the accused pleads guilty to the charge and the Court accepts it, he is convicted and sentenced (Sec.252) c) If the accused pleads not guilty, evidence is to be led by the prosecution. d) Order of evidence is as follows: i) The complainant is to be first examined in brief. He will then be cross examined by the accused. Thereafter he is to be re examined by the prosecution to remove all doubts arising out of the cross examination (Sec.138 IPC) ii) Other witnesses will then be called by the prosecution and similarly examined. iii) After the evidence of prosecution the Court is to examine the accused under Sec.313 CrPC The accused can put in written statement on his behalf at this stage. iv) The accused is then to examine any witnesses on his behalf if he so desires. v) If the accused leads evidence then he has to argue first. The prosecution will then reply. If no evidence is led by the accused, the prosecution has to argue its case first and the accused replied. vi) The court is then to deliver judgement. If the Court convicts the accused, the Court can impose a sentence of imprisonment against him as prescribed in the Act. CONVICTION/ACQUITTAL/APPEAL/REVISION There is a basic difference between discharge and acquittal under the CrPC Chapter XX of the CrPC which deals with trial of summons cases provides for conviction/or acquittal of an accused. The accused on appearance before the Court may either plead guilty of the charges or seek trial. In case where the accused does not plead guilty the Court will proceed to hear the prosecution (Inspector) and take all evidence on his behalf and subsequently will hear the accused. The Court, upon taking the evidence finds the accused guilty, it shall pass a sentence according to law. If it finds the accused not guilty, it can record an order of acquittal. Non-appearance or death of the

43 complainant or withdrawal of the case can also result in acquittal of the accused under Sections 256 and 257 CrPC Court can also discharge an accused under Section 258 CrPC where it has not jurisdiction to try a case even after taking evidence such as when the case is barred by limitation. In cases of acquittal, the complainant can file an appeal before the High Court under Section 378 CrPC after obtaining special leave to appeal within 6 months of the order of acquittal. Similarly, the complainant can file a revision petition either before the High Court or before a Sessions Court under Section 397 CrPC in cases of discharge ordered under Sec.258 CrPC. The P.F.Is are therefore advised to be thorough with the procedures contained in Sections 251 to 258 under Chapter XX of the CrPC. Certified copy of every order of the Court shall be collected so that at the time of filing prosecution under Sec.14AA, there is no difficulty in leading the evidence of earlier conviction. PAYMENT OF COMPENSATION UNDER SECTION 357 CrPC The Court on convicting the accused under Sec.255, may order, at its discretion under Section 357, any part of the fine (to be imposed on the accused) to be applied among other things. i) in defraying the expenses properly incurred in the prosecution; ii) in payment of compensation for any loss or injury to the complainant. The Inspector is, therefore, advised to make specific prayers for awarding expenses in the complaints (being incurred by them) which shall include traveling expenses from their Headquarters to the Court on each day of appearance incidental expenses such as typing, cost of papers and all other expenses incidental thereto. Prayers shall also be made for awarding compensation from out of fine being imposed on the accused which shall be equivalent to the amount due and outstanding from the accused towards Provident Fund and other dues for the period for which such complaints are filed in the Court. Normally, Court will be reluctant to pass order for such compensation unless it is strongly prayed for. The Provident Fund Inspectors should, therefore make it a point to specifically include prayers for compensation in all complaints filed against the accused. Absence of complainant If on the day of any hearing of the complaint, the complainant remains absent, the Court may dismiss the complaint and acquit the accused. However, the Court may dispense with the attendance of complainant and proceed with the trial of the case (Sec.247 CrPC.) It is hoped that the above guidelines would enable the Inspector to successfully conduct all cases under Sec.14 of the EPF and MP Act, 1952 as well as under Section 406/409 of I.P.C. They are advised to go through the guidelines carefully and equip themselves with all the important features of the CrPC. They may however contact the Regional Office for any further guidance in the matter.

Recovery of Statutory dues form Central Public Sector Undertakings(CPSU)/State Government Public Sector Undertakings(SPSU) The Head Office has reviewed the defaulting position of CPSUs and the steps to be taken to recover the dues expeditiously. It has been decided that all the legal action against CPSUs to be initiated to recover the dues. However, it is instructed that complaints u/s 406/409 of IPC should not to be filed. Similarly while exercising the powers of recover u/s 8B recourse should not be taken to the powers of arresting the senior officers of the CPSUs. Excepting the above all other coercive provisions in the Act & Scheme may be invoked for recovering the dues from the CPSUs. Many of the Public Sector Undertakings depend on grants etc. from the Government for their survival and payment of statutory dues including PF dues. Hence, the matter may have to be

44 taken up with the concerned authorities at the appropriate level, to make them realize the importance of PF dues and the consequences of not remitting such dues i.e. levy of damages and interest alongwith penal actions such as arrests and prosecutions. Apart from this, you should also build pressure on PSUs to recover the dues. Coercive actions like attachment of bank accounts, sundry debtors and immovable property if taken regularly and in all cases will definitely yield positive and substantial results. 1. To give effect to this strategy the following actions are required to be taken:Initiation and completion of assessment of all the outstanding dues in respect of all the defaulters on a war footing to ensure its completion by 31.3.2003 so that a clear picture emerges about the total default in this sector. In all cases of the Central and State PSUs, dues must be determined and other levies imposed so that the quantified position of arrears is correctly reflected in our workload. We are in a regime of disinvestments, various packages are under contemplation and if we do not project the actual liability position correctly the same will not be factored in any financial arrangement set up for such PSUs. It should be made very clear to all the Assessing Officers that if they fail to complete the assessment up to Dec, 2002 in all cases of Central and State PSUs by 31.3.2003, disciplinary action will be contemplated against them. It should also be made clear that in each office the Assessing Officer who has the oldest pending case of default or pending 7A in respect of a PSU will on 1st April, 2003 be designated as Compliance Officer, Special Circle for Central and State PSUs. All cases of Central/State PSUs will be transferred to him or her and he/she will only attend to Central and State PSUs. No action plan or strategy can be contemplated and / or executed unless there exists a robust database which gives clear picture and is capable of constant updation. You should therefore initiate immediate steps for preparation of a comprehensive and scientific database which should be ably to clearly reflect the total amount to be recovered with clear distinction in the employees and employers Share and other charges payable categorization of the establishment with regard to unit being registered with BIFR or other such relevant points like stay by court etc. alongwith the details of the possible sources from where the dues can be recovered e.g. Bank accounts, details of sundry debtors and properties etc. in respect of each establishment and keep an account of all the actions taken so far with regard of each establishment in default for recovery. Constant monitoring and updation of this database with regard to any further addition in default on account of damages and interest leviable and further default committed, if any, and scheme being sanctioned if the unit is registered with BIFR. Constant interaction with BIFR or the Official Liquidator, as the case may be, by officers fully equipped with the provisions of statute and case laws to strengthen their case. Constant and persistent efforts to get the stay, if any, granted by any court, vacated. Simultaneous action to take up the matter with the respective Governments/Ministries under whose control the PSU functions. Initiation of recovery action specially attachments of bank accounts, sundry debtors and immovable properties etc. STATUTORY PUNISHMENT FOR OFFENCES COMMITTED UNDER THE EPF & MP ACT, 1952 - EPF / EPS / EDLI SCHEMES Section 14 of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 provides for stringent punishment on the persons responsible for the offences committed under the Act / Schemes. The nature of offences and the punishment contemplated are hereunder: -

2.

3. 4. 5. 6. 7.

PENAL PROVISIONS
Act Sec. (1)
14(1)

Offender (2)
Whoever

Offence (3)

Imprisonment (4)

Fine (5)

Avoiding payment or of Extended to or Rs.5000/enabling any other person to One year. avoid payment under the Act/ Or with both.

45
Schemes, knowingly makes or causes to be made any false statement of representation. Extended to 3 years Contravention or Default in payment of Contribution payable under Sec.6, Nonpayment of Inspection Charges payable in A/C.No.2 & Non Payment of Administrative Charges payable in A/C.No.2 (a) Not less than Rs.10000/one year for non remittance of Employees Share of contribution deducted; (b) Not less that 6 months (in any other case) Extended to one year but shall not be less than 6 months (Proviso common to Sec.14(1A) and 14(1B) provides that the Court may or any adequate & Special reasons to be recorded in the judgement, impose a sentence of imprisonment for a lesser term). May extend to or One year Rs.5000/-

14(1A)

An Employer

14(1B)

An Employer

Contravention or Default in payment of EDLI Contribution payable in A/C.No.21, EDLI Adm. Charges payable in A/C.No.22 and Inspection Charges payable in A/C.No.22

And also fine extended to Rs.5000/-

14(2)

Any Person

Contravention or Default in Complying with any of the provisions of the three Schemes. Contravention or Default in complying with any provisions of the Act or any condition subject to which exemption was granted under Sec.17 (if no other penalty is else-where provided under the Act) Having been convicted by a court of an offence punishable under the Act / Schemes, commits the same offence under the Act / Schemes. Convicted of an offence in default in the payment of EPF/EPS/EDLI Contributions or non transfer of previous P.F Accumulations either on account of coverage or an account of cancellation of exemption and ordered to pay

with fine which may Extend to Rs.4000/Or with both. fine to

14(2A)

Whoever

Extend to 6 And also months (but not extend less that one Rs.5000/month) Extend to 5 And fine years but shall Rs.25000/not be less that 2 years Imprisonment as provided under Sec.14 of the Act, as relevant to the offence committed.

of

14(AA) 14C

Whoever An Employer

And also fine extended to one hundred rupees for every-day, after expiry on which the Court Order has not been complied

46
the contributions or transfer the accumulations within stipulated period and failure to pay or with. transfer the amount as directed by the Court. Non payment of any amount Simple interest @ 12 % p.a to be due from him under the Act paid from the due date to the date of within the date. payment.

7Q

An Employer

WITHDRAWAL OF PROSECUTION - PROCEDURE It should be ensured that once the prosecution is sanctioned by the competent authority, complaint is filed in the appropriate court by the Enforcement Officer within a period of seven days of its sanction. Prosecutions once sanction should not be held back merely because the establishment has paid the amount in arrears, before the prosecution complaint is actually filed in the Law Court. While it is not our intention to prosecute every defaulting employer indiscriminately, it is absolutely necessary for us to ensure that no defaulting employer commits a default and yet is allowed to get away with impunity. The prosecution once filed in the law court should not be withdrawn under any circumstances whatsoever except with the prior and specific permission of the Central Provident Fund Commissioner. Section 257 of the Code of Criminal Procedure deals withdrawal of prosecution complaints. It reads as follows: If a complainant at any time, before a final order is passed in any case under this chapter satisfies the magistrate that there are sufficient grounds for permitting him to withdraw his compliant against the accused or if there be more than one accused, against all or any of them, the magistrate may permit him to withdraw the same, and shall there upon acquit the accused against whom the complaint is so withdrawn. Although the power of withdrawal of prosecution vest with the complainant still it lis felt that as a measure of having uniformity in acting upon the provision of Section 257 of the Code of Criminal Procedure certain guidelines should be followed by the complainant before actual withdrawal is given effect to. Whenever any request from a defaulting employer for withdrawal of prosecution is received by the Regional P.F. Commissioner, he should before referring the same to the Central P.F. Commissioner for orders in the matter, ensure fulfilment of the following conditions: a. The accused is a first offender and has not been convicted for a similar offence earlier, nor is any other prosecution under the EPF & MP Act, 1952 pending against him. b. The accused has set right all the contraventions against which the compliant was filed. c. His current performance, in the matter of payment of all dues including interest due under Section 7Q of the Act, if any, is up to date. This is essential as it would be futile to withdraw one compliant and file another, close on the heels of withdrawal. d. The accused person has paid to the fund the damages upto date levied under Section 14 B of the EPF & MP Act, 1952 and also, reimbursed the legal and other expenses incurred by the office in connection with the prosecution. e. The accused gives an undertaking to Regional P.F. Commissioner, to make full and prompt complaints under the various provisions of the EPF & MP Act, 1952. As the employer seeking withdrawal of prosecution cases is required to pay the damages before his request is considered, it is necessary for the Regional P.F. Commissioners to

47 levy, without delay, the quantum of damages payable by the employer after observing all the necessary formalities and the employer should be called upon to pay the damages before his request is forwarded to the Central P.F. Commissioner for consideration. Moreover, the above instructions should be given effect to invariably in all cases and where any defaulting employer has not complied with any one or more of these requirements, his request for withdrawal of the prosecutions may straight away be rejected without any reference to the Central P.F. Commissioner to avoid protracted correspondence and wastage of time. Requests of employers who are habitual defaulters should not be entertained and they should be proceeded against in accordance with the law. The above instructions should be given effect to, uniformly in all cases. Furthermore, is a habitual or heavy defaulter is given lenient punishment by the court, immediate appeal should be filed. In case of any doubt, the case should be referred to Central P.F. Commissioner for instruction. The Regional P.F.Commissioner in charge of the region is required to recommend the withdrawal of prosecution in respect of cases arising from the Sub-Regional Offices under his jurisdiction duly furnishing the completer particulars of the case. 14

LEVY OF PENAL DAMAGES AN INTRODUCTION

The Employees Provident Funds and Miscellaneous Provisions Act, 1952 has been amended by Act 37 of 1953 providing for recovery of damages on the belated payment of dues under the Act/Schemes. The power to recover damages vested with the appropriate government till 25.4.1957. The power to levy damages was delegated to the State Government from 26.4.1957. As there was considerable delay in levy of damages, the Act has been amended by amendment Act 40 of 1973 vesting the power to levy damages to the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government. The Central Government has authorised the Regional Provident Fund Commissioners to levy damages vide notification S.O. 548(E) dated 17th October 1973 as amended by S.O.No.2793 dated 18.6.1983 with effect from 1.11.1973. The Regional Provident Fund Commissioners in the region as well as in the SubRegional Offices are empowered to levy and recover damages. The organisation was taking a stand that the damages as imposed under section 14B includes the penalty and the loss of interest sustained by the organisation by the belated payment of dues. The Apex Court has also held the same view in the case of Organo Chemical Industries v/s Union of India and others. By the amendment Act 33 of 1988, for the words from the employers such damages not exceeding the amount of arrears as it may think fit to impose, the words from the employer by way of penalty such damages, not exceeding the amount of arrears as may be specified in the Scheme were substituted to make it clear that the damages is by way of penalty only. Simultaneously section 7Q was inserted in the Act making employer liable to pay interest on belated payment of any dues under the Act. All the covered establishments are required to pay the dues within 15 days from the close of the month. Five days grace period is also allowed. The dues shall include, any amount of contribution or amount to be transferred to the Fund on account of coverage under Section, 15(2) or amount to be transferred to the Fund under Section 17(5), after the cancellation of exemption or payment of any charges payable under any other provisions of the Act/Schemes or any of the conditions specified under Section 17 of the Act. If the amount is not deposited within

48 this stipulated time, penal damages not exceeding the amount of arrears can be imposed under Section 14-B of the Act on the establishment. But before levying and recovering damages, the employer shall be given reasonable opportunities of being heard. The function of Regional Office/SRO/SAO with regard to Section 14-B are: (a) (b) (c) (d) (e) (f) (g) A centralised Damages Cell is to be constituted. Defaults are to be detected through CCTS Software. Issue of notices to the employers. Obtain postal acknowledgement for the notices. Hearing of representations of defaulters. Issue of speaking orders. Collection of the damages levied through revenue recovery action.

Functions of Accounts Branch: (a) For effective operation of the Section 14-B the Accounts Branch shall watch for the receipt of monthly returns and challans. After auditing Form 12A etc. and completing the entries in DCB register note down the delays made in remittances. The remittances made up to 20th of the following month are not to be taken as defaults. (b) A statement of delayed remittances should be prepared in Appendix A/B after verifying the particulars of remittances with Schedule of Receipts. The damages statement in Annexure-A and one copy of Annexure B should be sent by 15th of the following month to the Damages Cell duly approved by AAO/AO/AC. An entry for having sent the Damages statement is to be made in the DCB register for future reference. At present CCTS Software provides the list of defaulters, amount in default, amount of damages and dues under 7Q of the Act, and the same is forwarded to the defaulting employer. The employer can remit the amount of damages and the simple interest on the basis of CCTS reports. The personal hearing need to be provided to the employer and necessary procedure is required to be followed. Functions of Damages Cell: (a) On receipt of damages statement prepare a show cause notice in format Appendix-C. The notice should be accompanied by a statement of dues and payments. (b) Issue notice to the employer. Before issue of notice make necessary entries in the Register for watching levy and recovery of damages (vide special proforma No.20). (c) Watch for any replies, representations from the employers and add the same to the file and submit the same to the Asst. P.F. Commissioner /Regional PF Commissioner one day before the date of hearing. (d) Once an order is passed by Asst. P.F. Commissioner / RPFC, the damages cell should prepare the proceedings in prescribed format, get it approved by Asst. P.F. Commissioner /RPFC. After this the fair copy should be neatly typed and sent to the employer by registered post. Printed or cyclostyled forms of speaking orders should not be used for this purpose. (e) The amount of damages as ordered by Asst. P.F. Commissioner /RPFC is to be entered in the Register for watching the levy and recovery of damages. (f) If the remittances are not received within 15 days of the issue of the order the damages cell initiates revenue recovery action. (g) When instalment facility is granted, the damages cell should receive and keep the Bank guarantee and watch for remittances on due dates of the instalments. The process of levy and realisation of damages is a quasi-judicial function. As a result of the adjudication by the Regional Commissioner, civil consequences are vested on the

49 employer and it is therefore necessary that while conducting such adjudication, the quasi judicial authority have to act in conformity with the principles of natural justice. The employer should be given reasonable opportunity of being heard and his submission should be taken into consideration before deciding the case finally. The orders passed by the Asst. P.F. Commissioner /Regional P.F. Commissioner should be a speaking order which should specifically state the reasons for the imposition of the damages. Damages imposed under Section 14-B includes a punitive also. It is penal damages i.e., a penalty and not merely actual loss to the beneficiaries. It serves as a deterrent. The predominant object is to penalise, so that an employer may not commit further defaults. Damage is also a penalty imposed on the employer for the breach of the statutory obligation cast on him. It is not only a warning to the defaulting employers but also meant to provide compensation to the beneficiaries. By the Amendment Act 33 of 1988, it is clear that the damages under Section 14B levied is totally a penalty only. Accordingly to sustain the loss caused to the Organisation, simultaneous action need to be taken to charge the interest under Section 7Q of the Act in all belated remittances. Levy and realisation of damages should be made in time. As soon as the default is detected immediate action should be taken, to initiate the proceeding under Section 14-B. Even though the law of limitation does not apply, damages should be levied without much delay. . As soon as the default is detected, the Accounts Section should prepare the statement of delayed remittances and pass it on to the Damages Cell. The Damages Cell may take action on the Penal Damages Statement generated through CCTS Software and the amount realised should be accounted for properly. As already mentioned earlier, the process of levy of damages is a quasi-judicial function. The employer should be given an opportunity of being heard. On receipt of the statement of the delayed remittances, the Damages Cell will issue a show-cause notice to the employer. The soft notice through CCTS serves this purpose. The Asst. Commissioner /Regional Commissioner should fix certain dates every month for conducting personal hearings under Section 14-B. The show-cause notice indicating the date of personal hearing should be issued by Registered Post and the acknowledgement obtained and kept on record. This will ensure that the employer has been duly informed of the date of hearing and he can not take the plea that he was not aware of the dates. All the replies and representations received from the employer should be kept on record and the file put up to the Asst. Commissioner / Regional Commissioner with a brief note on the date before the date of hearing. On the date of hearing, Asst. Commissioner / Regional PF Commissioner should record the proceedings in his own hand and pass an appropriate speaking order applying his mind to the facts and circumstances of the case. In case the employer fails to attend the personal hearing on the specified date, damages may be levied taking into account the written representation, if any, received from the employer. The speaking order should specifically meet all points raised by the employer in his written and oral evidence, so that the orders once passed are self-speaking and complete in all respects. The order should be neatly typed and sent to the employer by registered post. A copy of speaking order should be sent to the accounts branch also. The section will enter the details in the DCB Register and the remittance watched. In case, the damages are not paid within 15 days action should be initiated to invoke the provisions of Section-8F of the Act. According to Section 14-B of the Act read with the provisions of the relevant scheme the Regional Provident Fund Commissioner may recovered from the employer by way of penalty such damages, not exceeding the amount of arrears, as specified in the Scheme. The rates of damages given in the Schemes are reproduced hereunder. E.P.F. Scheme ..Para 32-A

E.P.S.-1995 E.D.L.I. Scheme Period of default

50 ..Para 5 ..Para 8-A. Rates of damages (percentage of arrears per annum) Seventeen than Twenty Two Twenty Seven Thirty Seven

(a) Less than two months (b)Two months and above but less four months (c) Four months and above but less than six months (d) Six months and above

The Central Board of Trustees may reduce or waive the damages levied under Section 14-B of the Act in relation to an establishment which is a sick industrial company and in respect of which a Scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 subject to such terms and conditions specified in the relevant Scheme. In other cases, depending upon merits reduction of Damages upto 50% may be allowed. The order passed under Section 14B can not be revised or rescind. However, any clerical or arithmetical mistake can be rectified either suo motto or on a representation from the employer provided that no such rectification should be made without giving the employer a further opportunity on the point where such rectification will have the effect of enhancing the liability of the employer. An ex-parte order may be re-opened if it is subsequently brought to the notice of the Regional Commissioner by the employer that he did not receive the notice or that he was prevented by sufficient cause from sending representation in writing/appearing before the authority on the first date. In such cases, the Regional Commissioner may issue revised speaking order indicating the reasons for the review etc. cancelling the earlier order. Damages should not be waived by the Regional Commissioner as he is not empowered to waive the same. The employer may, however, be allowed to pay the damages in instalments if he satisfies the requisite conditions of instalment facility.

Levy of Penal Damages in respect of Establishments covered Retrospectively. In respect of the discovered establishments (i.e.) establishments covered retrospectively, damages were being calculated @ 12% to cover the actual amount of interest creditable to the members on their PF accumulations for the period in question in respect of the establishments which have paid the EPF dues after the issue of Coverage Memo but before the date indicated in the Coverage Memo. In respect of the establishments which have paid the EPF dues after the date stipulated in the Coverage Memo, damages are levied @ 12% till the date within which they were asked to pay the EPF dues as stipulated in the Coverage Memo besides damages as well as Simple Interest are levied/charged at the prescribed rates for the period beyond the date stipulated in the Coverage Memo. After introduction of slab rates of damages under Para 32-A of the EPF Scheme, 1952, the concept of damages has altogether been changed and damages has to be levied as a penalty for committing defaults and the loss incurred by the Fund has to be recouped by Demand of Simple Interest under Section 7-Q of the Act. Thus, the recovery of loss of interest for pre-discovery period (as contained in the Old Manual) becomes contrary to the Scheme provisions, (at present). It has since been

51 clarified by the Additional Central Provident Fund Commissioner (South Zone), Headquarters vide his letter No. ACC(SZ)/Misc./2003/71343 dated 29.1.2003 as under: Consequent upon to the amendment to Section 14-B of the Act, Damages are to be levied strictly in accordance with the provisions provided in the Schemes. Damages recovered should be credited to the respective Accounts. In view of the above, there is no question of separate rate of Penal damages for the pre-discovery period and all belated remittances will attract the slab rates as provided for in the scheme. PENAL DAMAGES MAY NOT BE LEVIED IN THE FOLLOWING CASES. 1. Damages may not be levied on an employer who sends a Bank Draft or cheque on or before 20th of the month even though the actual realisation of money into the account of the Fund takes place after the due date, including days of grace. 2. Where arrears arise due to mistake in totalling contributions etc. damages may not be levied for the reason that it can not be said to be a case of default. 3. Damages are not to be levied where an employer did not make deduction from the wages of an employee on account of an accidental mistake or a clerical error or where an employee giving a false declaration regarding his previous membership provided the employer was permitted in writing to make deduction from the subsequent months wages. 4. Only damages accrued upto the date of liquidation of a company can be realised from the liquidator. No damages can be levied subsequent to the date of liquidation. 5. Part payment made by the establishment is to be treated as default and damages are leviable on the balance amount due. 6. If the delay is solely due to and attributable to railway/General/Bank strike, no penal damages should be levied. This will, however, be subject to verification.

Need for timely Action The observation made by an High Court on the belated action in levying the damages is reproduced for guidance: the officers entrusted with the task of administering social welfare legislations should be aware of this and they should be conscious that they are administering a law which has been enacted for the welfare of the employees. The Government who have enacted the law owes a duty to set up proper machinery to administer it. If it needed 17 years to issue notice which only required turning the pages of a register with a view to seeing the date of payment, it is difficult to understand what sort of administration of this social welfare legislation is being done by the authorities concerned. This case is a glaring example of the way of the social welfare legislations are being dealt with and administered. The whole of the legislative purposes may be frustrated by administrative inefficiency, inaction or negligence. If any loss is caused to the employees by their inaction, negligence or remissness responsibility may be fixed and the amount recovered from the persons so responsible. Action taken after long 17 years for levy of damages of Rs.53,000 for a default committed for a period of 10 years can neither be exemplary nor act as a deterrent for other employers.

52 Where no period of limitation is prescribed by the law for exercise of any power it must be exercised within a reasonable time. Any unreasonable delay in exercise of power may affect its validity. What is reasonable time will depend upon the facts of each case. Though Apex Court set aside the impugned judgement of the High Court and salvaged the situation to certain extent, that it has not given any blanket permission to Regional Provident Fund Commissioner to levy the damages taking their own time. The Apex Court observed There can be no dispute that when a power is conferred by the statute without mentioning the period within which it could be invoked, the same has to be done within a reasonable period, as all powers must be exercised reasonably and exercise of the same within a reasonable period would be facet of reasonableness. Keeping in view of the above observations, Regional Commissioners should take action to levy damages every month to avoid the loss of interest to the Fund (as the interest under Section 7Q is due only after fifteen days of the issue of levy order) and the risk of quashing the levy order as time barred. Further, if action under Section 14B is initiated every month, instead of taking action at the end of the year or after several years it will be easier to recover the amount and this will act as a deterrent to the erring employers. Launching of prosecution for non-payment of Damages levied: The question as to whether an employer could be prosecuted for non-payment of damages was examined long back and it was decided by the Legal Advisor to the Government of India, Ministry of Labour than once the date or period within which the employer is required to pay the damages levied is incorporated specifically in the speaking order, legal action can be taken against the employer by resorting to the prosecution under Section 14(2A) of the Act. It was also decided that the protection of Article 20(2) of the Constitution of India will not apply as it would not amount to double jeopardy. The employer has to deposit the damages at the rate as specified under three Schemes immediately on issue of a proceedings issued by the Regional Provident Fund Commissioner in terms of proviso to Section 14B of the Act. Thus, the penal damages levied becomes an amount payable by the employer under the provisions of the Act and as such the non-payment of damages could be construed as an offence falling under Section 14(2A) of the Act. In view of this, speaking order should specifically mention the date by which the damages levied shall be remitted, and in the event of the employer failed to do so within the stipulated time, the employer is liable for prosecution, besides, recovery of interest under Section 7Q of the Act.

Database Creation:
With a view to ensure that Penal Damages under Section 14 B and interest under Section 7Q are realised in respect of all belated deposits, the Headquarters office has given directions to all the field offices to create a data base in the prescribed formats (Data base I & II) to the extent of 100% of all establishments. For this purpose, the remittance particular with the date of deposit are to be collected in respect of each establishment with reference to DCB Register and Enforcement files, from the date of Coverage of the establishment. Simultaneously, wherever the Penal Damages and interest are not realised action should be initiated to recover the dues on priority basis. The Regional P.F. Commissioners in charge of the Regions have been given the task of completing the task of creation of database I & II as their key functional areas.

RECKONING THE PERIOD OF DELAY:

To be reckoned from 16th of the month following to the month for which the dues relates to the date of remittance.

53 Where arrear wages are paid To be deposited within 15 days of disbursement. Transfer of past accumulation dues Within 10 days from the issue of related letter. Retrospective application of the Act From the normal due date, from the date of coverage and not from the date of issue of Code Number.

PENAL DAMAGES/INTEREST NOT TO BE LEVIED

Where the Demand Draft or Cheque are received by the State Bank of India before 20th of the month. Due to mistake in totaling of contributions etc. and the arrears paid. Where the contributions not deducted due to accidental mistake or clerical error of the employer, and permission granted. For the period subsequent to the date of liquidation. Solely on account of Railway/General/Bank strike, subject to orders of Regional Provident Fund Commissioner. Part Payment made before due date. (Balance amount alone will attract Penal Damages and Interest)

ASSESSMENT OF DUES UNDER SECTION 7A AND 14B OF THE ACT.

When the Compliance 01 program was introduced during 2001 detailed instructions were issued to all the field formations to scrupulously follow certain norms for accountability and transparency in quantification of dues under the Act. They were also required to maintain the basic books of accounts and furnish the information to the Recovery Officer as per the existing instructions. The Circle Officer was made the centre point of compliance in all matters regarding to arrear management including recovery up to the end of the financial year. Specific work norms were fixed for the Assessing Officers as well. However, it is a matter of record that many regions do not adhere to these instructions strictly with the result the arrears mount up which are not brought to the books of accounts. Directions were also issued making it imperative on the part of the supervisory officers like RPFC-II and RPFC-I to scrutinize the assessment orders, at least eight orders of each Assessing Officer every month. Out of the eight orders, four were to be selected by the supervisory officer whereas four were to be submitted by the Assessing Officer as per his choice. This should be communicated to the Head Office for every month before 10th of the subsequent month. Except from a very few regions, such information is not received in the Head Office, which has been viewed seriously by the Central Provident Fund Commissioner. [vide H.O. Letter No.RRC/28(3)2003/7A-14B/68533 dated 9.12.2003]

NOTIFICATION OF EPFO UNDER SECTION 138 OF INCOME TAX ACT, 1961 FOR DISCLOSURE OF INFORMATION OF ASSESSES
Section 138 of Income Tax Act, 1961 provides for disclosure of information of assesses. Section 138(1) provides that the Central Board of Direct Taxes or any other

54 income-tax authority specified by it by a general special order in this behalf may furnish or cause to be furnished to such officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary to do in the public interest, specify by notification in Official Gazette. Government of India vide notification No.9/2003 dated 7.1.2003 has specified Central Provident Fund Commissioner or any other officer, not below the rank of Regional P.F. Commissioner for the purpose of Section 138 of Income Tax Act, 1961 duly authorized by him. Authority: [CPFCs Letter No.Co-ord/24(5)2000/201 dated 12.6.2003 read with Ministry of Labour letter No.35025/2/2001-SS.II dated 27.1.2003.

15

APPLICATION OF SECTION 7Q
Provisions in the Act Section 7Q creates liability on the employer to pay simple interest at twelve percent per annum or at such higher rate, as may be specified in the Scheme on any amount due from him under the Act from the date on which the amount has become due till the date of its actual payment. The higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank. As no provision has so far been made in the Scheme for higher rate of interest, the defaulting employer is liable to pay simple interest at twelve percent per annum. Implications of Section 7Q of the Act. Section 7Q was inserted by the Amendment Act 33 of 1988 and it is given effect only since 1.7.1997. While amending the Act (by the Amendment Act 33 of 1988) for creation of Employees Provident Fund Organisations own recovery machinery on the lines of recovery machinery of the Income Tax department by adopting and applying the provisions of Second and Third Schedules to Income-tax Act, 1961 and Income-tax (Certificate Proceeding) Rules, 1962, some other provisions of the Income-tax Act, 1961 relating to recovery were also borrowed and incorporated with such modification as necessary to suit the requirements of the Employees Provident Fund Organisation. Section 7Q of the Act is adopted from Section 220 of the Income-tax Act, 1961. There is a reference to Section 220 of the Act in the Rule 5 of the Second Schedule to Income-tax Act, 1961. This section provides for payment of simple interest at the rate of one-and-a-half percent for every month or part of a month, comprised in the period commencing from the immediately following the end of period mentioned in sub-section (1) of 220 of the Income-tax Act, 1961 i.e. thirty days from the date of service of demand notice. Particularly when there is specific provisions in the Employees Provident Funds and Miscellaneous Provisions Act, 1952 for payment of interest on belated payment of due under the Act., i.e., Section 7Q of the Act, section 220 of Income-tax Act, 1961 cannot be invoked and the interest cannot be charged under this section in addition to charging of interest under Section 7Q of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The interest also cannot be charged at rates mentioned therein, ignoring the provisions of section 7Q of the Act. Interest can be charged only at the rate specified in section 7Q of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 or the rate as may be specified in the Scheme. Section 14B of the Act was also amended on the lines of section 221 of the Income-tax Act, 1961.

55 For the words may recover from the employer such damages not exceeding the amount of arrears, as it may think fit to impose in section 14B of the Act, the following words were substituted. may recover from the employer by way of penalty such damages not exceeding the amount of arrears, as may be specified in the Scheme. By adding the words by way of penalty in Section 14B, it is made clear that the damages imposed is by way of penalty and it does not cover the loss of interest to the fund. Further Incometax Act, 1961 also provided for penalty in addition to simple interest to be charged on the dues. In view of the above, employer is liable to pay simple interest at the rate of twelve percent per annum on the belated payment of contributions, administrative charges, inspection charges, previous accumulations due for transfer on coverage of establishment or cancellation of exemption from the date they become due for payment till the actual date of payment/transfer, in addition to the damages payable under section 14B of the Act. The exempted establishment also should pay the simple interest at twelve percent on the belated payment of contribution to the Board of Trustees of the exempted fund in addition to the damages payable under section 14B of the Act. The interest should be paid to exempted fund. Section 7Q of the Act creates liability on the employer to pay simple interest on any amount due from him under the Act and the damages levied under Section 14B of the Act is the amount due under the Act. Further rule 5 of the Second Schedule to Income-tax Act, 1961 provides for the payment of interest on belated payment of penalty also. In view of the above, simple interest at the rate of twelve per cent per annum should be recovered from the employer from the date it becomes due ( i.e. fifteen days from the date of receipt of levy order, as ordered in the levy order itself) till the date of actual payment. Action to be taken by the Regional Office/Sub-Regional Office/ Sub-Accounts Office As the section 7Q of the Act came into force with effect from 1.7.1997 the employer is liable to pay simple interest at twelve per cent per annum on the amount of arrears of contribution, administrative charges, inspection charges, damages and past accumulations due as on 1.7.1997, irrespective of period involved, from 1.7.1997 till the actual date of payment. The employer is also liable to pay interest on the amount of arrears of contribution or administrative charges, or inspection charges or damages or past accumulations, as the case may be, which has become due on or after 1.7.1997 from the date, the amount has become due till actual date of payment. The payment of dues under the Act, irrespective of the period involved, made on or after 1.7.1997, in respect of each establishment including exempted establishment should be reviewed and wherever the dues have been paid belatedly, action should be taken immediately under Section 7A of the Act to determine the amount of interest due as no recovery action can be initiated without determining the dues. This procedure of assessment of dues under Section 7A should be resorted only in respect of cases prior to 7Q notification. However, if order under Section 7A or 14B, as the case may be, issued earlier, specifically and clearly directed the defaulting establishment to pay the simple interest at the rate of 12% per annum as per the provisions of Section 7Q of the Act, in addition to the amount determined by the order, fresh determination of amount of interest payable under Section 7Q, under Section 7A of the Act is not necessary before initiating recovery action against the defaulting establishment for recovery of interest. In such cases, the Recovery Officer should recover the amount together with the interest. For the purpose of identifying the past belated payments, a day may be earmarked for the dealing hands in the Accounts Section of the Office as a whole to review the payments made on or after 1.7.1997 and to identify belated payments upto the specified period in respect of each establishment. Thereafter the dealing hand should prepare a list of belated payments, in triplicate, indicating therein the code number and name of the establishment, period, amount due, due date for payment, date of payment, amount of interest payable under

56 Section 7Q of the Act and send them to Enforcement Section or Penal Damages Cell, retaining one copy with them. Once the identification of past belated payment is completed, the dealing hand should prepare list of belated payment of dues under the Act on monthly basis by review of DCB Register, every month and send it to the Enforcement Section and Penal Damages Cell for further action. On receipt of list of belated payments for the past period, Enforcement Section should enter the code number and name of the establishment, period, amount due, amount paid, due date for payment, date of payment, amount of interest payable under Section 7Q of the Act in a separate Register of 7A cases for determination of interest payable under section 7Q of the Act and issue a show-cause to the defaulter. Further action should be taken as in other 7A case. On receipt of list of belated payment of dues under the Act for the subsequent period from the Accounts Section, Enforcement Section should take action on the above line on month to month basis. Penal Damages Cell should issue show cause notice for levy of damages under Section 14B of the Act, if no action has been taken on such belated payments. Entry in the Interest Suspense Account Register The interest realised under Section 7Q should be entered under a separate column in the interest suspense account register as credit to Interest Suspense Account. Action should be taken to provide a separate column in the Challan to show amount of interest under section 7Q of the Act. Till then the amount should be indicated against Misc. Remittances with remarks Interest under Section 7Q.

16
INSPECTOR
Powers and functions of Enforcement Officer under Section 13 of the Act Action by EO with regard to Annexure A & Annexure B Appointment of Inspectors
There are two kinds of Inspectors, one appointed by notification under Section 13 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 merely to exercise certain powers mentioned in that section. The others are officers of the Employees Provident Fund Organisation or outside thereof who could be appointed as Inspectors for exercise of powers referred to above. The former is appointed under Employees Provident Funds (Staff and Conditions of Service) Regulations, 1962 and fall under the distinct cadre of Enforcement Officers. The Central Provident Fund Commissioner, Regional Provident Fund Commissioners, Assistant Provident Fund Commissioners and Enforcement Officers are notified as Inspectors under Section 13 of the Act. A notification regarding appointment of Provident Fund Officer and Enforcement Officer to be Inspector under Section 13(1) of the Act is issued.

Duties and responsibilities

57
The chief duties and responsibilities of an Inspector 1. are : (a) to bring under the purview of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 every establishment which attracts the application of the Act by reason of requisite employment strength and its nature of activity; (b) to recommend the coverage of establishment under section 1(4) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 on the joint request of the employer and the majority of the employees of the establishment provided the establishment is not liable to implement the Act; (c) to bring under the ambit of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, establishment participating in Common Provident Fund in which one or more than one establishment is already covered under the Act; 2. to secure full compliance by the employer of that establishment with the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes framed thereunder; 3. to attend to the problems of employers arising in the process of compliance and to the grievances of employees including rendering service through the Service Centre, if any set up, and where he cannot solve the problem or redress the grievances, to report the case to the Regional Provident Fund Commissioner for further action; 4. to conduct surveys when asked to, assess coverage potential to new categories of establishment; 5. to supply various prescribed forms to the employers on their request and educate them about their proper completion and punctual submission to the Regional/SubRegional Office; 6. to report to the Regional Provident Fund Commissioner, evasion, abuse, violation, defect or abnormality noted in the implementation of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes framed there under; 7. to serve the warrant on the defaulting employer in recovery cases and attach and sell the property of the defaulting employer and to assist the Recovery Officer. 8. to attend to prosecution cases,

9. to conduct the prosecution cases as Assistant Public Prosecutors. 10. to ensure that the establishment exempted under Section 17(1) / 17(1C) / 2(A) of the Act / the establishment, where its individual/class of employees exempted under paragraph 27 /27A of Employees Provident Fund Scheme, 1952 or paragraph 28 of Employees Deposit Linked Insurance Scheme, 1976 as the case may be, is complying with the relevant provisions of the Act/Scheme and also the conditions governing the grant of exemption stipulated by the appropriate Government or Central Provident Fund Commissioner or Regional Provident Fund Commissioner, as the case may be. 11. to serve summons/warrants on the accused in respect of prosecution cases launched, to enable quick results in larger interests of the Organisation; and 12. to obtain the requisite documents or particulars or verification of facts, etc., that are required by Regional Office/ Sub-Regional Office for rendering effective service by keeping liaison between the establishment and the office. He shall arrange to obtain and forward the final settlement claims and pension claims of retiring employees two months in advance of their retirement. The Regional Provident Fund Commissioner in-charge of the Region shall fix a target for each Enforcement Officer in the matter of applicability of the Act to the establishments and enrolment of members, for each year and the progress will be monitored on monthly basis through the respective Regional Provident Fund Commissioners. the Enforcement Officers should ensure compliance of the target fixed; 13. all the Enforcement Officers are notified as Assistant Public Prosecutors.

58
14. to verify and certify the past accumulations dues transferable by the establishment on account of application of the Scheme either due to coverage or on cancellation of exemption. 15. to carry out such other functions as may be assigned to him/her by the competent authority.

Powers of Inspectors (Enforcement Officers)

The Inspector has been given the following statutory powers (vide Section 13 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952), to enable him to discharge his duties effectively: (a) (b) to require any employer or any contractor from whom any amount is recoverable under section 8A of the Act to furnish such information as he may consider necessary; at any reasonable time and with such assistance as he may require to enter and search any establishment or any premises connected with it and require any one found in-charge of it to produce for his examination any accounts books, registers and other documents which have bearing on the employment of persons and payment of wages in the establishment; to examine with respect to any matter relevant to the aforesaid purpose the employer or any contractor from whom any amount is recoverable under Section 8A or his agent or servant or any other person found in-charge of the establishment or any premises connected therewith or whom the Inspector has reasonable cause to believe to be the employee of the establishment; to make copies of or take extracts from any book, register or other documents, maintained in relation to the establishment and, where he has reason to believe that any offence under this Act has been committed by the employer, seize with such assistance as he may think fit, such book, register or other document or portion thereof as he may consider relevant to that offence; to exercise such other powers as the Schemes may provide.

(c)

(d)

(e)

Search and Seizure Scope and Powers of Inspector:

Section 13 of the Act empowers an Inspector for search and seizure to secure compliance from the establishment.

It is essential for every public servant to be well aware of his powers. This knowledge of powers helps him in discharging his duties more efficiently. Similarly, he can thereby avert the danger of exceeding limits of powers. Acting beyond the limits of powers can cause lot of problems including litigations, etc. Similarly, of the public servant is not aware of his powers, he is not able to achieve the results which he otherwise could have achieved by exercise of his powers. One of the powers of the Provident Fund Inspector defined under Section 13(1) of Employees Provident Funds and Miscellaneous Provisions Act, 1952 is that of search and seizure. This power was not available to the Inspectors in the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act) as it originally stood. However, the same was conferred on them by an amendment made by Act 28 of 1963). The Inspector can at any reasonable time carry out search, if necessary. He can also seize the documents connected with an offence under the Act, which he has reason to believe to have been committed. For carrying out the search and seizure, the assistance as deemed fit by the Inspector can be obtained. If it is felt that the law and order problem is likely to be created, the assistance of local

59 police can also be taken. The power of search of the premises is to be exercised sparingly and with discretion and as a last resort. Moreover, before carrying out the search it is desirable that the Regional Provident Fund Commissioner should be informed about the circumstances and his permission obtained to carry out the Search. If the employer refuses to produce the records before the Inspector, he should be persuaded to produce the same and even then if he fails to produce, the power of search and seizure as the case may be, may be exercised. Section 13(2B) says that the provisions of Code of Criminal Procedure, 1973, shall, so far as may be, apply to any search or seizure under that Section as they apply to any search or seizure made under the authority of warrant issued under Section 94. From the reading of this Section, it appears that it is not necessary to obtain warrant before carrying out the search. But the procedure for search is laid down in Code of Criminal Procedure, 1973 has to be scrupulously followed. The relevant provisions of Code of Criminal Procedure, 1973 in this regard are those under Section 38 and Section 100. Section 100 of Code of Criminal Procedure, 1973 reads as follows: Persons in charge of closed place to allow Search: (1) Whenever any place liable to search or inspection under this Chapter is closed, any person residing in, or being in charge of, such place, shall, on demand of the officer or other person executing the warrant, and on production of the warrant, allow him free ingress thereto, and afford all reasonable facilities for a search therein. (2) If ingress into such place cannot be so obtained, the officer or other person executing the warrant may proceed in the manner provided by sub-section (2) of Section 47. (3) Where any person in or about such place is reasonably suspected of concealing about his person any article for which search should be made, such person may be searched and if such person is a woman, the search shall be made by another woman with strict regard to decency. (4) Before making a search under this Chapter, the officer or other person about to make it shall call upon two or more independent and respectable inhabitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do. (5) The search shall be made in their presence, and a list of all things seized in the course of such search and of the places in which they are respectively found shall be prepared by such officer or other person and signed by such witnesses; but no person witnessing a search under this Section shall be required to attend the court as a witness of the search unless specially summoned by it. (6) The occupant of the place searched, or some person in his behalf, shall, in every instance be permitted to attend during the search, and a copy of the list prepared under this Section, signed by the said witnesses, shall be delivered to such occupant or person. (7) When any person is searched under sub-section (3), a list of all things taken possession of shall be prepared and a copy thereof shall be delivered to such person. (8) Any person who, without reasonable cause, refuses or neglects to attend and witness a search under this Section, when called upon to do so by an order in writing delivered or tendered to him, shall be deemed to have committed an offence under Section 187 of the Indian Penal Code (45 of 1860). While carrying out the search it is absolutely essential that at least two independent witnesses are present. Sub-section (4) of Section 100 says that the officer carrying out the search shall call upon 2 or more responsible inhabitants of the locality in which place the establishment is situated or any other locality, if no such inhabitant is available or willing to give witness for search. The emphasis is on the neutrality and respectability of the witnesses. Such witnesses should be unprejudiced and independent and able to inspire the confidence of the Court if such a case is put up for trial. Trial, of course, applies mostly to cases investigated by police and Income Tax authorities,

60 etc. It is desirable that these independent witnesses should be requisitioned from other Government department like ESIC, Office of Labour Commissioner, Factory Inspectorate, etc., wherever available. Such witnesses will be mostly unprejudiced, respectable and independent. Before carrying out the search the Inspector should disclose his identity and that of the witnesses to the employer or occupant of the premises, as the case may be. He should then call upon the occupier to immediately produce the relevant documents or records. If he fails to do so the search of the premises can be carried out in order to trace the documents or records in question. It is essential that the occupant of the premises should remain present can be allowed to watch the search. After the search is over, a panchanama should be drawn on the spot incorporating therein the time of the commencement of the search, the time when it was over, the particulars of the documents, records found or seized, description of the place from where it was found or seized, and other details of the search. The seized documents, records or things should be suitably marked for identification. Generally, the signatures of the witnesses with date are obtained on the documents, records or things seized. The panchanama should be signed by the witnesses and the officer carrying out the search on the spot. A copy thereof should be delivered to the occupant of the premises and his signature obtained on the copy retained by the Inspector. Even if no documents are found, nil panchanama should be drawn. If during the course of the search some other objectionable material like foreign currency, significant amount of unaccountable cash, unlicensed arms, etc., is found the appropriate authority should be informed immediately. If the employer or the occupier of the premises where search is to be carried out does not allow the Inspector and search party to enter the premises, resort can be taken to the provisions of Section 47(2) of Code of Criminal Procedure, 1973. Under this provision, if, even after disclosure of identity, authority, purpose and the demand of admittance duly made, the ingress cannot be obtained, it shell be lawful to break open any out or inner door or window of any house or place where search is to be taken. But, if such a place is in the actual occupancy of a female, who as per custom, is purdanshin, the officer carrying out the search shall, before entering such apartment, afford her every reasonable opportunity to withdraw and may then break open the apartment and enter it. Provision has also been made in Section 47(3) of Code of Criminal Procedure, 1973 to take care of the situation where the officer who has legally entered to carry out the search is detained or locked inside. In such an event he has the power to break open the door, window, etc., in order to liberate himself and the search party. It is obvious that the situation described above, viz., seeking ingress by making open the doors or lock or seeking to come out when locked inside will very rarely arise. The Inspector should be tactful to avoid such situations. If such a situation is likely to arise the assistance of local police must be taken before proceeding for search. As regards the seizure it is clear that this power is available only in respect of the books, register or other documents or portion thereof as are relevant in respect of any offence under the Act which the Inspector has reason to believe to have been committed by the establishment. It is necessary to prepare a seizure memo, on the spot, in respect of the seized documents. The seizure has also to be done before two independent and respectable witnesses. The seizure memo should contain the details of date, place and time of seizure, the signature, name of the persons from whom seized, the description of articles seized, the signature and name of the person from whom seized, the names of witnesses and their signatures, designation and full address and signature of the officer carrying out the seizure. The seized documents should also be marked for identification and signed by the witnesses with date. A copy of seizure memo should be delivered to the person from whom the documents were seized and his acknowledgement should be obtained for having received the copy. It is observed that a feeling of helplessness is often expressed by the Enforcement Officers regarding reluctance or non-cooperation of the employers in the matter of production of record. If the situation so warrants, the officers can take resort to their power of search and seizure in the manner stated above. This will have desired effect and the employers will also have the fear of authority of Inspectors.

61 To sum up: Use the power of search and seizure sparingly and with discretion. Use it only when persuasion fails. Apprise your Regional Provident Fund Commissioner about the circumstances and preferably obtain his permission to carry out search. Take the assistance of local police before proceeding for search, if law and order problem is visualised. Take two independent respectable and unprejudiced witnesses preferably two Government servants from departments like ESI Corporation, Office of Labour Commissioner, Factory Inspectorate, etc., as panchas. Section 94 of Code of Criminal Procedure, 1973 (Old Section 98), inter alia, provides-that if a District Magistrate, Sub-Divisional Magistrate or Magistrate of the First Class (JMFC) has reason to believe that any place is used for depositing or selling stolen property or for depositing, selling or producing any objectionable article described in this Section, he may by warrant authorise any police officer above the rank of a constable to: (a) enter such place with such assistance as may be required; (b) search the same in the manner specified in the warrant; (c) to take possession of any property or article found there, which he reasonable suspects to be one for which search was carried out. Section 99 of Code of Criminal Procedure, 1973 states that provisions of Section 38, 70, 72, 74, 77, 78 and 79 shall so far as may apply to all search warrants issued under Section 93, 94, 95 and 97.

Contents of Panchnama 1. Name and designation of the officer carrying out search 2. Name, designation and full address of witnesses. 3. Date and time of commencement of search. 4. Date and time of completion of search.
5. Description of what the panchas saw, viz., how the search was actually carried out, names of

members of search party, what documents/records were seized from which place, that the articles seized where marked for identification, the employer or the occupier of the premises was present and watched the proceedings of search. If no seizure made then the description of documents found for examination and places from where found, etc.
6. Panchnama to be drawn on the spot. 7. Panchnama to be signed by the Inspector carrying out search and by the witnesses on the spot.

8. Copy thereof to be delivered to the employer or occupier of the premises and his signature obtained in token of having received the same. Seizure Memo (Under Section 13(2)(d)/13(2A) of Employees Provident Funds and Miscellaneous Provisions Act, 1952.) 1. Date of seizure :

62 2. 3. 4. 5. Time of seizure By whom seized From whom seized Place from where seized : : : : Particulars of articles seized Signature of the person from whom seized: Signature of witness with full name, designation and address: (1) (2) Signature of the Inspector (Enforcement Officer): Action by EO with regard to Annexure A and Annexure B Preparation of Annexure A is the prime responsibility of Compliance Section. This should be prepared carefully and where the visit of the Enforcement Officer to the establishment is absolutely necessary and the defaulting establishments should necessarily be included in the Annexure A. In addition, the requirement of accounts branch, if any, should also be included. The Annexure A should be prepared preferably on weekly basis and provide the number of establishments atleast 7 establishments per day. This will take care of the actual and effective inspection that can be conducted by the Enforcement Officer. The establishments listed in the Annexure A should be supported by an authority letter for each establishment under the signature of the Assistant Provident Fund Commissioner of the circle. No Enforcement Officer is expected to visit the establishment without the authority letter. There is no regular inspection of establishments by the Enforcement Officer. The determination of dues under Section 7A also depends upon the receipt of Form 12-A from the establishments. Wherever the default in submission of Form 12A is detected through CCTS Reports, the Enforcement Officer should be directed to procure the same. It is the duty of the Assistant Provident Fund Commissioner to procure 90 per cent of the Forms 12A due from the establishments, either on voluntary compliance or through the Enforcement Officer. Role of EO in filing prosecution In order to facilitate the accord of sanction to prosecute any defaulter, the Enforcement Officer should furnish the Regional Provident Fund Commissioner a detailed report, in touching on the following points: (i) (ii) (iii) Name of the establishment. Nature of the legal composition of the management, viz., Sole Proprietorship concern, Partnership firm, Limited Company, etc. Name and designation of the employer (where the person committing offence is a company, name of the person who was in-charge and responsible to the company at the time when the offence was committed as well as of the company), if the fact indicates that the offence has been committed with the consent or convenience or is attributable to any neglect on the part of any Director or Manager, Secretary of the company name of such Director, Manager, Secretary and other Officer also be indicated. Address of the person(s) against whom prosecution is to be launched. Facts constituting the offence (Section of the Act/Paragraph of the Scheme). Evidence (witness as well as records) for supporting the case.

(iv) (v) (vi)

63 Once the prosecution is sanctioned the complaints should be filed in the Court within seven days along with the sanction of the Regional Provident Fund Commissioner. A proper record of hearings, adjournments and consultations, if any, with the Public Prosecutor or Private Lawyer should be maintained for each case, or a group of cases to be disposed of jointly. Mere making of notes of hearing, adjournment in the respective file is not enough. He should intimate the progress of the case(s) to Regional Provident Fund Commissioner after each hearing. The employers action in violation of the provisions of the Act / Schemes should be carefully brought out before the Court. Where the employees contribution after having been deducted has not been paid, the fact that such Act constitute Criminal Breach of Trust should be stressed before the Court to drive home the seriousness of the offence. Section 14AA provides for enhancement of punishment for certain offences after previous conviction for similar offence. While filing the complaint, the fact of previous conviction, if any, for similar offence should be brought to the notice of the Court. He should also press for enhanced punishment under Section 14AA of the Act. He should request the Court for awarding a portion of the fine as compensation to defray the prosecution expenses as contemplated under Section 357 of the Code of Criminal Procedure, 1973. Section 357 of Code of Criminal Procedure, 1908 (1) When a Court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part, the Court may, when passing judgement, order the whole or any part of the fine recovered to be applied-(a)in defraying the expenses property incurred in the prosecution; (b) in the payment to any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the Court, recoverable by such person in a Civil Court; (c)when any person is convicted of any offence for having caused the death of another person or of having abetted the commission of such an offence, in paying compensation to the persons who are, under Fatal Accidents Act, 1855 (13 of 1856) entitled to recover damages from the person sentenced for the loss resulting to them from such death; (d) when any person is convicted of any offence which includes theft, criminal misappropriation, criminal breach of trust, or cheating, or of having dishonestly received or retained, or of having voluntarily assisted in disposing of, stolen property knowing or having reason to believe the same to be stolen, in compensating any bona fide purchaser of such property for the loss of the same if such property is restored to the possession of the person entitled thereto. (2) If the fine is imposed in a case which is subject to appeal, no such payment shall be made before the period allowed for presenting the appeal has elapsed, or, if an appeal be presented, before the decision of the appeal. (3) When a Court imposes a sentence, of which fine does not form a part, the Court may, when passing judgement, order the accused person to pay, by way of compensation, such amount as may be specified in the order to the person who has suffered any loss or injury by reason of the act for which accused person has been so sentenced. (4) An order under this section may also be made by an Appellate Court or by the High Court or Court of Session when exercising its powers of revision. (5) At the time of awarding compensation in any subsequent civil suit relating to the same matter, the Court shall take into account any sum paid or recovered as compensation under this section. As soon as the final orders are passed by the Court, he should immediately make a report to the Regional Provident Fund Commissioner giving a gist of the order. He should take steps to obtain a copy of the order at the earliest. (To leave the task of obtaining a copy to the Public Prosecutor or Private Lawyer, if one has been engaged, may result in getting the appeal, if any, time barred).

64 Under no circumstances, he should with hold the sanction and delay the filing of complaints except on written direction from the sanctioning authority, withdrawing the sanction accorded. The Enforcement Officer should not Act on oral directions in such cases. The Courts should be prayed not to grant requests for adjournments so that the employees of the establishment are not put to hardships due to delay in the realisation of dues. Wherever a portion of fine is awarded to the Organisation as compensation, prompt action should be taken to collect the same from the Court and to deposit in EPF Account No.02. Wherever the employer did not comply with the orders of the Court in the remittance of dues within the stipulated period, the Court should be approached for invoking the provisions of Section 14C (2) of the Act for awarding enhanced punishment. Any difficulty or abnormal delay in the trial or disposal of prosecution should be reported to the Regional Provident Fund Commissioner, for such action as may be deemed necessary. Where default occurs owing to complacency in the employer which in turn has developed by lack of proper vigilance and supervision by the Enforcement Officer and the default is not wilful, timely contacts and prosecution will secure the results. The progress of prosecution cases should be watched through the special Register prescribed for this purpose. The Enforcement Officer should fully acquaint himself with the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes and the procedures. Role of Enforcement Officer in Recovery Machinery: Section 8 to 8G of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, deals with recovery of Provident Fund and other dues. The Enforcement Officer should fully acquaint himself with the provisions of the Act and procedure contained in the Chapter on Recovery Machinery.
He should assist the Recovery Officer in the recovery matter. For this purpose, he should obtain the latest bank account details of the establishments, details of debtors, business etc. and he should submit the same to the Assessing Officer/Recovery Officer. He should also obtain the latest Form 5A.

17

RECOVERY AN INTRODUCTION ACTION UNDER SECTION 8B -8F PROCEDURE ITCP RULES

RECOVERY MACHINERY
By the Amendment Act 33 of 1988, Section 8B to 8G have been inserted, to create the Employees Provident Funds own recovery machinery on the lines of the recovery machinery of the Income-tax Department by adopting and applying the Second and Third Schedules of Income-tax Act, 1961 and Income-tax (Certificate Proceeding) Rules, 1962. Though the Act was amended in the year 1988, these provisions were given effect from 1.7.90. Government in the first instance notified one Assistant Provident Fund Commissioner by name for each Region except Maharashtra Region where two Assistant Provident Fund Commissioners were provided, to exercise the powers of the Recovery Officer under the provisions of the Act. The process of recovery delayed due to large number of cases pending and also of concentration of work with one Assistant Provident Fund Commissioner. Subsequently, Government notified all the Regional Provident fund Commissioners

65 and Assistant Provident Fund Commissioners as recovery officers in their respective regions so as to decentralize and speed up the recovery work and also to make each assessing officer responsible for the recovery of arrear dues assessed by them. As the each Regional Provident Fund Commissioner/Assistant Provident Fund Commissioner is the assessing officer and also the recovery officers, it will be easier for each one of them to concentrate on recovery of arrears due from the defaulting establishments falling in their jurisdiction and to bring down the arrears. The main functions of the Recovery Officer are as under: (1) To initiate recovery proceedings against the defaulters. (2) To ensure compliance with the requirements for recovery proceedings. (3) Enforce the recovery of arrears by attachment and sale of movable and immovable property of the defaulter; (4) Enforce the recovery by attachment of business of the defaulter; (5) To appoint Receiver for running the business attached, of the defaulter; (6) Enforce the recovery by arrest and detention of the defaulter; (7) Investigate the claim preferred to or any objection made to attachment and sale of property and pass orders; (8) To ensure safe custody of the property attached; (9) To confirm the sale of the property; (10) To ensure the delivery of the property to the purchaser; (11) To ensure the amount realized are deposited on the same day of its realization in the EPF Accounts with the State Bank of India. The duties and responsibilities of an Enforcement Officer in recovery proceedings are as under: (1) (2) (3) (4) (5) (6) (7) (8) To cause service of summons/warrants/demand notices upon the defaulting employers to avoid delay. To collect the information about the movable/immovable property of the defaulting employer and the establishment. Attachment of the movable/immovable properties. To pursue the recovery of dues by sale or auction of the property attached. To attend the periodical meetings with the Recovery Officer and the Regional Provident Fund Commissioner to review the recovery position. To maintain the various Registers required for the purpose of monitoring the recovery. To maintain liaison with the Courts for speedy and expeditious recovery. To carry out such other functions as may be assigned to him by the Recovery Officer.

RECOVERY CERTIFICATE. Recovery Certificate means an authority given by the authorised officer to the Recovery Officer to recover the amount from the defaulter invoking the provisions of Section 8B to 8G. As such the authorised officer has to issue Recovery Certificate to the Recovery Officer furnishing the amount of due and the details of the defaulter. It is also the duty of the authorised officer to inform the recovery officer the assets and properties of the defaulter. Whenever the defaulter pays the amount or installment is granted or the amount due is waived the fact should be informed to the Recovery Officer then and there. The assessing officer on the close of every financial year before 5th of April the total defaulting amount to be intimated to the Recovery Officer through Recovery Certificate. On receipt of the Recovery Certificate by the Recovery Officer in his office enter in a register called Demand Collection Register the details of the Recovery Certificate. By which the Recovery Officer can ascertain his work load and the quantum of amount to be recovered from the defaulter for that financial year.

66 The Recovery Officer has to issue notice of demand in Form No.1 to all the defaulters giving 15 days time to remit the amount. On expiry of the 15 days, the Recovery Officer has to proceed for the recovery of the amount due wherever not remitted within that 15 days by invoking the powers of (i) attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer; (first the property of the establishment may be attached if it is not sufficient or if it is not available then the personal property of the employer shall be attached). Arrest of the employer and detention in prison. Appointing the receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer.

(ii) (iii)

ATTACHMENT The attachment means after serving the copy of the warrant to the defaulter, the Enforcement Officer, if he desires to attach the property he should choose movable property and its approximate value to be attached, then he has to make a punchanama (Mahajar) furnishing the entire events right from the stepping into the establishment to till the proceedings is over. In the mahajar he should mention the time and date of his arrival and leaving and the persons present over there, details of the properties attached and the value of the properties attached and where the attached property is kept and also he should obtain signature of the witnesses and signature of the employer or his representatives. Finally, the Enforcement Officer should sign the mahajar and the copy of the same should be handed over to the employer and one copy should be pasted in the notice board of the Recovery Officer. The attachment by the seizure should be made after the sunrise and before the sunset and not otherwise. ATTACHMENT OF MOVABLE PROPERTIES Issue of notice: If the defaulter fails to pay the dues within the date specified in the assessment under Section 7A or levy order under Section 14B, action should first be initiated under Section 8F of the Act to recover the dues. If the dues could not be recovered, either fully or partially, by taking action under Section 8F or if it is not feasible to initiate action under Section 8F, action should be initiated under Section 8B of the Act to recover the dues. The concerned Assessing Officer, i.e. Regional P.F. Commissioner or Asst. P.F. Commissioner himself should draw up statement of dues (i.e. the Recovery Certificate) specifying the period, amount, etc., in his capacity as Recovery Officer and issue the demand notice in the Form EPFCP-I requiring the defaulting employer or the establishment, as the case may be, to pay the arrears specified in the Recovery Certificate within 15 days receipt of notice, by registered post with acknowledgement due. Alternatively, the area Enforcement Officer may be directed to serve the demand notice and obtain the acknowledgement of receipt of notice from the defaulter. The notice should be issued only in the prescribed form. The non issue of notice as required above will render entire proceeding taken by the Recovery Officer, illegal and void. The issue of Recovery Certificate should be noted in the Register of Recovery Cases. As further action will have to be taken based on the date of receipt of notice by the defaulter, the receipt of acknowledgement card should be watched and the date of receipt of notice by the defaulter should be entered in the Register of Recovery Cases. The Acknowledgement Card should be preserved properly in the relevant recovery file of the establishment. The Acknowledgement Card may be printed by the office, if necessary, after getting approval of the Postal Department, with Red Border on all the four sides of the Card for easy identification.

67 After the service of notice, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him and if created, without specific permission of the Recovery Officer, it shall be void. Nor shall any Civil Court issue any process against such property in execution of a decree for the payment of money. Issue of warrant When the movable property is to be attached, the Recovery Officer should direct the area Enforcement Officer to serve a copy of the warrant in Form EPFCP-2 on the defaulter and take further action as directed therein. Enforcement Officer should return the warrant on or before the date specified therein with an endorsement certifying the date on which and manner in which, it has been executed. This requirement of service of the copy of the warrant of attachment on the defaulter, is to afford an opportunity to the defaulter to pay the amount. For due compliance of this requirement service should be personal service and not by affixation. The whole aim should be to recover the money and not otherwise. If the defaulter, after the service of warrant, fails to pay the amount of arrear dues forthwith, the Enforcement Officer should proceed to attach the movable property of the defaulter and intimate the details of the property attached to the Recovery Officer. If he could not execute the warrant, he should give reasons for its non-execution. While attaching the property, it should be ensured that the property exempted from attachment under Section 60 of code of Civil Procedure 1908 is not attachable. The Recovery Officers decision as to what property is so entitled to exemption shall be conclusive. Where the movable property other than the agricultural produce, is in the possession of defaulter, Enforcement Officer should attach the property by actual seizure. He should keep the property in his own custody and he should take adequate care and steps to keep the property safely, till the Recovery Officer directs him to sell the property. When the property seized is subject to speedy and natural decay or when the expenses of keeping it in the custody is likely to exceed its value, he may sell it at once. Warrant of Sale On receipt of report of Enforcement Officer regarding the attachment of property, Recovery Officer should issue the warrant of sale in Form EPFCP.12, in triplicate and direct the Enforcement Officer to act as per the instructions therein. The date of issue of warrant of sale should be entered in the Register of Recovery cases and the report of the Enforcement Officer should be watched. After serving the copy of the warrant of sale on the defaulting employer, Enforcement Officer should send a report indicating the date on which and manner in which it was served and also the valued of the each movable property seized to enable the Recovery Officer to fix the reserve price and order for sale of movable property. Proclamation of sale On receipt of the report of the Enforcement Officer, the date of receipt of report of the Enforcement Officer should be entered in the Register of Recovery cases. Thereafter, the proclamation of sale of the property in the form EPFCP-13 should be issued by the Recovery Officer in the languages to district of the intended sale. He should also fix the reserve price for each article and indicate in the proclamation of sale. The reserve price should be determined after an objective consideration of all the relevant facts. It should not be any figure having no relation whatsoever to the minimum price which the property intended to be sold is expected to fetch at the auction sale. The copy of the proclamation of sale should be affixed in a conspicuous part of the office of the Recovery Officer and Enforcement Officer. He should normally direct the area

68 Enforcement Officer to conduct the sale by public auction in one or more lot as the Enforcement Officer considers necessary. If the Recovery Officer considers that it is more advantageous to appoint a person other than the area Enforcement Officer to sell the property, he may appoint any other Enforcement Officer of the Regional Office/Sub-Regional Office, whom he considers more suitable for the job. He may also appoint any other fit person other than the Enforcement Officer from the approved, auctioneers to sell the property and fix the remuneration to be allowed to him for rendering such services. The remuneration payable to such person should be treated as cost of the sale and should be recovered from the defaulter along with other costs. While appointing an auctioneer, adequate care should be taken in selecting the auctioneer. The Recovery Officer may summon any relevant person and examine him in respect of any matters relevant to proclamation and required him to produce any document or power relating thereto for the purpose of ascertaining the matters to be specified in the proclamation of sale. The Enforcement Officer should arrange for the proclamation of sale by beating of drum or other customary mode: (1) (a) (b) in the case of property attached by actual seizure in the village in which the property seized or if the property was seized in a town or city, then in the locality in which it was seized. At such other place as the Recovery Officer may direct.

(2) in case of property attached otherwise than by actual seizure, in such places, as Recovery Officer may direct. Sale after fifteen days No sale of property should take place until the expiry of at least fifteen days calculated from the date on which the copy of the proclamation of sale affixed in the office of the Recovery Officer, i.e., Regional Office or Sub/Regional Office, as the case may be. Where the property is subject to speedy and natural decay or when the expenses of keeping it in custody is likely to exceed its value, sale may take place before fifteen days. If the defaulter gives his consent, in writing, for selling the property before fifteen days, sale may take place before fifteen days. Prohibition of sale on holidays No sale should take place on a Sunday or other general holidays recognized by the State Government on any days which has been notified by the State Government to be a local holiday for the area in which the sale is to take place. Prohibition against bidding or purchase by officer of the Employees Provident Fund Organisation No officer/staff of the Employees Provident Fund Organisation or any person having duty to perform in connection with any sale, should either directly or indirectly, bid for, acquire or attempt top acquire any interest in the property sold. Investigation by Recovery Officer If any claim is preferred to or any objection is made to the sale of any property in execution of certificate on the ground that such property is not liable for such sale, the Recovery Officer should proceed to investigate the claim or objection. ATTACHMENT OF IMMOVABLE PROPERTY

69 After the issue of notice in Form EPFCP.1,if the defaulter fails to pay the amount of arrears due, within the date specified therein, the Enforcement officer should send a report immediately to the Recovery Officer, furnishing the details of immovable property that may be attached. On receipt of report of the Enforcement Officer, the Recovery Officer should issue the order of attachment, after the expiry of notice period of 15 days in Form EPFCP-16 and he should direct the area Enforcement Officer to serve a copy of the order of attachment on the defaulter. The attachment of immovable property may be resorted only when sufficient movable property of the defaulter are not available for attachment or when the amount of arrears due is huge and it is not advisable to attach movable property. However, the Recovery Officer is under no obligation to recover the arrears first by proceeding against movable or by arrest before attaching the immovable property of the defaulter. If he so desires, he may attach the immovable property without resorting to attachment of movable property. The Enforcement Officer should return the order of attachment on or before the date specified therein with an endorsement certifying the date on which and the manner in which, it has been executed. The order of attachment should also be proclaimed at some place on or adjacent to the property attached by beat of drum or other customary mode and a copy of the order should be affixed on a conspicuous part of the property attached. This is necessary to make the public aware of the order of attachment. Further a copy of the order of attachment should be affixed on the notice board of the Recovery Office(i.e., Regional Office/Sub-Regional Office). The Enforcement Officer should also send the details of the property attached. Attachment relate back from the date of service of notice The attachment of immovable property shall relate back to or take effect from the date on which notice to pay the arrears issued in Form EPFCP.1, served upon the defaulter. Investigation by Recovery Officer If any claim is preferred to or any objection is made to the attachment or sale of any immovable property, on that ground that such property is not liable for attachment or sale, the Recovery Officer should, proceed to investigate the claim or objection. No such investigation should , however, be made, where he considers that the claim or objection was designedly by or unnecessarily delayed. The claimant or objector must adduce evidence to show that at the date of service of notice issued in Form EPFCP.1 to pay the amount of arrears due, on the defaulter, he had some interest in or was possessed of the immovable property in question. On investigation, if the Recovery Officer has found that attached property, at the date of service e of notice in Form EPFCP.1, was not in possession of the defaulter or if some person in trust for him or in the occupancy or a tenant or other person paying rent to him or that though the property was in possession of the defaulter, it was in his possession not in his own account or as his own property but on account of or in trust for some other person or partly on his own account and partly on account of some other person, the Recovery Officer should make an order releasing the property, wholly or to such an extent he think fit for attachment or sale. If he has found that the property at the above said date was in the possession of the defaulter, as his own property or was in the possession of some other person in trust for him or in the occupancy of a tenant or other person paying rent to him, he should disallow the claim. The party against whom the order is made may institute a Civil suit, to establish his rights to the property. The orders of Recovery Officer shall be conclusive, subject to result of such suit. The investigation by the Recovery Officer is not an empty formality. The process is quasijudicial involving a reasoned decision after hearing both sides. It is beyond the competence of the Recovery Officer to decide the question of title. His power is limited to decide as to who was in possession of the property. Proclamation of sale

70 The proclamation of sale should be issued in the Form EPFCP.13. It should be in the language of the district of the intended sale. Recovery Officer should normally direct the area Enforcement Officer to sell the property attached or portion thereof to cover the amount of arrears due and other expenses relating to recovery. If Recovery Officer considers that it will be more advantageous to appoint a person other than area Enforcement Officer to sell the property he may appoint any other Enforcement Officer of the Regional Office/Sub-Regional Office, whom he consider as more suitable for the job. He may also appoint any other fit person(other than the Enforcement Officer) from the approved auctioneers list to sell the property and to fix the remuneration to be allowed to him for rendering such services. The remuneration payable to such person should be treated as cost of sale and should be recovered from the defaulter along with other costs. While appointing an auctioneer, adequate care should be taken in selecting the auction agency. The Recovery Officer may summon any relevant person and examine him in respect of any matters relevant to proclamation of sale and require him to produce any document or power relating thereto for the purpose of ascertaining the matters to be specified in the proclamation of sale. The notice for settling the sale proclamation should be issued in Form EPFCP-17. Contents of Proclamation The proclamation of sale of immovable property should be drawn up after notice to the defaulter in Form EPFCP.17 and it should state the time and place of sale and also should specify, as fairly and accurately as possible (a) the property to be sold; (b) the revenue, if any, assessed upon the property or any part thereof; (c) the amount for the recovery of which the sale is ordered; (d) the reserve price, if any, below which the property may not be sold; (e) any other thing which the Recovery Officer considers material for the purchases to know, in order to judge the nature and value of the property. The reserve price should be determined after an objective consideration of all relevant facts. It should not be any figure having no relation whatsoever to the minimum price which the property intended to be sold is expected to fetch at the auction sale. If the sale proclamation simply mentions the name of the factory or establishment, but gives no details as to the nature of the building, machinery, etc., the sale on the basis of such deficient proclamation will be false and it is likely to be quashed by the Court on the ground that it would result in substantial injury to all concerned. The full details of the property should therefore be given in the sale proclamation. It should also be ensured that there is no material misdescription in the sale proclamation. Sale proclamation should not mention two different dates. The date mentioned should not be meaning-less, vague, ambiguous or unintelligible to a man of ordinary prudence. Mode of making proclamation The proclamation for the sale of immovable property should be made at some place on or near such property by beat of drum or other customary mode and a copy of the proclamation should be affixed on a conspicuous part of the property and also on a conspicuous part of the office of the Recovery Officer, i.e., Regional Office/Sub-Regional Office, and also of the office of the Enforcement Officer. If the Recovery Officer considers that such proclamation should also be published in the local newspaper, he may do so. The cost of such publication should bed treated as cost of sale. Where the substantial amount is involved, it is desirable to go for publication in the local newspaper,. Where the property is divided into lots for the purpose of being sold separately, it is not necessary to make a separate proclamation of each lot, unless proper notice of sale cannot, in the opinion of Recovery Officer, otherwise be given. Time of sale

71 No sale of immovable property should, without consent, in writing of the defaulter, take place until after the expiration of at least thirty days calculated from the date on which a copy of proclamation of sale has been affixed on the property or in the office of the Recovery Officer, whichever is later. However, if the defaulter gives his consent in writing for the sale before the expiry of the above period, sale may take place. Sale to be by auction The sale of immovable property should be by public auction to the highest bidder, subject to confirmation of sale by the Recovery Officer. Sale by public auction is mandatory and the sale held in any other manner is not valid. However, no sale shall be made, if the amount of bid by the highest bidder is less than the reserve price, if any, fixed. Adjournment or stoppage of sale The Recovery Officer may adjourn or stop the sale as per Para 28(i) of the EPF Recovery Manual. Bid of co-sharer to have preference Where the property sold is a share of undivided immovable property and two or more persons, of whom one is a co-sharer, respectively bid the same sum for such property or for any lot, the bid shall be deemed to be bid of the co-sharer. Postponement of sale to enable the defaulter to raise amount due under the recovery certificate The whole aim of the recovery action is to recover the amount of arrears and not otherwise. In view of this, if the defaulter proves to the satisfaction of the Recovery Officer that there is reason to believe that the amount of the recovery certificate may be raised by the mortgage or lease or private sale of such property or some part thereof or of any other immovable property of the defaulter and he applies for the postponement of sale of the property ordered for sale, the Recovery Officer may postpone the sale on such terms, and for such period, as he thinks proper, to enable the defaulter to raise the amount. In such case, the Recovery Officer should grant a certificate, in Form EPFCP.21, to the defaulter, authorizing him within a period to be mentioned therein, to make the proposed mortgage, lease or sale, subject to the condition that all money payable under such mortgage, lease or sale should be paid to Recovery Officer only and not to the defaulter. Investigation by the Recovery Officer If any claim is preferred to or any objection is made to the sale of any immovable property, on the ground that such property is not liable for sale, the Recovery Officer should proceed to investigate the claim or objection. Authority to bid All persons bidding at the sale should be required to declare as to whether they are bidding on their own behalf or on behalf of their principals. In the latter case, they should be asked to deposit their authority letter of their principals. If they fail to deposit the authority letter, their bids should be rejected. Prohibition against bidding or purchase by officer of the Employees Provident Fund Organisation No officer or staff of the Employees Provident Fund Organisation or any person having duty to perform in connection with any sale should either directly or indirectly bid for, acquire or attempt to acquire any interest in the property sold. Where, however, the sale has been postponed for want of a bid of an amount not less than reserve price fixed by the Recovery

72 Officer, an authorised officer, as defined in section 2(aa) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, if so authorised by the Chairman of the Central Board of Trustees, may bid for the property on behalf of the Central Board of Trustees at any subsequent sale. APPOINTMENT OF RECEIVER The Recovery Officer may attach the business of the defaulter and appoint a person as receiver to manage the business. This mode of attachment will have to be opted only in rarest of rare situations, where the adoption of other modes of recovery is not found feasible, as it is not the function of the Employees Provident Fund Organisation to manage the business and apart from that it has no expertise in this field. It should be ensured that by choosing this mode of recovery, the organisation will not land in trouble. It should be ensured before taking recourse to this action that i) there is no recession in the particular industry; ii) there is demand for the product of the establishment; iii) there is no labour problem; iv) there is good management team capable of running the establishment efficiently; v) the accumulated liability of the establishment is not beyond the manageable limit; and vi) there is ample scope for enough profits to recover the arrears in a reasonable period. Attachment of business should be made by issuing order in Form EPFCP-22. A copy of the order of attachment should be served on the defaulter and another copy should be affixed on a conspicuous part of the premises in which the business is carried on and another copy on the notice board of the Recovery Officer (Regional Office/Sub-Regional Office). While appointing a person as receiver, adequate care should be taken. The person chosen for the job should be of a man of very high integrity. He should be well experienced and knowledgeable in the particular field. He should be capable of managing the labour force and his managerial team. He should have good rapport with the financial institutions, which provide funds to the establishment. The order of appointment of receiver should be made in the Form EPFCP.24 which may be so varied as circumstance of each case may require. Appointment of receiver for immovable property When immovable property is attached, the recovery officer, instead of directing the sale of property, may appoint a person as receiver to manage such property. Powers of the receiver The receiver shall, subject to the control of recovery officer, have such powers, as to brining in and defending suits and for the realization management, protection and preservation of the property and the collection of rents and profits thereof, the application and disposal of such rents and profits and the execution of the documents, as owner himself has or such of those powers as the Recovery Officer thinks fit. Remuneration of the receiver The Recovery Officer may fix the amount to be paid as remuneration for the receiver, with the approval of the Central Provident Fund Commissioner.

73 Duties of the receiver Every receiver so appointed should a) furnish such security (if any) as the Recovery Officer thinks fit, duly to account for what he shall receive in respect of the property; b) submit his accounts at such periods and in such form as the Recovery Officer directs c) pay the amount due from him as the Recovery Officer directs; and d) be responsible for any loss occasioned to the property by his willful default or gross negligence.

The Receiver should (1) maintain--(i) true and regular accounts of receivership; (ii) cash book in which all receipts and payments should be entered; (iii) ledger accounts; and (iv) a counterfoil receipt book with leaves numbered for issuing receipt for payments made to the receiver. (2) open a account in the name of receiver ship in the bank as directed by the Recovery Officer. (3) deposit all receipts immediately after the receipt thereof, less the amount required for meeting day to day expenses. (4) make payments by cheques as far as possible. (5) submit his accounts once in every three months to the Recovery Officer within fifteen days of each period of three months (the first of such accounts commencing from the date of his appointment and ending with the expiry of three months should be submitted within fifteen days of expiry of said period) Enforcement of receiver duties If a receiver fails to submit his accounts at such periods and in such form as the Recovery Officer directs, the Recover Officer may direct his property to be attached until such time as such accounts are submitted to him. The Recovery Officer may at any time make an enquiry as to the amount, if any, due from the receiver, as shown by his accounts or otherwise, or an enquiry as to any loss to the property occasioned by his willful default or gross negligence and may order the amount found due, if not already paid by the receiver, or the amount of the loss so occasioned, to be paid by the receiver within the period to be fixed by the Recovery Officer. If the receiver fails to pay any amount which he has been ordered to pay within the period specified, the Recovery Officer may direct such amount to be recovered from the security (if any) furnished by the receiver or by attachment and sale of his property or, if his property has already been attached by the sale and sale of his property or, if his property has already been attached by the sale of such property, and may direct the sale proceeds to be applied in making good any amount found due from the receiver or any such loss occasioned by him and the balance (if any) of the sale proceeds should be paid to the receiver.

74 If a receiver fails to submit his accounts at such periods and in such form as directed by the Recovery Officer without reasonable cause or improperly retains any cash in his hands, the Recovery Officer may disallow the whole or any portion of the remuneration due to him for the period of the accounts with reference to which the default is committed and may also charge interest at a rate not exceeding twelve percent per annum on the moneys improperly retained by him for the period of such retention without prejudice to any other proceedings which might be taken against the receiver. Adjustment of profits, rents, etc., towards the discharge of arrears The profits or rents and profits of the business or other property should after defraying the expenses of the management be adjusted towards the discharge of arrears of dues and the balances, if any, should be paid to the defaulter. Withdrawal of management The attachment of management may be withdrawn at any time at the discretion of the Recovery Officer or if the arrears are discharged by receipt of such profits and rents or otherwise paid. Arrest and Detention of the Defaulter The arrest and detention of the defaulter should be resorted in an extreme situation. The order for arrest and detention of the defaulter in civil prison should not be issued unless the Recovery Officer, for reasons recorded in writing, is satisfied (1) that the defaulter, with the object or effect of obstructing the execution of Recovery Certificate, has after drawing up of the Recovery Certificate by the Recovery Officer, dishonestly transferred, concealed or removed any part of his property or (2) that the defaulter has or has had since the drawing up of the Recovery Certificate by the Recovery Officer, the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same. The warrant of arrest may, however, be issued even otherwise, if the Recovery Officer is satisfied by affidavit or otherwise that the with object or effect of delaying the execution of the Recovery Certificate the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Recovery Officer. The Recovery Officer should not order for the arrest and detention of woman or any person who in his opinion is a minor or of unsound mind. The gathering of information relating to concealment, removal or transfer of property, with the help of workers or their Union or otherwise is essential before resorting to arrest and detention of defaulter. Thereafter, a notice in Form EPFCP-25 should be issued by Recovery Officer and served upon the defaulter by Registered Post with Acknowledgement Due or through the Enforcement Officer, calling upon him to appear before the Recovery Officer on the date specified in the notice and to show cause why he should not be committed to the civil prison. When the defaulter appears before the Recovery Officer in obedience to the show cause notice issued to him, the Recovery Officer should give the defaulter an opportunity to show cause why he should not be committed to civil prison. If the defaulter has not appeared before the Recovery Officer on the day specified in the above notice served on him, he may issue the warrant for the arrest of defaulter in Form EPFCP26 and direct the area Enforcement Officer to act as directed therein.

75 If the defaulter for the time being found in the jurisdiction of other Recovery Officer, i.e., in other region (The jurisdiction of Regional Provident Fund Commissioners and Assistant Provident Fund Commissioners in Regional Office/ Sub-Regional Office is for the whole of the region, as they are notified as Recovery Officer for the area covering the whole region), the warrant of arrest issued by the Recovery Officer of one region may also be executed by the Recovery Officer of such other region. For the purpose of making the arrest of defaulter, as ordered by the Recovery Officer, the Enforcement Officer should not enter the dwelling house after the sun-set and before sun-rise. He should not break open the outer door of the dwelling house. If, however, such a dwelling house or a portion thereon is on occupancy of the defaulter and he or other occupants of the house refuses or in any way prevents access thereto, he may break upon the outer door of the dwelling house. If he has gained entry to any dwelling house in a normal way, he may break open the door of any room or apartment, if he has reason to believe that the defaulter is likely to be found there. No room which is in the actual occupancy of woman, who according to the customs of the country does not appear in public, should be entered into unless the Enforcement Officer has given notice to her that she is at liberty to withdraw and has given her reasonable time and facility for withdrawing. When the defaulter is brought by the Enforcement Officer and appear before the Recovery Officer, he should give the defaulter an opportunity of showing cause, why should not he be committed to civil prison. Though the rule 75 of Second Schedule to Income-tax Act, 1961 provides for detention of defaulter in the custody of any officer, as the Recovery Officer may think fit, pending conclusion of the enquiry the other alternative to release him on his furnishing security to the satisfaction of the Recovery Officer for his appearance, when required, is better than the earlier one, the Recovery Officer may adopt this procedure. Once a defaulter has appeared before the Recovery Officer in response to the notice issued to him in Form EPFCP-25 he is not to be arrested unless the inquiry contemplated by rule 74 of the Second Schedule to Income-tax Act, 1961 is over or the conditions mentioned in Rule 73(1) or 73(3) are fulfilled. Upon on the conclusion of enquiry, the Recovery Officer may make an order for the detention of the defaulter in the Civil Prison, in Form EPFCP-27 and should in that event cause him to be arrested, if he is not already under arrest. He may give an opportunity to the defaulter to pay the arrears before making order of detention and leave him in the custody of officer arresting him or any other officer for a specified period not exceeding fifteen days or release him on his furnishing security to the satisfaction of the Recovery Officer for his appearance at the expiration of the specified period, if the arrears are not paid. When the Recovery Officer does not make an order of detention, he should, if the defaulter is under arrest, direct his release. An order of arrest and detention of the defaulter cannot be made without following the procedure which is implicit in Rules 73 to 81 of Second Schedule to Income-tax Act, 1961. Immediately after arrest of an employer the same shall be communicated to the relatives, the best friend or any person closely associated with the employer. Detention and Release from Prison Every person detained in the civil prison in execution of a certificate may be so detained:(a) where the certificate is for a demand of an amount exceeding two hundred and fifty rupeesfor a period of six months; and

76 (b) in any other casefor a period of six weeks: Provided that he should be released from such detention i) on the amount mentioned in the warrant for his detention being paid to the officer-in-charge of the civil prison, or ii) on the request of the Recovery Officer on any ground other than the grounds mentioned in rules 78 and 79 of Second Schedule to Income-tax Act, 1961. Where the Recovery Officer is satisfied that the defaulter who has been arrested has disclosed his whole of property and has placed it at his (Recovery Officer) disposal and that he has not committed any act of bad faith, he may order release of the defaulter. If he has ground for believing the disclosure made by the defaulter earlier to have been untrue, he may order for his re-arrest. The period of detention in the civil prison should not in aggregate exceed the period mentioned above. The Recovery Officer may release the defaulter on the following grounds: (i) defaulter suffering from serious illness (ii) he is not in a fit state of health to be detained in the civil prison. (iii) existence of any infectious or contagious disease or serious illness. A defaulter released on the above grounds may be rearrested if the above grounds cease to exist, but the period of detention in the civil prison should not, in aggregate, exceed the period mentioned above. The Order of release should be issued in Form EPFCP-28. A defaulter released from detention under this rule should not, merely by reason of his release, be discharged from his liability for the arrears; but he should not be liable to be rearrested under the certificate in execution of which he was detained in the civil prison. APPEAL Thought there is provisions for appeal in Rule 86 of the Second Schedule to Income Tax Act, 1961, for filing appeal against any original order of the Recovery Officer, not being an order, which is conclusive, no authority has so far been specified for hearing such appeal. As such, the appeal provision will be inoperative till the Central Government notify the Appellate Authority to make them operative. Time Limit and Form of Appeal: After the Government notifies the Appellate Authority, the appeal must be presented to the specified Appellate Authority, within 30 days from the date of order appealed against or within such period as may be specified by the Government in respect of orders passed by the Recovery Officer before the appointment of Appellate Authority. Pending decision of any appeal, the execution of Recovery Certificate may be stayed, if the Appellate Authority, so desires, but not otherwise. The appeal should be made in Form EPFCP.30 which should be verified in the manner indicated therein and should be accompanied by a copy of the order appealed against. The above prescribed form of appeal, the grounds of appeal and the form of verification appended thereto should be signed by the defaulting employer or one of the persons referred to in Form 5A under EPFS, 1952 or any person affected by the orders of the Recovery Officer. Procedure in appeal:

77 The specified Appellate Authority should fix a day and place for the hearing of the appeal and should give a notice of the same to the appellant and the Recovery Officer against whose order the appeal is preferred. The appellant either in person or by an authorized representative and the Recovery Officer either in person or by an representative should have the right to be heard at the time of appeal. The appellate authority, if sufficient cause is shown, at any stage of the appeal, grant time to the parties or any of them and may for reasons to be recorded in writing, adjourn from time to time, the hearing of the appeal. The appellate authority, before disposing of any appeal, make such further enquiry as it thinks fit or may direct the Recovery Officer to make further inquiry and report the result of the same to the Appellate Authority. The Appellate authority at the time of hearing appeal allows the appellant to go into any ground of appeal not specified in the grounds of appeal, if the appellate authority is satisfied that the omission of that ground from the form of appeal was not willful or unreasonable. The order of the appellate authority should be in writing and should state the points for determination of the decision therein and the reason for the decision. The appellate authority should communicate the order to the appellant, defaulter (if he is not the appellant) and Recovery Officer. The appeal should be disposed as expeditiously as possible and endeavor should be made to dispose of the appeal within six months from the date on which it is presented. Assistance by Police Whenever assistance of Police is required by the Recovery Officer/Enforcement Officer, in connection with the attachment and sale of property, arrest of defaulter, etc., he may apply to the officer in charge of nearest Police Station for providing such assistance by inviting reference to Section 8G of the EPF & MP Act, 1952 read with Rule 19 of the Second Schedule to Income Tax Act, 1961. Scale of Fees for process, charges for other proceedings and poundage fees etc. The fees for (i) service and execution; (ii) copying; (iii) inspection; (iv) poundage etc., should be charged as prescribed in Rule 56 to 59 of Income Tax (certificate proceeding) Rules, 1962. Register to be maintained. The Registers specified should be maintained and verified every month by the Recovery Officer. Note: As per the provisions of Section 8G of the Act, the provisions of the Second and Third Schedule to the Income Tax Act, 1961 and The Income Tax (certificate proceeding) Rules, 1962, as in force from time to time shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount mentioned in Section 8 of the Act instead of the Income Tax Act. Further any reference in the said provisions of the rules to the assessee shall be construed as a reference to the employer under the Act. Officer referred hereunder shall mean Recovery Officer as defined under Section 2(kb) of the Act.

78 Defaulter means the establishment who has failed to pay the dues, damages, interest payable under the Act and the three schemes framed there under.

COST OF RECOVERY INCLUDING COST OF LITIGATION Employees Provident Fund Organisation has been incurring heavy expenditure towards stationary, postage, transport and communication litigation, advertisement etc. for recovery of dues from the defaulting establishments. Auction sale of movable and immovable properties, arrest and detention of defaulters are also expensive exercises for the Employees Provident Fund Organisation. Substantial amounts are being spent from the administrative account by the field offices regularly. Very often these amounts are either not recouped at all or recouped only partially. Approach to realization of cost also differs from office to office. It is to be ensured that our recovery exercise should not be at the cost of the revenue health of the organization. Moreover the defaulters need to bear a cost for their non-compliance as well. The rule 5 of the II schedule to the IT Act also emphasizes this. The expenses towards recovery exercises are to be recovered from the defaulters and all the field offices shall have a uniform approach to the same as detailed below: S.NO. Nature of services Cost/Fees 1. Summons and notices Rs.50/- or actual cost whichever is including letters sent by post higher. 2. Attachment of properties Actual cost incurred subject to a minimum of Rs.500/-. 3. Cost of litigation Actual cost subject to a minimum of Rs.500/- per case. 4. Auction, sale, release etc. of Actual cost incurred for valuation, movable properties transportation, auctioneer and also for process subject to a minimum of Rs.1000/-. 5. Auction, sale, release etc. of Cost incurred for prohibitory order, movable properties valuation, auctioneer, processing including cost of transportation incurred for the third parties subject to a minimum of Rs.1000/-. 6. Warrant of arrest, detention Actual cost including transportation and release charges subject to a minimum of Rs.1000/- per case. 7. Cost of advertisement for sale Actual cost + 10% processing charges. proclamation, sale etc. 8. Attachment of bank account Rs.500/- per attachment.

9.

Appointment of receiver

79 Actual cost involved including receivers remunerations subject to a minimum of Rs.1000/-.

[Hqrs letter No.RRC/28(13)03/87579 dated 17.02.2004]

USE OF ASHOKA EMBLEM AS THE OFFICE STAMP OF RECOVERY OFFICERS Ministry of Home Affairs has objected the use of Ashoka Emblem as the office stamp by the autonomous bodies. Headquarters has also taken a serious view of the use of Ashoka Emblem without any authority and sanction and also directed that the practice of using Ashoka Emblem as the office seal by some of the Recovery Officers of the Employees Provident Fund Organisation has to be stopped with immediate effect. The officers of the EPFO including the Recovery officers shall use only the approved symbol of the EPFO in their office stamp as well as for letterheads. Any deviation will be viewed seriously. [Hqrs letter No.RRC/28(13)2003/7A-14B/Pt./87609 dated 17.02.2004] RECOVERY CERTIFICATES ISSUE AND EXECUTION Recovery Certificates are issued in respect of all cases of demand raised during the financial year which remain uncollected as on 31st March of the year, during the first week of April itself. Recovery Certificates relate to contributions, damages u/s 14B or interest levied u/s 7Q of the Act. In the Recovery Certificates item-wise details is required to be given as to the nature of the dues, period of default etc. While issuing the Recovery Certificates care may be taken to ensure that interest u/s 7Q is calculated up-to the date of issue of the Recovery Certificate and shown separately by the authorised officer and added to the total dues. Thereafter, admissible interest u/s.7Q shall be collected by the Recovery Officer executing the certificate until the date of realization of the dues. This shall be specifically reported and accounted against each Recovery Certificate. The Recovery Officer shall show specifically the nature of dues in the challans while making remittance on execution of the certificate. The Assessing Officer shall ensure that there is no confusion in accounting, that the interest and damages are accounted properly and not accounted against the PF dues. While executing the Recovery Certificates instances of seizure/recovery of liquid cash and negotiable instruments also occur. Wherever such instances arise, an official receipt in CTR Form No.5 shall be issued under the signature of the Recovery Officer. As soon as the cash is brought to the office, the same shall be entrusted with the office cashier for immediate deposit of the same in the banks if not already done by the Recovery Officer. Copies of the challans shall be received by the Recovery Officer and the triplicate copy shall be sent to the authorised officer with a report. The

80 quadruplicate copy shall be kept on files of the Recovery Officer and necessary entries shall be made in his books of accounts. [H.O.Letter No.RRC/28(13)03/91371 DATED5.3.2004]

18

EFFECT OF BIFR UNDER EPF & MP ACT 1952

Section 6 of the Act The enhanced rate of contribution shall not be made applicable for the person commencing on and from the date of registration of the reference in the Board and ending either on the date by which the net worth of the said company becomes positive in terms of the orders passed under sub-section (2) of Section 17 or on the last date of the implementation of the Scheme sanctioned under Section 18 of the said Act as the case may be. Section 14 of the Act Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 provides for suspension of legal proceedings in relation to the proposals of the sick industrial company. However, criminal cases can be filed against the Manager, Director, Secretary or other officer, under Rule 14 of the Act, for having committed an offence under the Act with the approval of the Central Provident Fund Commissioner. Section 8 of the Act Even though the Recovery Certificate should be issued, the execution and other recovery measures thereof should not be resorted to without obtaining the prior permission of BIFR as required under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985. When any request/prayer is made to the Bench for such permission, the request/prayer should be carefully worded, bringing out (i) the period of default; (ii) the amount of dues; and (iii)the circumstances warranting the immediate recovery of the dues etc. Relevant section/provisions of Sick Industrial Companies(Special Provisions) Act, 1985 under which permission is sought from BIFR as also the relevant provisions of the EPF & MP Act, 1952 which are to be invoked should be specified in the request/prayer. The request for permission should be sent to the Central Provident Fund Commissioner indicating inter alia the aforesaid information. The Head office will take up the BIFR and communicate their permission for further action. Levy of Damages:

81 In such cases, where the BIFR recommend waiver/reduction of damages in such sanctioned package(s) the same will have to be placed before the Central Board of Trustees for its consideration and decision. Timely action under BIFR Cases The BIFR vide their letter no.CASE NO.384/99 dated 5.10.2000, had informed:The SICK companies, registered under the Act, sometimes withhold even the workers share towards Provident Fund and ESIC dues even after deducting the same from their wages/salaries. We have been withdrawing the protection available to Sick Cos. Under Section 22(1) of SICA against non deposit of such dues on grounds sickness. Employers share alongwith interest is, however, usually allowed to be recovered in accordance with the rehabilitation schemes should be sanctioned in such cases with the concurrence of the concerned departments. For the above purpose it is essential for the Board to get the amounts outstanding in respect of Provident Fund and other dues from the Sick Industrial Companies from the representatives of the concerned department. As soon as information about the registration of establishment with BIFR is received immediate action may be taken to communicate the upto date Provident Fund arrear position including damages and interest to the appropriate bench of the BIFR through an affidavit. Copy of this may also be registered with the operating agency. This procedure will ensure adequate provision for the Provident Fund dues in the rehabilitation package. Wherever possible, a senior officer may be deputed to attend the hearing. In case of sitting at Delhi, the Head Office will be able to arrange for appearance before the BIFR on furnishing the full details by the Field Offices. Some of the Field Offices have been trained to shift this responsibilities to the Head Office by raising objections that the Code nos. of the Offices to which it belong are not furnished while calling for details. It is made clear that the responsibility of realisation of dues in respect of any type of establishments including those registered with BIFR squarely rest on the Provident Fund Commissioner. The role of the Central Office is limited to that of a facilitator. It has become necessary for each of the field officer to make a review of the situation to ensure that: 1. Defaulters are proceeded against immediately at their first default (Action through CCTS to be monitored by the commissioners) 2. Dont allow arrears to be got accumulated. 3. Do not lapse time enabling the defaulter to go for dilatory action making the arrear realization difficult. 4. Keep a track of the defaulting establishments and have the information on the statutory dues updated, including possible damages under Section 14 B and interest under Section 7Q. 5. As soon as information regarding sick companies is received prefer our claim with BIFR as well as the operating agency covering our entire demand. 6. If an affidavit is not filed arrange for personal appearance by a responsible officer with details before such forum. 7. Have the follow up action monitored at frequent intervals until the entire dues are realized. 19

GRANT OF INSTALMENT FACILITIES

The Regional Provident Fund Commissioner in charge of the Sub-Regional Office/RPFC in charge of the Region are empowered to grant instalment facilities in respect of an application

82 received from a defaulting establishment. It is applicable in respect of outstanding default payments and also contribution and other dues. Wherever the total amount of default exceeds rupees three lakh, the power to grant instalment facilities vest with the Central Provident Fund Commissioner. The RPFC may grant instalment facilities upto an arrear dues of rupees three lakhs subject to the following conditions. The instalment facility should not be considered in respect of habitual defaulters or in respect of establishments which violated the instalment Scheme earlier. (1) The establishment should be prompt in remitting current dues. (2) The employer should give an undertaking to pay damages and interest under Section 7Q on all belated remittances. (3) A revolving Bank Guarantee equivalent to the amount of one instalment should be furnished. (4) The legal charges, if any, should be borne by the employer. (5) The dues in respect of members who may leave service should also be remitted along with the instalment dues. (6) The maximum number of instalment that may be granted should not exceed thirty-six. Wherever, the instalment facilities are sanctioned, the same should be communicated to the establishment under intimation to the Enforcement Officer and also to the Accounts Branch. The releasing of the instalment amount should be watched periodically and follow up action initiated wherever the conditions are not complied with. GRANT OF INSTALMENT FACILITIES TO SICK INDUSTRIAL COMPANIES The instalment facilities shall be granted to the Sick Industrial Companies defined under Section 3(i)(o) of the Sick Industrial Companies(Special Provisions) Act, 1985 for payment of arrears of EPF dues subject to the terms and conditions outlined below: (1) The establishment will make a down payment of 20% of arrears from out of the grant sanctioned for its rehabilitation by any financial institution (2) It will furnish a revolving Bank Guarantee for the amount equal to one instalment (3) The establishment will pay the current dues regularly (4) The establishment will withdraw all Court cases filed by them and get the injunction, if any, vacated (5) If the Courts have already granted them instalment facilities, for a period exceeding eight years, they will have the installments suitably rescheduled, so as to ensure payment of the entire dues within five to eight years (6) If the liquidity position of the company proves that the company will have the installments suitably rescheduled so as to liquidate the entire dues within a shorter period (7) The establishment will pay interest on the outstanding amount at the rate of twelve per cent per annum or such higher rate as may be specified by the Central Board of Trustees under Section 7Q of the EPF & MP Act, 1952 respectively In the event of an establishment availing of instalment facility on the above mentioned terms and conditions, the prosecution cases, if any filed against it for previous default will be help in abeyance. The Scheme sanctioned by the BIFR, which provide for the liquidation of the dues as per the above terms and conditions may be accepted. Since the ultimate object of the BIFR Scheme is to revive/rehabilitate a Sick unit thereby ensuring continuance of employment of workers while simultaneously providing for the liquidation of the accumulated arrears of the Provident Fund, etc, which in turn will assure the social security cover to these workers, the consent of the Organisation under Section 19(2) of the Sick Industrial Companies(Special Provisions) Act, 1985,

83 when approached by the BIFR or the financial institution appointed as operating agencies by the BIFR, may be given.

20
ACTION AGAINST ESTABLISHMENTS UNDER LIQUIDATION If the Court has passed orders to wind up a company and has appointed a Liquidator, the Claim for the realizing the arrears of Provident Fund and other dues should be filed before the Liquidator. While filing the claims, the details of employees and employers share of contributions should be given separately along with the other dues. The provisions of Section 11 of the Act should also be brought to the notice of the Liquidator. However, if the Court has appointed a Receiver, expressly or specifically ordering to carry on the business of the factory to sell it as a going concern, such Liquidator or Receiver is liable as an employer or occupier within the meaning of Section 2(e) of the EPF & MP Act, 1952 and he should remit the contributions and other charges required to be paid under the provisions of the Act and the Schemes for the period from which he has taken over the company, If the Receiver fails to pay the dues, action should be initiated to recover the dues and also to prosecute him. However, action to recover the amount as well as to prosecute him for the failure to pay the dues and comply with the provisions of the Act and Schemes should be taken only for the period after which he has taken over as Receiver, with the permission of the Court. 21

CONTRACTORS SECURING COMPLIANCE FROM CONTRACTORS REVISED PROCEDURE. Over the years the process of allotment of code numbers to establishment by the officers of the EPF Organisation has become major area of concern to the law abiding employers. It should be noted the allotment of code number to an establishment is only to identify the establishments. In fact the act takes its own course applying the provisions to an establishment on the date in which it fulfils the condition. Keeping this in view, the revised instructions in the matter of issuance of code number are adopted. 1. The important condition of coverage is based on the nature of industry in which engaged or the activity of the establishment. 2. No. of employees employed therein. 3. Date of set up. In case the above three conditions are fulfilled, the establishment should be brought under the purview of the Act, for which the following are the details necessary. 4. Name and address of the establishment.

84 5. Nature of business activity/manufacturing activity 6. Date of set up of the business/factory 7. Employment Strength 8. Legal status of the establishment i.e. whether Public/Private Ltd. Co., Partnership, Society Proprietorship etc. Copies of the Partnership deed Articles of Association be provided. 9. Details of branches and Head Office of the establishment, if any including addresses alongwith details of Bank A/c(s) maintained. 10. Telephone No. of the employer (Office and Residence)

Out of the above particulars, we may require documentary proof regarding date of set up of the establishment. This could be any one of the following categories like copy of the first Sales Invoice, proof regarding date of trial production, Incorporation Certificate issued by the registrar of the Companies, Commencement of business by the Registrar of Companies, Registration Certificate issued by the Registrar of Co-operative Society or Registration Certificate issued by Registrar of Societies, Small Scale Industry Registration Certificate, Copy of the first assessment by the Sales Tax Authorities, Copy of the first assessment by the Income Tax Authorities, Copy of the Registration if any issued by the Reserve Bank of India or any other authorities under any other statute, enactment etc. In the case of certain types of establishments especially manufacturing concerns, there may be a time gap after incorporation of the company, construction of factory, erection of machinery and actual manufacturing or trial production. However, if the employer comes forward with a request for coverage it maybe accepted. The Proforma for furnishing the information for coverage by an employer has been revised, keeping in view the changed business environment and to make the process of registration simple and easy both for employer as well as for the Employees Provident Fund Organisation. Apart from the above, the crucial information which has a bearing on coverage is the employment strength. The employers may be asked to furnish the employment strength month wise, if it is available with them right from the date of set up to the month in which application for registration is made. (In case of belated registration). However, this can be done later after the coverage also and the date of coverage can at any time be shifted back provided we have sufficient evidence and other material with us to sustain our decision. Therefore, under this pretext no coverage should be delayed. Requests for coverage submitted in person in the reception counter should be entered in a separate register. The date of receipt and the serial no. in the register should be affixed with a rubber stamp in the Proforma submitted by the employer and the same serial no. and date stamp should be affixed in a receipt to be given to the employer or his representative who brings the application to our office. The same serial no. be sent to the APFC in-charge or the Compliance circle the same day or the next day morning. It would be the responsibility of the APFC in charge of the circle to allot a Code No. to the establishment immediately on receipt of the minimum documentation as aforementioned and in any case within three working days of receipt of the particulars for coverage from an employer alongwith a demand draft for payment of the first dues. The letter allotting the Code numbers will be signed by the Assistant Provident Fund Commissioner. It would be the responsibility of the APFC who signs the letter to ensure that the details of the establishment to whom the code number is allotted is properly entered in the code number register under his signature. The details of the newly covered establishment should immediately be entered in the data base of the computer in Employer Master. The Demand Draft/Pay order received should be sent to the cash

85 section immediately denoting the name and Code No. allotted to the establishment in the challans, by the APFC, the same day itself.

22
EXEMPTION - PROVISIONS OF ACT/SCHEME
Types of Exemption: An establishment covered under the EPF & MP Act, 1952 is required to comply with the statutory provisions of the Act and also the provisions of the Schemes framed under the Act namely EPF Scheme, 1952, EPS Scheme, 1995 and EDLI Scheme, 1976. However, the Act provides for grant of exemption from the operation of the Act and also exemption from the operation of the Schemes framed under the Act. Thus, the types of exemption provided under the Act may be broadly classified as under: (a) Exemption from the Act (including the Schemes), under Section 16(2) of the Act. (b) Exemption from the operation of the Scheme/s viz. EPF Scheme/EPS/EDLI Scheme. (a) Exemption from the Act (Including the Schemes): This type of exemption is allowed under Section 16(2) of the Act by the Central Government. Exemption from the Act is allowed only to a class of establishments. It is granted considering the financial or other circumstances of the class of establishments. This exemption can be given prospectively or retrospectively. It is allowed for a specified period only. The class of establishments for which this type of exemption currently in force and valid upto 31.3.2005 (vide Government Notification dated 21.6.2003) a) Those being wholly financed by the grants-in-aid received from the Central Government, or any State Government or State Governments, or partly by the Central Government and partly by one or more State Governments subject to the condition that grants-in-aid does not include any amount for the purpose of meeting the liability of the employer towards the employers contribution to the provident fund or b) Those being run by public religious or charitable trusts or endowments (including maths, temples, gurudwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies and Trusts for religious or charitable or other public purposes and notified as such by the Central Government under the Income Tax Act, 1961 (43 of 1961),: Provided that if such class of establishments run any university, any college, any school, any scientific institution, any institution in which research, education, imparting knowledge or training is carried on against charges or fees from the students, or run any hospital, nursing home or clinic in which any medical treatment or procedure is carried on against charges or fees from the patients, such activity shall not be exempted from the operation of the first mentioned Act,: Provided that the Government reserves the right to revoke and/or modify the exemption as and when it is deemed fit.

86 (b) Exemption from the Operation of the EPF Scheme/EPS/EDLI Scheme: In this type of exemption, it is only an exemption from the operation of a specified scheme and not from the Act. Apart from granting exemption to an establishment from the operation of a particular scheme, the Act also provides for grant of exemption to an individual employee and also to a class of employees. Thus exemption from the operation of the Scheme is granted. i) To an establishment as a whole; ii) To an individual employee; (under the EPF & EDLI Scheme only) iii) To a class of employees. An establishment may seek exemption from the operation of all the three schemes or any of the Schemes framed under the Act. This is illustrated in the following table.

TABLE UE-Unexempted E-Exempted.

Sl.No. 1. 2. 3. 4. 5. 6. 7. 8. Establishment Code No. DL/1111 DL/2222 DL/3333 DL/4444 DL/5555 DL/6666 DL/7777 DL/8888 EPF UE E E UE UE E E UE EPS UE UE UE UE E E E E EDLI UE UE E E E UE E UE

Issue of Relaxation Order under the EPF and EDLI Schemes: Before granting exemption to an establishment the application of the establishment and also the rules of the Fund are required to be scrutinised for considering the grant of exemption. As it may take some time to process the application, the Regional Provident Fund Commissioner/Central Provident Fund Commissioner as the case may be, may issue a relaxation order to the establishment specifying that the establishment may not, pending grant of exemption. i) ii) iii) Submit the returns required to be submitted under the Scheme. Remit the dues to the Fund; and Transfer the accumulations from the existing Fund to the CBT, E.P.F.

The Regional Provident Fund Commissioner/Central Provident Fund Commissioner may also impose certain other conditions on maintenance of accounts, enrolment of members, Investment of monies, payment of inspection charges and submission of returns etc. in the Relaxation Order. For all practical purposes the establishment under Relaxation Order shall be treated on par with the

establishment EPF Scheme.

granted

exemption.

87 The Relaxation Order is issued under Para 79 of the

** However prior permission of CPFC is mandatory for issue of Relaxation Order under this Para and till such time the establishment seeking exemption should comply as an unexempted establishment.

Exemption from the operation of EPF Scheme, 1952.

Exemption from the operation of EPFs to an establishment as a whole, is granted either under Section 17(1)(a) or under Section 17(1)(b) of the Act. Exemption under Section 17(1)(a) To grant of exemption to an establishment under Section 17(1)(a) is considered where the rates of contribution are not less favourable than the statutory rates provided in Section 6 of the Act and the employees are also in enjoyment of other PF benefits which are also on the whole not less favourable than the benefits provided under the Act/Scheme. The authority to grant this exemption is the Appropriate Government, as defined in Section 2(a) of the Act (Central/State Government, as the case may be) and notified in the Gazette. Exemption under Section 17(1)(b) Exemption under Section 17(1)(b) is granted where the employees in an establishment are in enjoyment of benefits in the nature of Provident Fund, Pension or gratuity which are separately or jointly are on the whole not less favourable than the benefits provided under the Act/Scheme. It is granted by the Appropriate Government, through a notification in the gazette. Payment of Inspection charges: The establishment to which Relaxation Order issue/exemption granted is required to pay Inspection charges @ 0.18% of total wages on which P.F. is recovered, to the R.P.F.C. concerned by deposit in Cash/local cheque in S.B.I. to the credit in Account No.2 of the E.P.F., through the prescribed challan. Monthly Return: The employer of the establishment to whom the exemption is granted to the establishment as a whole under section 17(1) shall submit a monthly return to the Regional Provident Fund Commissioner by the 25th of the month following that to which it relates in the proforma prescribed in the schedule annexed to the notification issued by the Central Government through S.O.No.3469, dated 3.9.83. Similarly the employer of an establishment to which exemption is granted to an individual employee under para 27 of the scheme is also required to submit monthly return to the Regional Provident Fund Commissioner by 25th of the following month to which it relates, in a separate proforma set out in the schedule annexed to the Notification No.936, dated 30.3.91 issued by the Central Government. (Ref. Section 17(3)(a) read with para 27(2) of the Employees Provident Fund Scheme, 1952).

88 Exemption of an employee: (E.P.F. Scheme, 1952) Section 17(2) read with para-27 of the EPF Scheme provides for exemption from the operation of all or any of the provisions of the scheme to an individual employee. It is granted by the Regional Provident Fund Commissioner on receipt of application in Form-1 from the employee. The exemption is granted where employees is entitled to benefits in the nature of PF, gratuity or old age pension and such benefits separately or jointly are on the whole not less favourable than the benefits provided under the Act and Scheme. Wherever the exemption to an individual employee is granted, the employer is required to submit a monthly return to the Regional Provident Fund Commissioner in the prescribed proforma. The due date for submission of this return is 25th of the month following that to which it relates. The employer is required to pay Inspection Charges @ 0.18% on wages of the employees exempted and invest the P.F. money in accordance with the pattern of investment prescribed by the Central Government. The employee may again be permitted to the statutory fund by making an application. The re-election is permitted once only on each account. Exemption of a class of employees: (EPF Scheme, 1952) Section 17(2) read with para 27-A of the EPF Scheme provides for grant of exemption from the operation of all or any of the provisions of the Scheme to a class of employees. It is granted by the appropriate Government on receipt of application from the employer. The exemption is granted were the employees are entitled to benefits in the nature of PF, gratuity or old age pension and such benefits separately or jointly are on the whole not less favourable than the benefits provided under the Act and Scheme. Wherever the exemption to a class of employee is granted, the employer is required to submit a monthly return to the Regional Provident Fund Commissioner in the prescribed proforma. The due date for submission of this return is 25th of the month following that to which it relates. The employer is required to pay Inspection Charges @ 0.18% on wages of the employees exempted and invest the P.F. moneys in accordance with the pattern of investment prescribed by the Central Government. The class of employees may again be permitted to join the statutory fund. The reelection is permitted once only on each account.

Exemption - Provision of Act/Scheme At a glance

Sl.No. Nature of Exemption 1. 2. Exemption from the Act Exemption from the operation of EPF 1952 - Do Granted under Act/Scheme Sec.16(2) of the Act Sec.17(1)(a) or 17(1)(b) Authority to grant exemption Central Government Appropriate Government Authority to issue Relaxation Order N.A. R.P.F.C.(Para 79) On confirmation from CPFC. R.P.F.C. (Para 79) On confirmation from CPFC -Remarks

Exemption to a class of estts. Only for a specified period. Exemption to an estt. As a whole

3.

Sec.17(2) read with Para 27A of the EPF Scheme Sec.17(2) read with Para 27 of the EPF Scheme

Appropriate Government

To a class of employees.

4.

- Do -

R.P.F.C.

To an individual employee.

5.

6. 7.

Exemption from the operation of the EPS, 95 - Do Exemption from the operation of EDLI, 1976 - Do - Do -

Sec. 17 (1C) Para: 39 A Sec. 17(1C) Sec.17(2-A)

89 Appropriate Government Appropriate Government C.P.F.C.

--

To an estt. As a whole. Monthly return. To a class of estt. To an estt. As a whole To a class of employees. To an individual employee.

-R.P.F.C. (Para 28(7) - Do --

8. 9.

Sec.17(2B) read with Para 28(4) Sec.17(2B) read with Para 28(1)

C.P.F.C. R.P.F.C.

Exemption from Employees Family Pension Scheme: Section 17(1C) of the Act provides for grant of exemption from the operation of Employees Pension Scheme, 1995. It is granted by the Appropriate Government through a notification in the official Gazette. Exemption may be granted to an establishment as a whole or to a class of establishments. The grant of exemption is subject to the conditions specified by the Appropriate Government. The exemption is granted where the establishment or the class of establishments are in enjoyment of benefits in the nature of pensionary benefits are at par or is, more favourable than the benefits provided under this Scheme. An application for grant of exemption should be disposed of within 6 months otherwise the exemption applied for shall be deemed to have been granted. (Para 39 of the EPS, 95). Exemption from the Employees Deposit Linked Insurance Scheme, 1976: Section 17(2A) of the Act provides for grant of exemption from the operation of Employees Deposit Linked Insurance Scheme, 1976. It is granted to an establishment, where the employees are without making any separate contribution or payment of premium, in enjoyment of benefits in the nature of Life Insurance whether linked to their deposits in Provident Fund or not and such benefits are more favourable than the benefits admissible under the Insurance Scheme. It is granted by the Central Provident Fund Commissioner by notification in the official gazette and is subject to conditions that may be specified in the notification. It is granted either prospectively or retrospectively. Pending grant of exemption to an establishment relaxation order may be issued under Para28(7) of the Employees Deposit Linked Insurance Scheme, 1976 by the Regional Provident Fund Commissioner. An establishment exempted from the operation of the Employees Deposit Linked Insurance Scheme, 1976 is required to submit a monthly return to the Regional Provident Fund Commissioner. Para 28(4) of the Scheme provides for grant of exemption by the Central Provident Fund Commissioner to any class of employees. Under Section 17(2B) read with Para-28(1) of the Employees Deposit Linked Insurance Scheme, 1976, the Regional Provident Fund Commissioner may grant exemption from the operation

90 of all or any of the provisions of the Employees Deposit Linked Insurance Scheme to an employee. The establishment shall pay inspection charges at the rate of 0.005 per cent of the basic wages and Dearness Allowance subject to a minimum of Re.1 per month. CANCELLATION OF EXEMPTION Exemption granted to an Establishment shall be cancelled by the authority who granted it for violation of any condition governing the grant of exemption or on the surrender of exemption by the establishment on its own volition. 23

DUTIES OF EMPLOYER-EXEMPTED ESTABLISHMENT

The duties of the employer of an establishment exempted are--a. To comply with all the conditions governing grant of exemption.

b. To deposit the contributions on Provident Fund/Pension/Insurance Fund (premium on LIC Policy) to the respective Board of Trustees on or before the due date stipulated. c. To remit the Inspection charges on due dates to the Regional Provident Fund Commissioner concerned. d. To remit penal damages under Section 14B and interest under Section 7Q of the Act promptly, wherever due. e. To comply with the provisions of other Scheme/s for which exemption not obtained and in particular to ensure furnishing of Nomination and Family particulars of all members under Employees Pension Scheme, 1995 to Regional Provident Fund Commissioner concerned. f. To constitute Board of Trustees complying with the provisions of paragraph 79C of Employees Provident Fund Scheme, 1995 and conduct elections as per the guidelines issued. g. To submit monthly and annual returns on due dates.

h. To ensure that the Board of Trustees maintains individual accounts of employees, benefits are extended promptly, Rules of Private Provident Fund is updated on par with the statutory Scheme to transfer the account of employee within three months, to invest the monies as per the pattern, to supply Pass Book/Annual Statement of Accounts to the members, etc., and the total quantum of benefits of employees towards Provident Fund or gratuity and pension is not reduced after the grant of exemption. Note:- The reasons for shortfall of Employer share of contribution to the extent of 8.33% and payable towards Pension contribution to the R.P.F.C. should be mentioned in the Annual Statement of Accounts issued to the members.

i.

91 To make good the loss sustained by the Board of Trustees in sale/purchase of securities and the resultant shortfall in declaring the rate of interest on par with statutory fund. (It is not necessary for the employer to make good the loss as and when sale/purchase of securities is made and if such loss should be borne by the interest account of the fund.) To assist and enable the Enforcement Officer to conduct the inspection of records of Board of Trustees and the establishment. The transfer the past accumulation dues of members before the due date, on cancellation/surrender of exemption. While doing so, the amount forfeited from the employees account, if any, amount lying in interest account, unclaimed account should also be transferred.

j. k.

Returns to be submitted by the Employers on EPF side a. b. c. d. Monthly return in The Schedule (Annexure A) Triplicate copy of challan for deposit of Inspection charges in Account No:2 Annual Return in Form-B Audited Balance Sheet of the Provident Fund Trust together with the audit report.

Returns to be submitted by the Employers on EPS side a. b. c. d. Basic return in Form-3 (EPS) Monthly return in Form-4,5 & 6 (EPS) Annual return in Form-7 & 8 (EPS) Particulars concerning the member and his/her nominee(s) in Form-2

Returns to be submitted by the Employer on EDLI side (if exempted from the provisions of EDLI scheme, 1976) a. Monthly return in Form 7 (IF) together with triplicate copy of challan for deposit of Inspection Charges in Account No:22 b. Renewal application and LIC certificate in Form-3 wherever necessary ( on expiry of valid period of exemption). (For Establishment exempted Provident Fund but not under EDLIS 1976 ) a. Basic return in Form-1 (IF) b. Monthly returns in Form-2 ,3 , 4(IF) alongwith triplicate copy of challan for remittance of EDLI contributions and Administrative charges in Account No:21 and 22 respectively. ALL MONTHLY RETURNS SHOULD BE SUBMITTED BEFORE 25TH OF THE FOLLOWING MONTH AND REMITTANCES BEFORE 15TH OF THE FOLLOWING MONTH INSPECTION CHARGES

92 Section 17(3) (A) and Section 27(3A)(a) provides for payment of inspection charges by the employers of exempted establishment to the respective Regional Provident Fund Commissioners on or before 15th of each month. However, five days grace period is allowed. The inspection charges should be calculated on the actual wages on which PF/EDLI contributions are payable. The inspection charges is also payable in respect of member who is transferred from exempted fund as a members of the Provident Fund exclusively maintained by the employer for the executives of the establishment, if any. The total inspection charges due in a month should be rounded to the nearest five paise. The rate of inspection charges prescribed from time to time, by the Central Government, is given in Table below. The inspection charges should be remitted into any branch of State Bank of India to the credit of EPF Account No.2 or EDLI Account No.22, as the case may be. Separate Challans to be used for depositing the inspection charges in Account No.2 and 22. Belated deposit will attract interest under Section 7Q as well as penal damages under Section 14B read with the provisions of the Scheme/s. With effect from 31.10.1953, inspection charges are leviable in respect of exemption granted under paragraph 27. With effect from 10.8.1956 the establishments enjoying the exemption under paragraph 27A shall pay inspection charges at prescribed rates. S. No. 1. Period Upto 31.12.1962. Rate Authority

0.75% of the total Ministry of Labour Circular No.PFemployers & employees 533(1) dated 6.3.1953 & Notification P.F.Contribution No.S.O.1460 dated 16.6.1961. 0.6% of above in respect of 4 industries in which rate of contribution is raised from 6 % to 8%. 0.09% of the pay(Basic wages + DA + retaining allowance & cash value of food concession) 0.18% of the pay

2.

1.1.1963 to 30.9.1964 1.10.1964 to 31.7.1998 1.8.1998 onwards

S.O.No.3793 Gazette of India dated 13.12.1962.

3.

S.O.No.3450 dated 18.9.1964. S.O.No.1436 dated 18.7.1998 (Ministry of Labour Notification No.G.20017/1/98 /SS.II dated 9.7.1998.

4.

24

FUNCTIONS OF EXEMPTION SECTION

Matters relating to exempted establishments shall be dealt by Enforcement Section in each Regional Office/Sub-Regional Office. This Section shall monitor the functioning of exempted establishments (including establishments wherein individual and class of employees, granted exemption under EPF & EDLI schemes). Considering the number of establishments exempted from Employees Provident Funds Scheme, 1952, Employees Deposit Linked Insurance Scheme, 1976, Employees Pension Scheme, 1995, a separate Section may be kept, wherever justified.

93 The Exemption Section shall be under the charge of one Section Supervisor and under the overall supervision of Assistant Provident Fund Commissioner. The Assistant Provident Fund Commissioner (Exemption) shall assist the Regional Provident Fund Commissioner in discharging the job assigned to him and ensure prompt and proper function of exemption section in the following areas of work: (a) (b) To receive the applications seeking exemption from the operation of EPF/EPS/EDLI Schemes and also in respect of class of employees and individual employee under EPF and EDLI Schemes. To process the exemption application within thirty days from the date of receipt and to communicate the issue of Relaxation Order or otherwise to the establishment. Paragraph 39 of the Employees Pension Scheme, 1995 specifies the period of six months within which the application for exemption should be disposed, failing which the establishment is deemed to have been granted exempted. A close monitoring is therefore essential. To maintain the register for receipt and disposal of exemption applications and to submit the Register to Assistant Provident fund Commissioner on 5th of every month duly drawing a summary of the receipts, disposal and pending applications. To update the prescribed register of exempted establishments including the individual and class of employees for whom exemption granted. To maintain the Roster of Exempted establishments to watch the prompt inspection by the area Enforcement Officers. The exempted establishment should be inspected atleast once in a year and through frequent visits, wherever required. To watch for the inspection reports on due dates and to initiate follow up action within seven days from its receipt. To watch for monthly return in Annexure A on due date (25th of each month) and to extract the details to a register for consolidation of data on exempted establishments. To scrutinise it as per the check points and to initiate action to rectify the irregularities noticed in the matter of compliance as observed from the monthly return. To maintain the DCB Register for each establishment to watch the realisation of inspection charges. To initiate action for non-remittance of contribution by the employer to the Board of Trustees and to pursue the assessment of dues through the enquiry under Section 7A for initiating penal action, if need be. To levy damages under section 14B of the Act and to recover interest under Section 7Q of the Act on all belated remittances of contribution and inspection charges. To examine the amendment to the exempted Scheme proposed through the resolution of the Board of Trustees and to accord approval wherever the same is at par with the statutory Scheme. In the case of non-compliance on conditions governing grant of exemption, to issue show cause notice to the establishment and to pursue the question on withdrawal of Relaxation or cancellation of exemption. To examine the request of the establishment for surrender of Relaxation Order/Exemption and to recommend to the appropriate Government. To ensure conduct of election promptly to the Board of Trustees by the exempted establishment, duly observing the guidelines and in accordance with the provisions of the Scheme. To clarify the points referred by the exempted funds, in particular in the matter of investment of funds, within seven days.

(c)

(d) (e)

(f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p)

94 (q) To examine the request of the exempted fund (Provident Fund) in sale of securities with reference to the need and justification given by the Board of Trustees and to regulate the same as per the guidelines received from the Central Office from time to time. The permission to sell the securities may be given wherever it is justified that funds in excess of current accretions are required to meet the obligatory payments. The withdrawal from the Special Deposit Scheme may be given after ensuring the sale of Government securities, etc. Simultaneously, the capital loss on account of sale of securities should be examined with reference to the capacity of the fund and the balance in its interest suspense account to bear the loss that it does not affect the rate of interest to be declared. An undertaking from the employer should be obtained that any loss on account of sale of securities will be borne by the employer, if the same affected the rate of interest to be declared. It should be ensured that the provisions of the private Provident Fund Scheme towards refundable and non-refundable loans are not affecting the spirit of the Scheme and irregularities noticed, if any, should be corrected forthwith. Immediately on cancellation of exemption or withdrawal of Relaxation Order, it should be ensured that the exempted fund transfer the past accumulation dues promptly within the due date and in proper manner. Suitable guidelines should be given to the exempted fund. To handle the securities carefully and to arrange for its prompt acceptance by the SBI towards the credit of Central Board of Trustees, Employees Provident Funds duly maintained the register for receipt and disposal of securities (Refer Chapter 17 of Manual of Accounting Procedure). To accept the abstract portion of past accumulations statement after ensuring the realisation of entire past accumulation dues and to transmit the detail past accumulations statement to the accounts group for its acceptance and crediting the past accumulation dues to the members ledger account in the year in which the entire past accumulation dues are realised. To watch for the annual return in Annexure B from the exempted establishment before the due date (30th September). The certified Audit Report and Balance Sheet of the exempted fund should be examined with reference to the Assets and Liabilities and the details received through the monthly return. To furnish statistical data maintained in computer for supply to Annual Report and Central Office. To furnish the reports to Central Office on due dates and also to Exempted Committee. To arrange for recovery of dues from exempted establishments through recovery machinery and invoking provisions of Section 8F of the Act. To monitor the court cases arising from the exempted establishments and to take prompt action in consultation with legal section. In addition to the above, the Exempted Section shall perform such other matter concerning exempted establishments that may be entrusted by Regional Provident Fund Commissioner/Assistant Provident Fund Commissioner Exemption) for smooth monitoring of exempted establishments. The Exemption Section should keep a close liaison with the section dealing with the Pension and EDLI relating to Provident Fund exempted establishments. Non-compliance and default in non-submission of returns and non-remittance of dues, etc., should be obtained through a defaulters list and initiate action to secure compliance. The section dealing with Pension/DLI of Provident Fund exempted establishments should be under the control of Regional Provident Fund Commissioner (F&A)/Assistant Provident Fund commissioner (Accounts).

(r) (s)

(t)

(u)

(v)

(w) (x) (y) (z) (aa)

(bb)

95 Note: 25 In the absence of a separate Exemption Section, the above items of work on Exemption may be entrusted to officials in the Enforcement section.

TERMS & CONDITIONS OF EXEMPTION (UNDER PARA 27AA)

All exemptions already granted or to be granted hereafter under section 17 of the Act or under paragraph 27A of the Scheme shall be subject to the revised Terms and conditions as given in the Appendix below. 1. APPENDIX A The employer shall establish a Board of Trustees under his Chairmanship for the management of the Provident Fund according to such directions as may be given by the Central Government or the Central Provident Fund Commissioner, as the case may be, from time to time. The Provident Fund shall vest in the Board of Trustees who will be responsible for and accountable to the Employees Provident Fund Organisation, inter alia, for proper accounts of the receipts into and payment from the Provident Fund and the balance in their custody. For this purpose, the employer shall mean i. In relation to an establishment, which is a factory, the owner or occupier of the factory; and ii. In relation to any other establishment, the person who, or the authority, that has the ultimate control over the affairs of the establishment. 2. The Board of Trustees shall meet at least once in every three months and shall function in accordance with the guidelines that may be issued from time to time by the Central Government/Central Provident Fund Commissioner (CPFC) or an officer authorised by him. All employees, as defined in section 2(f) of the Act, who have been eligible to become members of the Provident Fund, had the establishment not been granted exemption, shall be enrolled as members. Where an employee who is already a member of Employees Provident Fund or a provident fund of any other exempted establishment is employed in his establishment, the employer shall immediately enrol him as a member of the fund. The employer should also arrange to have the accumulations in the provident fund account of such employee with his previous employer transferred and credited into his account. The employer shall transfer to the Board of Trustees the contributions payable to the Provident Fund by himself and employees at the rate prescribed under the Act from time to time by the 15 th of each month following the month for which the contributions are payable. The employer shall be liable to pay simple interest in terms of the provisions of Section 7Q of the Act for any delay in payment of any dues towards the Board of Trustees. The employer shall bear all the expenses of the Administration of the Provident Fund and also make good any other loss that may be caused to the Provident Fund due to theft, burglary, defalcation, misappropriation or any other reason. Any deficiency in the interest declared by the Board of Trustees is to be made good by the employer to bring it upto the statutory limit. The employer shall display on the notice board of the establishment, a copy of the rules of the funds as approved by the appropriate authority and as when amended thereto along with the translation in the language of the majority of the employees. The rate of contributions payable, the conditions and quantum of advances and other advances laid down under the Provident Fund rules of the establishment and the interest credited to the account of each member, calculated on the monthly running balance of the member and declared by the Board of Trustees shall not be lower than those declared by the Central Government under the various provisions prescribed in the Act and Scheme framed there under.

3. 4.

5.

6. 7. 8.

9.

96
10. An amendment to the Scheme, which is more beneficial to the employees than the existing rules of the establishment, shall be made applicable to them automatically pending formal amendment of the Rules of the Trust. No amendment in the rules shall be made by the employer without the prior approval of the Regional Provident Fund Commissioner (referred to as RPFC hereafter). The RPFC shall before giving his approval give a reasonable opportunity to the employees to explain their point of view. All claims for withdrawals, advances and transfers should be settled expeditiously, within the maximum time frame prescribed by the Employees Provident Fund Organisation. The Board of Trustees shall maintain detailed accounts to show the contributions credited withdrawal and interest in respect of each employee. The maintenance of such records should preferably be done electronically. The establishments should periodically transmit the details of members accounts electronically as and when directed by the CPFC/RPFC. The Board of Trustees shall issue an annual statement of accounts or passbooks to every employee within six months of the close of financial/accounting year free of cost once in the year. Additional print outs can be made available as and when the members want, subject to nominal charges. In case of pass book, the same shall remain in custody of employee to be updated periodically by the trustees when presented to them. The employer shall make necessary provisions to enable all the members to be able to see their account balance from the computer terminals as and when required by them. The Board of trustees and the employer shall file such returns monthly/annually as may be prescribed by the Employees Provident Fund Organisation within the specified time limit, failing which it will be deemed as a default and the Board of Trustees and employer will jointly and separately be liable for suitable penal action by the Employees Provident Fund Organisation. The Board of trustees shall invest the monies of the provident fund as per the directions of the Government from time to time. Failure to make investments as per directions of the Government shall make the Board of Trustees separately and jointly liable to surcharge as may be imposed by the CPFC or his representative. 18. (a) The securities shall be obtained in the name of the Trust. The securities so obtained should be in Dematerialised (DEMAT) form and in case the required facility is not available in the areas where the trust operates, the board of trustees shall inform the RPFC concerned about the same. (b) The Board of trustees shall maintain a script wise register and ensure timely realisation of interest. (c) The DEMAT Account should be opened through depository participants approved by Reserve Bank of India and Central Government in accordance with the instructions issued by the Central Government in this regard.

11.

12. 13.

14.

15. 16.

17.

(d) The cost of maintaining DEMAT account should be treated as incidental cost of investment by the Trust. Also all types of cost of investments like brokerage for purchase of securities etc. shall be treated as incidental cost of investment by the Trust. 19. All such investments made, like purchase of securities and bonds, should be lodged in the safe custody of depository participants, approved by Reserve Bank of India and Central Government, who shall be the custodian of the same. On closure of establishment or liquidation or cancellation of exemption from EPF Scheme, 1952, such custodian shall transfer the investment obtained in the name of the Trust and standing in its credit to the RPFC concerned directly on receipt of request from the RPFC concerned to that effect. The exempted establishment shall intimate to the RPFC concerned the details of depository participants (approved by Reserve Bank of India and Central Government), with whom and in whose safe custody, the investments made in the name of trust, viz., investments made in securities, bonds, etc. have been lodged. However, the Board of Trustees may raise such sum or sums of money as may be required for meeting

20.

97
obligatory expenses such as settlement of claims, grant of advances as per rules and transfer of members P.F. accumulations in the event of his/her leaving service of the employer and any other receipts by sale of the securities or other investments standing in the name of the Fund subject to the prior approval of the RPFC. 21. 22. Any commission, incentive, bonus, or other pecuniary rewards given by any financial or other institutions for the investments made by the Trust should be credited to its account. The employer and the members of the Board of Trustees, at the time of grant of exemption, shall furnish a written undertaking to the RPFC in such format as may be prescribed from time to time, inter alia, agreeing to abide by the conditions which are specified and this shall be legally binding on the employer and the Board of Trustees, including their successors and assignees, or such conditions as may be specified later for continuation of exemption. The employer and the Board of Trustees shall also give an undertaking to transfer the funds promptly within the time limit prescribed by the concerned RPFC in the event of cancellation of exemption. This shall be legally binding on them and will make them liable for prosecution in the event of any delay in the transfer of funds. (a) The account of the Provident Fund maintained by the Board of Trustees shall be subject to Audit by a qualified independent chartered accountant annually. Where considered necessary, the CPFC or the RPFC in-charge of the Region shall have the right to have the accounts reaudited by any other qualified auditor and the expenses so incurred shall be borne by the employer. (b) A copy of the Auditors report along with the audited balance sheet should be submitted to the RPFC concerned by the Auditors directly within six months after the closing of the financial year from 1 st April to 31st March. The format of the balance sheet and the information to be furnished in the report shall be as prescribed by the Employees Provident Fund Organisation and made available with the RPFC Office in electronic format as well as a signed hard copy. (c) The same auditors should not be appointed for two consecutive years and not more than two years in a block of six years. 25. A company reporting loss for three consecutive financial years or erosion in their capital base shall have their exemption withdrawn from the first day of the next/succeeding financial year. The employer in relation to the exempted establishment shall provide for such facilities for inspection and pay such inspection charges as the Central Government may from time to time direct under Clause (a) of sub-section (3) of Section 17 of the Act within 15 days from the close of every month. In the event of any violation of the conditions for grant of exemption, by the employer or the Board of Trustees, the exemption granted may be cancelled after issuing a show cause notice in this regard to the concerned persons. In the event of any loss to the trust as a result of any fraud, defalcation, wrong investment decisions etc. the employer shall be liable to make good the loss. In case of any change of legal status of the establishment, which has been granted exemption, as a result of merger, demerger, acquisition, sale, amalgamation, formation of a subsidiary, whether wholly owned or not, etc., the exemption granted shall stand revoked and the establishment should promptly report the matter to the RPFC concerned for grant of fresh exemption. In case, there are more than one unit/establishment participating in the common Provident Fund Trust which has been granted exemption, all the trustees shall be jointly and separately liable/responsible for any default committed by any of the trustees/employer of any of the participating units and the RPFC shall take suitable legal action against all the trustees of the common Provident Fund Trust. The Central Government may lay down any further conditions for continuation of exemption of the establishments.

23.

24.

26.

27.

28. 29.

30.

31.

98 26

RELAXATION UNDER PARA 79

It has been observed by Internal Audit Party that a large number of establishments have been enjoying relaxation under para 79 of the EPF Scheme, 1952 for the past several years without issue of notification for grant of exemption by the Appropriate Government. It may be mentioned that relaxation under Para 79 is only a temporary arrangement to avoid delay and facilitate the establishments to implement their PF Scheme pending notification by Appropriate Government granting theme exemption from the operation of the provisions of the employees Provident Fund Scheme, 1952. The compliance position of the establishment concerned is to be kept under observation during this period, on the basis of which Regional Provident Fund Commissioner may take a decision regarding suitability of the case for recommendation to Head Office for issue of Notification by Appropriate Government. All such cases which are pending as relaxed under Para 79 for more than two years may be reviewed and their proposal may be submitted to Head Office along with all supporting documents. In case the establishment does not satisfy all the condition required for exemption, the matter for withdrawal of relaxation be considered after following the due procedure as laid down in this regard without any delay. [Head Office letter no.E.III/18(8)2001/68427 dated 11.12.2003] 27

THE BOARD OF TRUSTEES - ELECTION PROCEDURES

a. The Board of Trustees of the establishment granted exemption under clause (a) of subsection (1) of Section 17 of the Act shall consist of not less than two and not more than six representatives each of the employers and employees. The number of Trustees shall be so fixed, as to afford, as far as possible, representation to employees of each branch or department of the establishment. In the case of common provident fund for a group of two or more establishments, there will be at least one representative each from the participating establishments. b. Provided that any factory or establishment seeking fresh exemption shall not be permitted to participate in any common provident fund having more than six participating factories or establishments. c. The employer shall nominate his representatives on the Board of Trustees from among the officers employed in managerial or administrative capacity in the establishment. d. The representatives of the employees, on the Board of Trustees shall be nominated or elected in the following manner, viz., (i) Where ever there is a union recognized by the employer under the Code of Discipline in industry or under any Act, such union shall nominate the representatives of the employees; (ii) Where there are more than one trade union recognized by the employer, the representatives of employees shall be elected by the members of the union in an election to be held for the purpose on any working day; (iii) Where there is no union recognized by the employer under the Code of Discipline in industry or under any Act but there are more than one registered unions functioning in the

99 establishment, the union having the largest number of members, subject to a minimum of 15% membership, shall have the right to nominate employees representative; and in case there is only one registered union, it shall have the right to nominate the employees representative, provided it has a minimum of 15% membership; e. The employer shall nominate one of his representatives on the Board to be the Chairman thereof. In the event of equality of votes, the Chairman may exercise a casting vote. f. The terms of office of the Trustee shall be give years from the date of election or nomination. An outgoing Trustee shall be eligible for re-election or re-nomination. A Trustee elected or nominated to fill the casual vacancy shall hold office for the remaining period of the term of the trustee in whose place he is elected or nominated. g. Provided that a member who has already completed two or more terms on the Board may continue his present term subject to the provisions of the Scheme. h. Provided further that a Trustee elected or nominated to fill the casual vacancy shall hold office for the remaining period of the term of the Trustees in whose place he is elected or nominated. i. A person shall be disqualified for being a Trustee, if he(i) is declared to be of unsound mind by a competent court; (ii) (iii) (iv) j. or

has been convicted of an offence involving moral turpitude; or is an undischarged insolvent; or is an employer of a exempted or unexempted establishment which has defaulted in payment of any dues under the Act.

A person shall cease to be Trustee of the Board, if (i) he ceases to be an employee of the establishment; or (ii) (iii) (iv) he ceases to be a member of the Provident Fund of establishment; or ` the union on whose behalf he was elected or nominated ceases to be recognized by the employer; or he fails to attend three consecutive meetings of the Board without obtaining leave of absence from the Chairman of the Board of Trustees. The Chairman may, however, condone the absence of a Trustee, if he is satisfied that there were reasonable grounds for such absence.

k. The procedure for election or nomination of Trustees, the quorum at the meeting of the Board, records to be kept of the transaction of business and all other matters not specifically provided for in the Scheme shall be regulated as per the provisions of the approved Provident Fund rules of the establishment and the guidelines for the functioning of the Board of Trustees of the Exempted establishments which the Commissioner may, specify, from time to time. l. In case of any dispute or doubt, the matter shall be referred to the Regional Provident Fund Commissioner in whose jurisdiction, the Head Office of the establishment is located. The decision of the Commissioner in the matter shall be final and binding.

100

DUTIES OF THE MEMBERS OF THE BOARD OF TRUSTEES The duties of the members of the Board of Trustees have been clearly laid down under section 17(A) and sub clause b are reproduced below:(i) maintain detailed accounts to show the contributions credited, withdrawals made and interest accrued in respect of each employee; (ii) submit such returns to the Regional Provident Fund Commissioner or any other officer as the Central Government may direct from time to time; (iii) invest the provident fund monies in accordance with the directions issued by the Central Government from time to time; (iv) (v) transfer, where necessary, the provident fund account of any employee; and perform such other duties as may be specified in the Scheme.

UTILISATION OF FORFEITED AMOUNT Utilisation of forfeited amount of Provident Fund lying with establishment under Section 17(1) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. The forfeited amount can be utilized for the following purposes: a) To maintain a higher rate of interest on the members account at least at par with the rate of interest declared by Government of India in respect of unexempted establishment. b) To operate the Death Relief Fund. c) To make good the capital loss to the fund on account of purchase/sale redemption of securities. d) To meet the money order commission with despatch of Provident Fund consequent on settlement of claims to the members of their deceased family members, where the Provident Fund amount payable is upto Rs.500. e) Adhoc payment of Rs.30 to the heirs of deceased members as an aid for procuring a succession/guardianship certificate. 28

APPLICATION OF PENAL PROVISIONS TO EXEMPTED ESTABLISHMENTS The provisions of Section 6, 7A, 8 and 14B apply to the employer of the exempted establishment. Further the exemption is granted to an establishment/class of employees/employee, subject to certain conditions specified in the notification granting the exemption. An employer who contravenes or makes default in complying with the provisions of the Act or conditions governing grant of exemption or any other provisions of the Act, attracts the penal provisions of the Act and thus punishable under section 14 of the Act. APPLICATION OF PENAL PROVISIONS BOARD OF TRUSTEES

101 The employer of the exempted establishment should establish a Board of Trustees for the administration of the Provident Fund, as per paragraph 79C of the Employees Provident Funds Scheme, 1952 and perform the duties as specified in sub-section (d) of Section 17(1A) of the Act. Any contravention or default by the Board of Trustees is deemed to have committed an offence under sub-section 2(A) of Section 14 of the Act shall be punishable with the penalties provided in that sub-section. The penal provisions are also applicable to the establishments exempted from Employees Pension Scheme,1995 and/or Employees Deposit Linked Insurance Scheme,1976.

SCRUTINY AND FOLLOWUP ACTION ON RETURNS DUE FROM ESTABLISHMENTS EXEMPTED FROM EPF SCHEME 1952 CHECK POINTS FOR SCRUTINY OF ANNEXURE A a. Whether Annexure A has been received within 25th of the close of each month, if not action taken. b. Whether inspection charges have correctly been calculated and deposited by the employer within fifteen days of each month. If not, whether any action taken to levy damages has been taken. c. If the employer is habitual defaulter in the payment of inspection charges or in the submission of Annexure A. d. Whether there is any abnormal decline in the number of employees and number of subscribers as shown in Annexure A as compared with previous Returns. e. Whether the information showing the contractors workers has also been shown or not. f. In case of deficiencies in the Rules, whether the same have been amended by the Company, if not Action Taken. g. Whether the Provident Fund Rules of the Company have been scrutinised and approved by the Income Tax Authorities and the Regional Provident Fund Commissioner, if not action taken. h. Whether it is a case of relaxation, if so, the date of issue of relaxation order and the action taken to grant final exemption. i. Whether information showing the number of employees, number of subscribers, amount of contribution, refund of advances, grant of loan/advances, payment towards Life Insurance premia, date of transfer of contributions to the Board of Trustees, investment transfer of accumulations, election etc., has been verified by the area Enforcement Officer, if so, whether any action on the deficiencies pointed out by the Enforcement Officer has been taken. j. Whether Board of Trustees has been properly constituted and there is equal representation to the employer and the workers side, as per Paragraph 79C of the Scheme. k. Whether the Board of Trustees is common to more than six units, if so, action taken to bifurcate them so that each group of six units or less is required to have a separate Board of Trustees. l. Whether the rate of interest and rate of contribution is at par or more favourable to the employee than those provided under the statutory Scheme, if not, action taken. m. Whether the forfeiture amount is being utilised for the welfare of the members according to rules as per pattern duly approved by the Regional Provident Fund Commissioner. n. If the pre-coverage Provident Fund accumulations had been invested in shares/debentures floated by private corporate bodies/companies, whether all such shares/debentures have been promptly registered according to Law and dividends in accordance with Central Government instructions from time to time. o. Whether in the matter of advances, the Scheme of the exempted establishment is less/more favourable than the Employees Provident Funds Scheme, 1952.

p. q. r. s. t. u. v. w. x. y.

102 Whether the employer has automatically made application to his employees any amendment to the statutory scheme which is more beneficial to the employees than the existing rules of the establishments. Whether the amount of Provident Fund contributions has been transferred by the employer to the Board of Trustees within the prescribed period, if not, action taken. Whether the amount due for investment in different categories is correctly assessed and the amount actually invested tallies, if not whether there is abnormal deviation. Whether the Provident Fund accumulations have been invested in securities as per pattern of investment approved by the Government within the prescribed period. Whether the amount lying uninvested at the end of each month is within the permissible limit and justified. Whether a copy of the Balance Sheet together with audit report for each year has been received in the Regional Office, if so, whether there is any adverse comments of the Auditors with require further action. Whether Board of Trustees is meeting atleast once in every three months, if so, whether copies of minute of the meeting are being received in the Regional Office. Whether the position showing the inspection of each exempted establishment and the deficiencies have been noted in the register maintained in the Office. Whether the pension contribution is transferred to the Regional Provident Fund Commissioner by deposit in Account NO.10 before the due date. The quantum of contribution and the date of remittance should be verified. Whether the condition governing exemption as stipulated in Para 27AA of the EPF Scheme are followed properly.

29

DRILL FOR CONDUCT OF INSPECTION OF UNEXEMPTED ESTABLISHMENTS. The Enforcement Officers are expected to attend office and report to their Assistant Provident Fund Commissioner (in case of Inspectorates at the Inspectorate) except where directed otherwise by the Assistant Provident Fund Commissioner, In-charge, of the Circle or Regional Provident Fund Commissioner (Enf.) or Regional Provident Fund Commissioner Gr. I. The Enforcement Officers will be deployed by the Assistant P.F.Commissioner to whom they are assigned to attend to any work assigned to them. They will attend court cases as directed by the Assistant P.F.Commissioner In-charge of Enforcement to whom they are attached. The Enforcement Officers shall be deployed during this year which is to be observed as Compliance 2001 Programme year to inspect inoperative establishments only and to secure compliance from them in the first instance. After completion of the inspection of inoperative establishments, inspection of other defaulting establishment may be conducted with the specific written direction from Assistant Provident Fund Commissioner, in-charge of the circle. No routine inspection is allowed for the present. No Enforcement Officer should be allowed to visit any establishment without clear and specific written direction of Assistant Provident Fund Commissioner, in-charge of the circle. Publicity may be made to the effect that no Enforcement Officer should be allowed access to any establishment without specific written authority/direction from Assistant Provident Fund Commissioner or Regional Provident Fund Commissioner. Reports indicating remarks such on record were not produced establishment asked to produce records in office responsible official not found establishment found closed

103 etc. indicate poor efforts and lack of initiative on the part of Enforcement Officers and should be avoided. Enforcement Officers must inspect the record/take the statements of employees present in the establishment, in exercise of the powers vested in him under Section 13(2)(a) to (d) of the Act. Enforcement Officers are expected to take the extracts of the relevant books, registers and documents maintained in the establishment. For taking these copies, extracts etc. presence of responsible person is not required. Any person who is keeping these records can be treated as an employee or representative and in his presence extracts or copies of the record can be made. The presence of employer is not necessary for this purpose. The Inspector should examine the person present in the establishment and must record his statements on relevant matters. It is the responsibility of the Enforcement Officer to lay his hands on the required documents and examine the person whom he believes to be in-charge of these documents. In case it is felt that an offence has been committed relevant books, registers or other documents or portion thereof as may be considered relevant in respect of these offences may be seized. Enforcement Officer must record his observation with dated signature in the Inspection Book of the establishment and bring a photocopy/carbon copy thereof for submission to Assistant Provident Fund Commissioner in-charge of the circle alongwith his report. Enforcement Officers may ensure collection of details regarding the change of ownership, details of responsible persons, Bank-accounts- Sundry creditors-debtors/properties etc. to be utilised for realisation of the dues if the dues are not remitted within the period specified in the speaking order. The filing of prosecution must be selective. Prosecution need not be filed in routine cases as launching prosecution which goes on for years has not been an effective means either to secure compliance or to deter the establishments from committing defaults. The purpose of prosecution must be to ensure punishment which may be exemplary in nature. Accordingly prosecution for routine may be avoided until and unless all other methods of brining the defaulter to mainstream of compliance have failed.

30
DRILL FOR CONDUCT OF INSPECTION OF EXEMPTED ESTABLISHMENTS BOARD OF TRUSTEES SPECIAL INSPECTION ON INVESMENT. Inspections will hereafter be carried out only by an APFC level Officer in whose jurisdiction the establishment is located. In respect of Regional Office, Mumbai, Calcutta, Chennai and Bangalore inspection have to be carried out by an APFC level Officer exclusively assigned by RPFC-I. The monthly returns received from the exempted establishments should be scrutinized only at the level of APFC or above. The functioning of the Trust can be monitored from these monthly returns itself and only in those cases where the establishment do not respond or do not give a satisfactory reply on the deficiencies communicated by the APFC there should be a need for an inspection. The particulars furnished by the establishment in the monthly return should be either entered in a register manually or the information may be fed in respect of each establishment in the Computer. Normally, those exempted establishments which are found to function well in the matter of enrolment, proper investment of investible surplus after meeting the obligatory outgoings, declaration of same or better rate of interest than the statutory interest rate, prompt sanctioning of withdrawals, settlement/transfer of PF accumulations etc. during the last two financial years as disclosed in the monthly Annexure-A as well as the report of the squad during the exempted months need not be inspected during this financial year.

104 In case the monthly returns are not received from an establishment a letter should be sent by the APFC reminding the establishment in polite language to submit the return. If the first letter does not elicit any reply or submission of returns within fifteen days a more tersely worded letter has to be sent to the establishment. If the second letter also do not generate any response an EO should be sent to the establishment with a specific written direction to ascertain the reasons for nonsubmission of the returns. The EO is not expected to do any inspection. Depending upon the report of the EO, the APFC, In-charge of Enforcement should inspect the establishment. This procedure is intended to detect default promptly and to take necessary legal action immediately so that the arrears do not mount. 31

PROCEDURE FOR INVESTMENT OF PROVIDENT FUND MONIES

The employer of an establishment exempted from the operation of Employees' Provident Fund Scheme, 1952 either in respect of the establishment as a whole for which, exemption granted under Section 17(1)(a) or 17(1)(b) of the Act or in respect of an employee/Class of employees for whom exemption granted under Paragraph 27 or 27-A of Employees' Provident Fund Scheme, 1952, respectively, shall transfer the monthly Provident Fund contributions (both shares, after diverting the Pension contributions from the employer's share of Provident Fund) including the refund of withdrawals to the respective Board of Trustees within fifteen days of the close of the month (with five days grace period), through a cheque drawn in favour of the Trust. The Area Enforcement Officer should ensure the actual crediting of the monthly dues remitted by the employer duly verifying the Pass Book of the Exempted Fund and the Bank Statement showing the realization of Cheque before due dates. All belated remittances, as explained in the Chapter on Penal Damages, will attract levy of damages by the Regional Provident Fund Commissioner concerned. In addition to the contributions and refund of withdrawals remitted by the employer, the Board of Trustees may realize the interest due on various securities/deposits, etc., kept on its investment holdings and also on redemption proceeds (i.e., repayment on account of matured securities). Similarly, the transfer of Provident Fund accumulations received from the statutory or other exempted establishments will also constitute the current accretions for a month. Out of monthly current accretions, the Board of Trustees should discharge, in the first instance, the payment of dues towards outgoing members of their final settlement, transfer of account, payment of refundable and non-refundable withdrawals. These are known as obligatory outgoings. After meeting the obligatory outgoings, the money available (investible fund) should be invested as per the pattern of investment notified by the Ministry of Labour, Government of India, under Section 17(3)(a) of the Act. The pattern of investment prescribed by the Central Government from time to time, is enclosed below: The pattern of investment prescribed by the Central Government is applicable both for the funds generated through unexempted establishments and also of exempted funds. As regards

105 unexempted establishments the pattern is notified under the provisions of Paragraph 52 of the Employees' Provident Fund Scheme, 1952 and the pattern for exempted Provident Fund is notified separately under Sec.17(3)(a) of the Act.

PATTERN OF INVESTMENT
NOTIFICATION : GOVT. OF INDIA, MINISTRY OF LABOUR, New Delhi, NO. G-27031/3/99/-SS.II dated 9th July, 2003 Sl.No.. (i) Category Percentage of amount to be invested

(ii)

(iii)

(iv) (v)

Central Government securities as defined in Section 2 of the Public Debt Act, 1944(18 OF 1944); and/or units of such Mutual Funds which have been set up Twenty five per cent as dedicated Funds for investment in Government securities and which have been approved by the Securities and Exchange Board of India. (a) Government securities as defined in Section 2 of the Public Debt Act, 1944 (18 of the 1944) created and issued by any State Government ; and/or units of such Mutual Funds which have been set up as dedicated Funds for investment in Government Fifteen per cent securities and which have been approved by the Securities and Exchange Board of India. and/or (b) Any other negotiable securities the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government except those covered under (iii)(a) below. (a) Bonds/Securities of "Public Financial Institutions as specified under Section 4(1) of the Companies Act; "Public Sector Companies" as defined in Section 2(36-A) of Thirty per cent the Income Tax Act, 1961 including Public Sector; and/or (b) Short duration (less than a year) Term Deposit Receipt (TDR) issued by Public Sector Banks To be invested in any of the above three categories Thirty per cent as decided by the Trustees The Trusts, subject to their assessment of the risk-return prospects, may invest upto 1/3rd of (iv) above, in private sector bonds/securities which have an investment grade rating from at least two credit rating agencies.

106

2. Any money received on the maturity of earlier investments reduced by obligatory outgoing shall be invested in accordance with the investment pattern prescribed in this Notification. 3. In case of any instruments mentioned above being rated and their rating falling below investment grade and the same rating has been confirmed by two credit rating agencies then the option of exit can be exercised. 4. The investment pattern as envisaged in the above paragraphs may be achieved by the end of a financial year, and shall come into force with immediate effect.

PATTERN OF INVESTMENT UNDER SEC.17(3)(A) OF THE ACT

NOTIFICATION : GOVT. OF INDIA, MINISTRY OF LABOUR, New Delhi, NO. G-27031/3/99/-SS.II dated 9th July, 2003 S.No. (i) Category Central Government securities as defined in Section 2 of the Public Debt Act, 1944 (18 of 1944); and / or units of such Mutual Funds which have been set up as Percentage of amount to be invested 25 %

(ii)

107 dedicated Funds for investment in Government Securities and which have been approved by the Securities and Exchange Board of India (a) Government securities as defined in Section 2 of the Public Debt Act, 1944 (18 of the 1944) created and issued by any State Government ;and/or units of such Mutual funds which have been set up as dedicated Funds for investment in Government Securities and which have been approved by the Securities and Exchange Board of India; and/or Any other negotiable securities the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government except those covered under (iii)(a) below. (a) Bonds/Securities of "Public Financial Institutions as specified under Section 4(I) of the Companies Act; "Public Sector Companies" as defined in Section 2(36-A) of the Income Tax Act, 1961 including Public Sector Banks; and or (b) Short duration (less than a year) Term Deposit Receipts (TDR) issued by public sector bank. To be invested in any of the above three categories as decided by their Trustees (b)

15 %

(iii)

30 %

(iv) (v)

30 %

The Trustees, subject to their assessment of the risk-return prospects, may invest upto 1/3rd of (iv) above, in private sector bonds/securities which have an investment grade rating from at least two credit rating agencies.

2. Any money received on the maturity of earlier investments reduced by obligatory outgoing shall be invested in accordance with the investment pattern prescribed in this Notification. 3. In case of any instruments mentioned above being rated and their rating falling below the investment grade and the same rating has been confirmed by two credit rating agencies then the option of exist can be exercised. 4. The Investment pattern as envisaged in the above paragraphs may be achieved by the end of a financial year and shall come into force with immediate effect. Item (iv) of the pattern provides investment of 20% of the investible funds in any of the three categories, viz., Central Government securities, State Government Securities and Public Financial Institution/Public Sector Companies/IDFC/Public Sector Banks/IDFC/Certificate of Deposits issued by the Public Sector Banks. The option for investment of 20% in any of the said categories is left to the concerned Board of Trustees. With effect from 1.4.1998, the Board of Trustees may invest the extent of ten per cent out of the amount allocated for item (iv) (which is to be invested at the discretion of the Board of Trustees in any three categories specified above) in private sector bonds/securities which have an investment

108 grade rating from at least two credit rating agencies. While doing so, the Board of Trustees should assess the risk-return prospective of the bonds/securities of the private sector companies. The bonds/securities issued by the private sector companies should be examined after assessing their risk return prospects(Default risk) with reference to their investment grade rating, as under : Assessment of risk-return prospects Credit rating refers to the rating (or assessment and gradation) of creditorship securities or debt instruments, particularly with regard to the probability of timely discharge of payment of interest and repayment of principal obligations. Credit rating are usually expressed in alphabetical or alphanumeric symbols enabling the investor to choose between debt instruments on the basis of their underlying credit quality. For example, standard and poor, corporate and municipal debt rating definitions are as follows: High Investment Grades Investment Grades Speculative Grades : "AAA" (Triple A) "AA" (Double A) : "A" "BBB" (Triple B) : "BB" (Double B) "CCC"(Triple C) "CC" (Double C) : "D"

Default Grade

The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Credit rating aims toI. II. III. IV. provide superior information to the investors at a low cost; provide a sound basis for proper risk-return structure ; subject borrowers to a healthy discipline ; and assist in the framing of public policy guidelines on institutional investment. Thus, the credit rating financial services represent an exercise in faith building for the development of a healthy financial system.

109

32
WITHDRAWAL AND SALE OF SECURITIES
Govt. & Govt. Guaranteed NSC
Non Govt. / Guaranteed Securities (FDR)

Purchase Price (EO)

Appreciated Value

Purchase Price only with Central Government Approval. POTD SB-3/10-b SDS SBI & Bank (Nationalised) To SBI, Bombay

GP Note

Stock Certificate

NC-34/32

R P F C (RO/SRO) SBI, MUMBAI Securities Dept. MDS to CPFC EPF Credit Acceptance intimation to R.O Final acceptance of PA statement & Cr. to L.C

110

ACCEPTANCE OF PA STATEMENT TRANSFER OF PAST ACCUMULATIONS On Application of EPF Scheme

On Coverage under Section 1(3) a,b & 1(4)

On Cancellation of Exemptionn under Section.17(5)

PA Statement (within 25 days) (para.28)

Liquid Cash in Bank

Securities as per pattern

Deposits, Securities not as per pattern

Due date within 10 days From date of Coverage Memo/Cancellation Order

Due Date with 30 days

Penal Damages on belated transfer

No PD but to ensure prompt transfer to avoid loss of interest on interest

= Matured securities not to be accepted. = To be watched by Regional Office, Monthly Return to CPFC

111

33
HOLDING OF SECURITIES IN DEMAT FORM
OPENING OF DE-MAT ACCOUNT BY EXEMPTED PF TRUSTS. De-mat Dematerialisation is a process by which the investors gets physical certificate converted into electronic balance maintained in his account with the depository participant. Depository is an Organisation where securities are held in electronic form through the medium depository participants. DP(Depository participants) is a representative of the depository in the system maintained clients securities accounts. Advantages of De-mat. 1. No requirement of filling up the transfer deed and lodging for transfer. 2. Immediate transfer on registration of securities as against 3-4 months. 3. Shorter settlement cycle ensure prompt liquidity (transaction plus 5 days). 4. Eliminates bad deliveries. 5. Eliminates cost of wastage of time. 6. Reduction in brokerage. 7. Special concession on stamp duty. 8. Minimum handling of paper. 9. Avoiding cost of courier. 10. Avoidance loss in transaction/mutilation resulting in expenditure. 11. Receives interest direct to depository account as direct credit. 12. Avoid loss towards interest on interest. 13. Safety in holding. 14. Depository is like a bank. 15. Depository can legally transfer ownership to an institution account. 16. DP will intimate the status of holdings. 17. One can dematerialized debt instructions, mutual fund units, Government securities in his De-mat account. It can be held in a single De-mat account. 18. DP(Depository participant) will assist for selling dematerialized securities and also purchase dematerialized securities. Transactions in Government Securities: The Reserve Bank of India has advised that RBI regulated entities will have to hold and deal in debt instructions in the De-mat form. As a result, in due course, entities like PF holding securities in the physical form may be faced with problem of liquidity on account of counter parties un willing to transact in the physical mode. The Reserve Bank of India, therefore, suggested to issue suitable instructions to PF trusts exempted under EPF & MP Act, 1952 to start the process of dematerializing the existing holding in their own interest.

112 To mitigate the difficulties in making the investments in physical form of securities as pointed out by Reserve Bank of India, Board of Trustees of establishments exempt under relevant provisions of EPF & MP Act, 1952 be allowed to keep the securities in DEMAT accounts with Scheduled Bank under the credit control of the Reserve Bank of India. Further it may be noted that RBI does not control all the brokers/private firms who are entitled to operate as depository participants of NSDL/CSDL. NSDL and CSDL do not open the DEMAT accounts directly, rather they operate through depository participants such as Scheduled Commercial Banks, private companies and brokers. For safe custody of funds exempted provident fund trusts should not be allowed to open DEMAT accounts with brokers/other private fund trusts should not be allowed to open DEMAT accounts with brokers/other private companies acting as depository participants. Accordingly such exempted trusts may open DEMAT account only with Scheduled Commercial Bank. To encourage securities in DEMAT form, now Reserve Bank of India has stopped to issue Government Stock certificates in physical form. The State Bank of India, the portfolio manager for the EPFO has also desired that whenever securities are to be transferred either to exempted trust or EPFO requisition to transfer securities in DEMAT form should be forwarded alongwith particulars of CSGL account and all scheduled bank with whom CSGL account has been opened. Consequent to cancellation of exemption, particulars of CSGL Account and of scheduled bank wherein the Employees Provident Fund Organisation has opened CSGL account would be furnished alongwith the cancellation order itself. Henceforth, the securities are to be transferred only in Demat form to the CSGL Account of the Employees Provident Fund Organisation. While transferring the securities the details in respect of securities transferred, date of transfer, date up to which interests have been credited to the Trust Accounts and next due date of interest on securities so transferred, may be intimated to the respective Regional Provident Fund Commissioner immediately. It is therefore reiterated that the securities held by exempted Provident Fund Trust are to be immediately converted to Demat form. Wherever necessary, CSGL accounts for the purpose may be opened with scheduled banks under the control of Reserve Bank of India. DEMATERIALIZED MODE: The Reserve Bank of India has started encouraging holding of Government Securities in the dematerialized mode in the following ways: All entities having a Subsidiary General Ledger (SGL) account with RBI are allowed to open Constituent Subsidiary General Ledger (CSGL) accounts on behalf of their clients. Although being non-banks, depositories (NSDL/CDSL) and organizations such as SHCIL have been provided an additional SGL account to open CSGL accounts on behalf of their clients. The cost of postage incurred by the depositories on remitting interest and redemption proceeds is being reimbursed by RBI so as to encourage dematerialized holding and retail participation in Gilts. Guidelines have been issued to the banks prescribing the safeguards to be adopted for maintenance of CSGL accounts.

113 To import transparency in Government Securities traded by clients (though CSGL accounts), a special feature has been incorporated in the Negotiated Dealing System (NDS) for reporting and settlement of such trades. Provisions has also been made in the NDS for giving quotes on behalf of clients i.e CSGL account holder. In the light of some fraudulent transactions, in the guise of Government Securities transactions in physical format by a few co-operative banks with the help of some broker entities, the Reserve Bank of has now proposed the following measures to accelerate the trading in dematerialized form:

All entities regulated by RBI (including financial institutions (FIs), primary dealers (PBs), cooperative banks, RRBs, local area banks (LABs), non banking financial companies (NBFCs) should necessarily hold their investments in Government securities portfolio in either SGL (with RBI) or CSGL (with a schedule commercial bank/ State Cooperative Bank/PD/FI/sponsor bank (in case of RRBs) and SHCIL or in a dematerialized account with depositories (NSDL/CDSL). Only one CSGL or dematerialized account can be opened by any such entity. In case the CSGL accounts are opened with a scheduled commercial bank or state cooperative bank, the account holder has to open a designated funds account (for all CSGL related transaction) with the bank. In case a CSGL account is opened with any of the non-banking institutions indicated above, the particulars of the designated funds account (with a bank) should be intimated to that institution. The entities maintaining the CSGL / designated funds accounts will be required to ensure availability to clear funds in the designated funds accounts for purchases and of sufficient securities in the CSGL account for sales before putting through the transactions. No further transactions by a regulated entity should be undertaken in physical form with any broker with immediate effect.

SUBSIDIARY GENERAL LEDGER (SGL) ACCOUNT: The Reserve Bank of India has extended the facility of holding Government securities in Subsidiary Ledger Form to all exempted Provident Funds. The Public Debt Offices of Reserve Bank of India has permitted the exempted trust to hold a minimum balance of Rs.10,000/- to open an SGL Account. This facility was allowed in the year 1987. 2. In order to ensure efficient payment and settlement system in respect of transactions in Government Securities, Reserve Bank of India, in consultation with Government of India has introduced the Delivery Versus Payment (DVP) System with effect from 17th July 1995. Under this system, it is obligatory for the SGL Account holders to effect simultaneous fund transfer through their current account with Reserve Bank of India along with the transfer of securities held in the SGL accounts. As such those SGL account holders not having current account with the Reserve Bank of India are not eligible to maintain their SGL accounts with the Reserve Bank of India. Provident Fund Trusts and approved brokers, etc., are not eligible to open current account with the Reserve Bank of India. Accordingly

114 Provident Fund Trusts, etc. have been advised to transfer their existing SGL holdings to SGL Account No.II of a Commercial Bank of their choice or convert their holdings into stock certificates. Commercial Banks have allowed to open additional SGL Account with Reserve Bank of India for transaction in Government Securities on behalf of their clients. Stock Certificates are transferable by just completing the transfer deed and by tendering the same at the Public Debt Office of the Reserve Bank of India for registration. In other words, the holdings in the form of stock certificate do no inhibit the holders from selling, transferring or gifting the same to others. The Stock Certificate holders also enjoy the benefit of receiving half-yearly interest warrants in respect of their holdings to their respective registered addresses without lodging of the original securities with Reserve Bank of India for claiming interest. The level of service available in respect of stock certificates will be the same as in the case of holdings in SGL Account. 3. The exempted establishments may maintain an SGL Account with a Commercial bank and obtain periodical certificate of holding with shall be verified by the Assistant Provident Fund Commissioner / Enforcement Officer. Alternatively, the securities may be kept in the form of Stock Certificates. CONSTITUENT SGL ACCOUNT: Subsidiary General Ledger (SGL) account is an account maintained by banks and other select financial institutions with the Reserve Bank of India (RBI). The Public Debt Office (PDO) maintains SGL Accounts of banks, which have a record of their holds of Government of India and State Government Securities. The Public Accounts Department (PAD) of the RBI maintains SGL accounts of banks, which have a record of their holdings of Treasury Bills. 2. Banks are allowed to maintain two SGL accounts from Government Securities (G-Secs) with PDO and two accounts for Treasury Bills (T-Bills) with the PAD. The first account in each case is for the banks holdings of G-Secs and T-Bills on its own account. The second account in each case is for GSecs and T-Bills, which the bank holds on behalf of its constituents and is termed the Constituent SGL account. The bank in turn maintains sub-accounts, which have a record of the holdings of G-Secs and TBills by each of its constituents. TRANSFER OF SECURITIES BETWEEN CONSTITUENT ACCOUNTS: The transfer of securities through the SGL accounts is done by means of a SGL Transfer Form. The seller of a security instruct this bank to execute a SGL Transfer Form in favour of the buyer of the securitys bank, which gives details of the transactions. This SGL Transfer Form is lodged by the buyers bank with the RBI. On receipt of the SGL Transfer Form the RBI debit the sellers banks SGL account and credits the buyers banks SGL account with the face value of the security transacted. Simultaneously the RBI debits the buyers banks current account and credits the sellers banks account with the proceeds of the transaction. This settlement system is known as Delivery-versus-Payment (DVP) and it eliminates settlement risk. 2. All transactions will be carried on receipt of the client instructions. The Settlement paper work, and RBI liaison is done by the concerned banks.

115 3.

The settlement will not take place in the SGL Transfer Form improperly executed.

following cases:

Seller has insufficient balance in SGL Account Buyer has insufficient balance in Current Account. Since the banks current account with the RBI gets debited in case of purchase by the bank or by the banks constituent, the constituent must have clear funds in its Current / Savings account with the bank to enable the transaction to be put though.

4. The constituent will receive a Debit / Credit advice for both the SGL as well as the Current / Savings account if a transaction is put through on its behalf.

COUPON / REDEMPTION PROCEEDS: The RBI credits the Coupon and Redemption proceeds for G-Sec/T-Bill to the banks Current Account with the RBI. The constituent will receive a credit advice for the amount credited to its Current / Savings account immediately on receipt of the funds from RBI. 2. The present long prevalent scrip-based system has traditionally involved paper work involving stock certificates in paper form and transfer deeds. The process beginning from purchase of securities, getting the securities duly endorsed in the buyers name and depositing in safe custody is complex and time consuming. 3. RBIs Subsidiary General Ledger (SGL) account system essentially aims at eliminating the cumbersome paper work involved in the scrip-based system and also assures risk-free and paperless trading. 4. Advantages of holding securities in a Constituent SGL account rather than as Physical stock certificates:

When any trust buys securities via the constituent SGL account, the Securities are transferred to the name of the trust immediately on confirmation of a valid delivery-versus-payment transaction. If scripts are purchased in physical form the trust will have to wait for over one month for scripts to be transferred in their name, while the trust has already paid the seller the full consideration. Thus the trust will have to take settlement risk on the seller of the security, who may be a broker or NBFC . The SGL account system has been designed by RBI to eliminate risk of default, which the investor may face while transacting in government securities. When the trusts bid is successful at a RBI auction, RBI may directly credit the securities allotted into the SGL account. Any refund amount will be directly be credited into the trusts bank account. Thus the trust will be spared the bother of collecting refund and securities from the Reserve Bank.

116

There is no requirement of filling transfer deeds and lodging the transfer documents with the RBI, thus saving paper work and time for the trust. To operate an SGL account the trust would have to instruct the bank regarding the execution of a transaction. All the settlement paper work is done between the concerned banks. The client will receive a memo after every transaction. The bank also allows non-Mumbai trusts to maintain their bank accounts in their city but purchase securities in Mumbai. This enable a non-Mumbai trust to take advantage of the deeper security market in Mumbai. Additionally, as Treasury bills are only transacted in Mumbai the non-Mumbai trust will also be able to invest in the same. Since all transactions are by book entry, consolidation, transfer or splitting of a security between various trusts can be effected easily and quickly. There is no scope of any risk of loss, theft or fraud with regard to stock certificate. If securities are maintained in a Constituent SGL account it is not necessary to have a safe custody account for Government Securities and Treasury Bills, thereby saving the safe custody charges. The Bank provides the statement of holdings on a monthly basis. This will aid in audit and valuation of the trusts holding. The bank will collect interest on SGL holdings on behalf of the constituent and will credit the constituents bank account at no extra cost. As the recent budget has removed tax reduction at source on government securities, the full amount of interest as paid by RBI will be credited to the clients account. As per the investment guidelines, any interest earned has to be reinvested in similar category of securities. The Bank can also offer quotes for sale of securities to its client for their investments.

NATIONAL SECURITIES DEPOSITORY LTD The NSDL (National Securities Depository Ltd) provides opening of Demat Account in NSDL system. The Employees Provident Fund Organisation has also opened demat account in the NSDL system and has dematerialized and significant part of its non-SLR holdings. All the PF Trusts should be advised to hold their Securities in demat form. For more details on DP and Demat, Please consult the Website

http:// www.nsdl.co.in

34

117 TRANFER OF PROVIDENT FUND ACCUMULATIONS TO EXEMPTED ESTABLISHMENTS CONSEQUENT UPON GRANT OF EXEMPTION Hitherto, on grant of exemption under Section 17 of the Act, or Para 27/27A of the Employees Provident Funds Scheme 1952, the past accumulations have been transferred partly in cash and partly in securities. 2. The Central Board of Trustees at its 163rd meeting held on 19.08.2003 has decided that consequent to grant of exemption or in any other eventually necessitating transfer of past accumulations to an establishment or trust, 100% of past accumulations be transferred in cash in all cases. All pending cases are also required to be regulated accordingly, However, where the requisition for transfers are pending in Headquarters Office, the decision to transfer 100% past accumulations in cash may be made after getting specific instructions from Headquarters Office in each individual case. 3. The amount transferred in cash should be invested as per the prescribed pattern of investment immediately and submit the proof thereof to the Regional Provident Fund Commissioner. (Authority : Headquarters Office Lr.No.Invest.I/1(10)2000/42517, dated 4.9.2003) The aforesaid circular is applicable in case of transfer of past accumulations to excluded establishments also. Securities will not be transferred by Head Office in exclusion cases too. (Authority: Headquarters Office Lr.No.Invest.I/1(10)2000/24131, dated 26.07.2004) DISCONTINUATION OF SPECIMEN SIGNATURE FOR TRANSFER OF SECURITIES In continuation of the Head Office letter No.Invst.I/6(4)96/Authorisation dated 23.9.2002 on forwarding of specimen signatures of all the Regional PF Commissioners, who authorise the requisition for transfer of past accumulations by way of securities to establishments exempted from the purview of Employees PF Act, 1952 and Schemes framed there under for verification by Central Office before the State Bank of India and regarding transfer of provident fund accumulations in shape of cash/securities to exempted establishment 100% in cash vide Head Office letter No.Invst.I/1(10)2000 dated 4.9.2003, specimen signature for transfer of securities are not required and the same is discontinued. [H.O.Letter No.Invst.II/6/MR/RO/98/03/MH/77945 dated 12.01.2004] PROCEDURE FOR TRANSFER OF PREVIOUS ACCUMULATIONS A. 1. Procedure for transfer of Special Deposit Account on cancellation of exemption or on coverage of the establishment. The deposit Bank which holds the Special Deposit Accounts, should be approached by preferring an application for transfer of Special Deposit Account in favour of Central Board of Trustees, Employees Provident Funds and also to transfer the balance to the State Bank of India, Securities Services Branch, Mumbai Main Branch, Mumbai, where the Special Deposit Account of Central Board of Trustees is being maintained. Memorandum in Form Annexure VIII addressed to the State Bank of India, Securities Services Branch, Mumbai.(This form is available with Bankers).

2.

3. 4.

A copy of the Regional Provident the establishment to transfer the funds.

118 Fund Commissioners order/coverage Notice instructing

Statement showing the details of deposits made, interest due, collected, etc., as on the date of coverage(Applicability of the Act to the establishment or as on the date of cancellation of exemption as the case may be) should be submitted in quardruplicate together with the SDS Pass Book with upto date entries. The interest upto 31st December of the previous year should have been realized and credited to the account. Copy of the resolution passed by the Trustees for transfer of Special Deposit Account. Acceptance of Special Deposit Account towards previous accumulation dues should be only through transfer of balances from the books of deposit bank to the State Bank of India, Securities Services Branch, Mumbai and not by closure of the account and remitting the proceeds in cash or by cheque, etc, to the Account of Central Board of Trustees,. Employees Provident Funds. After the transfer is effected, SDS Pass Book with due endorsement thereon should be collected from the transferor branch of the Bank and submitted to the Regional Provident Fund Commissioner along with photocopy of the Pass Book. Procedure for Transfer of other Securities (Paragraph 28 of Employees Provident Fund Scheme, 1952). Previous accumulation dues should be transferred only in cash. Wherever the instruments are kept in Government/Guaranteed securities, Post office Term Deposit, Special Deposit Account, Certificates, etc., they may be accepted only if the instrument is transferable to the Central Board of Trustees, Employees Provident Funds, otherwise cash should be paid. The securities should be endorsed/transferred through transfer deed in favour of Central Board of Trustees, Employees Provident Funds irrespective of the fact, whether they are Stock Certificate, Government Promissory Notes, etc. The endorsement should be made only by the authorised Trustees of the Fund. Endorsement should be certified by the public Debt Office of Reserve Bank of India/authority issued the securities, by affixing the seal on the instrument itself. Endorsed securities should be forwarded to the Regional Provident Fund Commissioner for onward transmission to the State Bank of India, Securities Services Branch, Mumbai. Actual purchase price of the securities should be intimated to this office duly certified by the area Enforcement Officer of the Employees Provident Fund Organisation. Original or authenticated copy of the memorandum and articles of association, copy of Certificate of Incorporation and the appointment and the authority in favour of the authorised Trustees of the Fund to deal with securities should be forwarded.

5. 6. 7.

8.

B. (1)

(2)

(3) (4) (5) (6) (7)

(8)

119 Securities which have already been notified for repayment and securities which are in the short period i.e. which are due for repayment within a period of one month cannot be accepted on account of the past accumulations. A certificate from the Income-Tax Commissioner approving the transfer of the accumulated assets of the Old Private Provident Fund to the new one, i.e. Employees Provident Funds, should be obtained and forwarded as and when received. The transfer need not be delayed only on account of this.

(9)

(10) Securities purchased after the date of application of the Act should not be transferred, i.e all accumulation after the date of application of the Act should be transferred only in cash, by deposit in EPF Account No.1 in State Bank of India. (11) The details of interest due on securities but not collected beyond the notified period should be furnished. (12) Income Tax deduction certificate, if any, should be surrendered. (13) Wherever any security is not transferable by endorsement in favour of Central Board of Trustees, Employees Provident Funds such securities should not be forwarded. In lieu of this, the transfer should be made in cash only. (14) Wherein a previous accumulation bearing no guarantee as regards principal and interest, it can be transferred only if the deposit account is transferable in the name of Central Board of Trustees, Employees Provident Funds, by the bank on the instrument as well as in the books of the bank, subject to acceptance of Central Govt., failing which the amount kept in such deposits should be transferred in cash. (15) In the case of NSC and NPSC, appreciated value will be taken into account in determining the amount for transfer, in case the difference between face value and appreciated value has been credited to the members. (16) Securities etc., to be transferred within thirty days and cash in hand/Savings Bank Account of the Trust should be transferred within ten days.

35
RETURNS DUE FROM EXEMPTED AND UNEXEMPTED ESTABLISHMENTS UNDER EDLI SCHEME The duties of the employer of an establishment exempted are--l. To comply with all the conditions governing grant of exemption. m. To deposit the contributions on Provident Fund/Pension/Insurance Fund (premium on LIC Policy) to the respective Board of Trustees on or before the due date stipulated. n. To remit the Inspection charges on due dates to the Regional Provident Fund Commissioner concerned. o. To remit penal damages under Section 14B and interest under Section 7Q of the Act promptly, wherever due. p. To comply with the provisions of other Scheme/s for which exemption not obtained and in particular to ensure furnishing of Nomination and Family particulars of all members under Employees Pension Scheme, 1995 to Regional Provident Fund Commissioner concerned. q. To constitute Board of Trustees complying with the provisions of paragraph 79C of Employees Provident Fund Scheme, 1995 and conduct elections as per the guidelines issued. r. To submit monthly and annual returns on due dates.

120 s. To ensure that the Board of Trustees maintains individual accounts of employees, benefits are extended promptly, Rules of Private Provident Fund is updated on par with the statutory Scheme to transfer the account of employee within three months, to invest the monies as per the pattern, to supply Pass Book/Annual Statement of Accounts to the members, etc., and the total quantum of benefits of employees towards Provident Fund or gratuity and pension is not reduced after the grant of exemption. Note:- The reasons for shortfall of Employer share of contribution to the extent of 8.33% and payable towards Pension contribution to the R.P.F.C. should be mentioned in the Annual Statement of Accounts issued to the members. t. To make good the loss sustained by the Board of Trustees in sale/purchase of securities and the resultant shortfall in declaring the rate of interest on par with statutory fund. (It is not necessary for the employer to make good the loss as and when sale/purchase of securities is made and if such loss should be borne by the interest account of the fund.) u.To assist and enable the Enforcement Officer to conduct the inspection of records of Board of Trustees and the establishment. v.The transfer the past accumulation dues of members before the due date, on cancellation/surrender of exemption. While doing so, the amount forfeited from the employees account, if any, amount lying in interest account, unclaimed account should also be transferred. Returns to be submitted by the Employers on EPF side e. Monthly return in The Schedule (Annexure A) f. Triplicate copy of challan for deposit of Inspection charges in Account No:2 g. Annual Return in Form-B h. Audited Balance Sheet of the Provident Fund Trust together with the audit report. Returns to be submitted by the Employers on EPS side e. Basic return in Form-3 (EPS) f. Monthly return in Form-4,5 & 6 (EPS) g. Annual return in Form-7 & 8 (EPS) h. Particulars concerning the member and his/her nominee(s) in Form-2 Returns to be submitted by the Employer on EDLI side (if exempted from the provisions of EDLI scheme, 1976) c. Monthly return in Form 7 (IF) together with triplicate copy of challan for deposit of Inspection Charges in Account No:22 d. Renewal application and LIC certificate in Form-3 wherever necessary ( on expiry of valid period of exemption). (For Establishment exempted Provident Fund but not under EDLIS 1976 ) c. Basic return in Form-1 (IF) d. Monthly returns in Form-2 ,3 , 4(IF) alongwith triplicate copy of challan for remittance of EDLI contributions and Administrative charges in Account No:21 and 22 respectively. ALL MONTHLY RETURNS SHOULD BE SUBMITTED BEFORE 25TH OF THE FOLLOWING MONTH AND REMITTANCES BEFORE 15TH OF THE FOLLOWING MONTH

INSPECTION CHARGES Section 17(3) (A) and Section 27(3A)(a) provides for payment of inspection charges by the employers of exempted establishment to the respective Regional Provident Fund Commissioners on or before 15th of each month. However, five days grace period is allowed.

121 The inspection charges should be calculated on the actual wages on which PF/EDLI contributions are payable. The inspection charges is also payable in respect of member who is transferred from exempted fund as a members of the Provident Fund exclusively maintained by the employer for the executives of the establishment, if any. The total inspection charges due in a month should be rounded to the nearest five paise. The rate of inspection charges prescribed from time to time, by the Central Government, is given in Table below. The inspection charges should be remitted into any branch of State Bank of India to the credit of EPF Account No.2 or EDLI Account No.22, as the case may be. Separate Challans to be used for depositing the inspection charges in Account No.2 and 22. Belated deposit will attract interest under Section 7Q as well as penal damages under Section 14B read with the provisions of the Scheme/s. With effect from 31.10.1953, inspection charges are leviable in respect of exemption granted under paragraph 27. With effect from 10.8.1956 the establishments enjoying the exemption under paragraph 27A shall pay inspection charges at prescribed rates. S.No. Period Rate Authority 0.75% of the total Ministry of Labour Circular No.PFUpto 1. employers & employees 533(1) dated 6.3.1953 & Notification 31.12.1962. P.F.Contribution No.S.O.1460 dated 16.6.1961. 0.6% of above in respect of 1.1.1963 4 industries in which rate of S.O.No.3793 Gazette of India dated 2. to 30.9.1964 contribution is raised from 13.12.1962. 6 % to 8%. 1.10.1964 0.09% of the pay(Basic to wages + DA + retaining 3. S.O.No.3450 dated 18.9.1964. 31.7.1998 allowance & cash value of food concession) S.O.No.1436 dated 18.7.1998 (Ministry 1.8.1998 4. 0.18% of the pay of Labour Notification onwards No.G.20017/1/98 /SS.II dated 9.7.1998.

36
LEGAL CELL
FUNCTIONS OF LEGAL SECTION WRIT PETITIONS PROCEDURE FOR DISPOSAL

122 Set up of Legal Cell

The Legal Wing of the Organisation is headed by the Law Officer in Central Office. He is assisted by an Regional Provident Fund Commissioner in Head Quarters and in the Regions, through the Regional Provident Fund Commissioner in-charge of Regional/Sub-Regional Offices. In the regions having 7,500 establishments or more, Assistant Provident Fund Commissioner (Law) is posted. The Legal Cell is formed in all the Regional Offices with One Enforcement Officer, Two Legal Assistants, Two Clerks (UDC/LDC).

Functions of Legal Cell in the Regional Offices

1) The Legal Assistant will ensure whether the complaint to be filed is as per the requirement of law and is accompanied by the sanction of the competent authority. 2) Monitoring of prosecution cases 3) Preparation of parawise comments in Writ Petitions and Special Leave Petitions. 4) Preparation of draft counter affidavit or written statement and vetting the draft received from the Government advocates before they are filed. 5) Forwarding the proposal to Central Office for empanelling the advocates as per the guidelines prescribed as Annexure VII. Enforcement Officer (Legal) will coordinate with the panel of advocates which inter alia will include appointment, engagement, briefing, etc. 6) Processing bills received from the advocates and certifying them whether they are in order or not. 7) To analyse proposals for filing appeal/SLPs. 8) Legal cases relating to Section 7A and 14B of the Act. 9) Cases filed before EPF Appellate Tribunal - watching of progress for follow up action. 10) Matters arising out of administration of the Act and the Schemes framed thereunder, such as (a) Computation of employment strength; (b) Infancy protection (till September 1997); (c) Clubbing of establishments; (d) Applicability of the Act to individual cases; (e) providing clarifications/advice on references received from different sections of the Office; maintenance of judgements of Courts on EPF matters (including other judgements having a bearing on Employees Provident Fund Organisation); and (f) furnishing of statistical data on the number of cases filed and disposed by the and Supreme Court. Tribunal, High Courts

The Legal Assistants will assist the Enforcement Officer / Assistant Provident Fund Commissioner (Legal) in dealing with the Legal work in the Legal Cell of the Regional Offices. The cases that are listed for hearing with date of hearing, etc., should be obtained well in advance and on the day of hearing he should be present to assist the Advocate in defending the case. The judgement delivered should be brought to the notice of Assistant Provident Fund Commissioner (Legal), on the same day, for follow

123
up action. Enforcement Officer (Legal) will obtain a Commissioner. certified copy and submit to Regional Provident Fund

The performances and position on various legal cases will be reviewed by the Regional Provident Fund Commissioner-I of the Region, during the monthly review meeting.

Writ Petitions
The Employees Provident Funds and Miscellaneous Provisions Act, 1952 is a public law and the authorities constituted under the said Act are public officials. They are persons or a body or Tribunal having legal authority, conferred under the said Act, to determine questions affecting the right of citizens in respect of the liability under the Act and having the duty to act judicially. While so exercising these powers, if they exceed their jurisdiction or refused to exercise their powers where they are required to do so or wrongly decide a jurisdictional fact, the party, aggrieved has his extraordinary remedy to seek writ of Mandamus, Writ of Certiorari and Writ of Prohibition, if no other alternative remedy is available or provided for in the Act. In order that an action for the above lapses should lie against the Tribunal or the public body, that public bodies, etc., should be a State within the meaning of the Article 12 of the Constitution of India. The Employees Provident Fund Organisation is a State within the meaning of the said Article in view of the successive rulings of the Honble Supreme Court of India in the cases of Safdurjang Hospital, Bangalore Sewage Board, Airports Authority of India, etc. As such, writ can lie against the department and its officials for violation of any of the fundamental rights of a party whose establishment has been covered under the provisions of the Act.

Writ of Mandamus
The Writ of Mandamus is a high prerogative writ of a most extensive remedial nature and is a command issuing from the High Court directed against authorities to do certain particular thing specified therein which is in the nature of a public duty. It is discretionary and not of right. It can be refused if there is an adequate alternative remedy. Mandamus is not available to restrain the violation of fundamental rights unless the respondent is a State within the meaning of the Article 12.

Writ of Certiorari
Where the authorities under the Act acts without jurisdiction or refuses to exercise jurisdiction or exercises jurisdiction by erroneously deciding facts necessary to found jurisdiction or exercises jurisdiction by taking into account irrelevant or extraneous consideration, the High Court can step in, and quash such orders by certiorari and direction will be issued for such authorities to hear and determine the matter afresh according to law. Grant of Certiorari is discretionary in the hands of the court. Nevertheless it is granted there is alternative remedy available to the party. even where

Writ of Prohibition
Writ of Prohibition lies only in respect of a judicial or quasi-judicial body which has legal authority to determine questions affecting the rights of persons and having the duty to act judicially. It may be seen that there is not much difference between the Writs of Certiorari and Prohibition. The only difference is that they are issued at different stages of the proceeding before the Tribunal.

Check points
The following check points should always be observed while scrutiny of petitions directed against an order passed by the authorities. 1. Whether the petition is premature. If the party approaches the High Court for a writ, which without exhausting the remedy available in the Act, the writ petition filed by the party can successfully be opposed and the High Court is likely to dismiss such premature petitions.

124
2. Whether the proper parties are cited as respondents in the petition. Where the challenge is made on the Constitutionality of any of the sections of the Act or a paragraphs of the Schemes, unless the Union Government is cited as Respondent No.1, in the petition, the writ becomes defective and liable to be dismissed by the Court. 3. A writ petition, filed after an inordinately long time, after the liability accrues, is bound to be dismissed, as being badly delayed. No doubt, the law of limitation does not provide for any period of limitation for filing writ petitions under Articles 32 and 226 of the Constitution. Yet, the Supreme Court has held that a Court cannot lay down a period of limitation, because this is a legislative and not a judicial function. Each case must be decided on its own facts, subject to the overriding qualifications that a party seeking the extra-ordinary remedy must come to the Court within a reasonable period of time. 4. Grounds not urged before the authorities during the hearing cannot be taken up for the first time in a writ petition, as a High Court, in its supervisory jurisdiction does not sit in judgement over questions of facts. The Court in its supervisory jurisdiction will only go into the questions whether there was proper application of law and the findings recorded on question of fact are based on evidence. 5. The conduct of the petitioner may at times, disentitle him for relief, for example, if the party does not disclose certain material facts relevant to the question in the petition but are available with the respondents and produced before the court the court will disentitle him from relief solely on his behaviour. 6. In case where constitutional validity of any of the sections in the Act is challenged in the petition such petitions cannot be entertained before the High Court in terms of Article 226A of the Constitution and should on the other hand be filed before the Supreme Court. 7. Where granting relief would be futile, petitions praying for such relief need not be admitted by the Court and, where admitted, may be opposed strongly as, when the Act is amended by the legislature in the meantime during the pendency of the petition which denies grant of relief or takes away the ground for relief on that ground. 8. Where a writ sought for by a party is admitted by the High Court and an interim stay has been granted, a prayer must be made before the High Court, when the case comes for confirmation of the stay for an order for depositing 75% of the assessed dues or furnishing bank guarantee by the petitioner to an amount equivalent to the amount, which is the subject matter of the petition.

Guidelines for filing appeals

The desirability or otherwise of filing appeals in the High Court/Supreme Court against the adverse judgements of the High Courts/Lower Courts/EPF Appellate Tribunal shall be considered in time and appeals should be filed in the court in time. The failure to file appeals against adverse judgements within the limitation period will obviously be detrimental to the interest of the organisation as a whole. With a view to ensuring the timely filing of appeals in the High Court/Supreme Court, the following procedure should be observed scrupulously. 1. As soon as any judgement is pronounced by any court/Tribunal affecting the interest of the organisation, the contents of the judgement should be examined and legal opinion obtained as to the filing of appeal. 2. Once it is decided to file appeal the Standing Counsel shall be addressed with the following documents: a. b. lower Court; c. d. e. f. the judgement/order in original. the legal opinion of the Advocate who conducted the case before the The copy of the complaint/petition filed before the lower Court A copy of the counter, if any, filed before the lower Court. Copies of documents which were produced before the lower Court Brief statement of facts.

125
g. may also be indicated. If there is any delay in filing the appeal the reasons for the same

In case the appeal is to be filed before Supreme Court the above referred documents may be forwarded to the Central Office. 3. In all the communications to Central Office, the previous file number/reference number, wherever available, should be quoted without fail. 4. After filing of appeals in the appropriate court, these appeals should be pursued systematically and the developments of the case should be intimated from time to time duly quoting the Central Office file number, if any. 5. On the date of judgement, arrangement should be made to obtain the certified copies of the judgements. 6. In cases where the appeals do not succeed it should be examined by obtaining the legal opinion of the counsel, whether they are fit cases for filing appeals/special leave petitions in the Supreme Court. 7. The date within which the appeal is to be filed in the Supreme Court should be clearly indicated for avoiding any delay on the part of the Central Office. 8. On receipt of complete details from the Regional Provident Fund Commissioner, the Central office will examine the feasibility of filing appeals or otherwise and advise the concerned Regional Provident Fund Commissioner suitably. 9. If for any reason, the delay in obtaining the certified copies of the judgements is obvious, the available details along with the opinion on the filing of appeals should be furnished immediately to the Central Office so as to prepare a prima facie case for special leave petition in the Supreme Court. Simultaneously, action to obtain and forward the certified copies of the judgements should be expedited. Similarly, in the cases of appeals filed by the establishments in the Supreme Court, the following procedure should be adopted. 1. On receipt of the notice and copy of the affidavit from the Registrar of the Supreme Court, the same in original should be forwarded to the Central Office, immediately. 2. The parawise comments on the affidavit alongwith relevant documents should also be furnished in duplicate expeditiously so as to prepare the Counter affidavit by the Government Advocate in the Supreme Court. 3. At the time of preparing the papers for filing appeals or counter in the Supreme Court, it should be ensured that they are duly typed or cyclostyled in double line space on one side of the sheet only keeping wide margin on the left side. 4. A Register of Writ Petitions showing the Writs filed by the Organisation and against the Organisation should be kept by the Legal Section in Central Office and Regional Office . 5. The position in respect of cases pending before the respective High Court, Central Administrative Tribunal and Employees Provident Fund Appellate Tribunal may be compiled at the end of each month and sent in the first week positively. The list of the title of cases and date from which pending should also be forwarded along with the compilation statement.

37

126

EPS-1995 BENEFITS DOS & DONTS IN PROCESSING THE CLAIMS SCRUTINY OF FORM 10C AND 10D
DETAILS OF BENEFITS TO MEMBERS OF EMPLOYEES PENSION SCHEME 1995 & THEIR FAMILY MEMBERS Pension is defined as the Pension payable under the Employees Pension Scheme, 1995 and include the Family Pension admissible and payable under the ceased Employees Family Pension Scheme, 1971. Pension depends upon 4 factors: 1. Pensionable Salary 2. Age (Date of Birth). 2. Pensionable Service 4. Pension Factor

Pension is classified broadly into 2 categories:a) Pension to the members; b) Pension to the family. TYPES OF BENEFITS:
BENEFITS TO MEMBERS WITHDRAWAL BENEFIT WIDOW PENSION SCHEME CERTIFICATE CHILDREN PENSION PENSION 1.SUPERANNUATION PENSION 2.RETIRMENT PENSION 3.SHORT SERVICE PENSION 4.DISABLED PENSION COMMUTATION OF PENSION OPTION FOR RETURN OF CAPITAL NOMINEE PENSION RETURN OF CAPITAL TO NOMINEE DEPENDENT PARENT PENSION ORPHAN PENSION DISABLED CHILDREN PENSION BENEFITS TO FAMILY MEMBERS

AGE (DATE OF BIRTH) AGE IS AN IMPORTANT FACTOR WHICH PLAYS A VITAL ROLE IN DECIDING THE FOLLOWING

127 1. RETENTION OF MEMBERSHIP. 2. ELIGIBILITY FOR PENSION 3. NATURE OF PENSION 4. THE QUANTUM OF PENSION PAYABLE TO A MEMBER 5. PERIOD OF PAYMENT OF PENSION IN THE CASE OF CHILDREN / ORPHAN. The age should be determined with reference to the date of birth. Wherever the date of birth is not given, it shall be determined in the following manner : 1. where the year of birth is given but no the exact date, 1st July shall be treated as the date of birth. 2. where the year and month are given, the 16th of the month shall be treated as the date of birth; and 3. where only the age is indicated the member shall be assumed to have completed that age on that date of the medical certificate accompanying Form 2, and where no medical certificate is attached to From 2, on the date of filing Form 2. On attaining the age of 58 years the member can normally draw the pension. On attaining the age of 58 years the member is not required to pay the pension contribution. Further the age as on 16.11.1995 is also relevant to determine the monthly members pension, to the members of EFPS, 1971. The completed age of the member alone should be taken into account for all purposes and as such the question of rounding off of age does not arise. A member is entitled to draw reduced pension after attaining the age of 50 years. A member is entitled to disabled pension before attaining the age of 50 years. The payment of pension for past service is determined as on 16.11.1995 and for that purpose the Existing members are divided into three groups. 1. 2. 3. those who have not attained the age of 48 years as on 16.11.1995 those who have attained the age of 48 years but less than 53 years as on 16.11.1995 and those who have attained the age of 53 years or more as on 16.11.1995.

In the case of children, on attaining 18 years of age they become major. Till then, the guardian is to be appointed to receive the benefit. The children are entitled to pension upto the age of 25 years. SALARY The term SALARY means the pay / wages on which contributions is due. Pay for the purpose of contributions means Basic wages dearness allowance, retaining allowance and cash value of food concession, admissible, if any [para 2(xiii)] a). Salary for Calculation of MMP for Past Service: The Salary drawn as on 16.11.1995 or date of exit whichever is earlier was divided into two groups .

128 i). Salary upto Rs.2500/- per month. ii). Salary more than Rs.2500/- per month. b).Salary for Calculation of MMP for Pensionable Service: Average monthly pay drawn during the contributory period of service of 12 months preceding the date of exit from the membership of the Employees Pension Scheme, 1995. c).Salary for Calculation of Widow Pension (Table C) Salary at the date of death. d).Salary for Calculation of Withdrawal Benefit (Table A & Table B): Salary at the date of exit. e).Salary for Calculation of Return of Contributions (Table D) Salary at the date of exit. Statutory ceiling of Salary (Pay/Wages) Statutory ceiling of pay on which contributions are to be made is as follows; Wage Ceiling 1000/1600/2500/3500/5000/6500/From To 31.12.1962 28.02.1983 (01.03.1971) 01.03.1983 31.08.1985 01.09.1985 31.10.1990 01.11.1990 30.09.1994 01.10.1994 31.05.2001 01.06.2001 onwards

IMPORTANT FACTORS TO DECIDE THE ELIGIBILITY AND QUANTUM OF PENSION a).Upto 15.11.1995 1. SERVICE b).On or after 16.11.1995

a) as on 15.11.1995 2. SALARY b). On or after 16.11.1995 (Pensionable Salary) 3. AGE Date of Birth of the member Age as on 16.11.1995

129 Age as on date of exit after 16.11.1995 Date of birth of the family members SERVICE The term service is classified into the following four categories 1. Past Service 2. Actual Service 3. Eligible Service 4. Pensionable Service The total period of each service referred to above is calculated for the following purposes 1. To decide the eligibility of the member for Pensionery Benefits under the Employees Pension Scheme, 1995. 2. To decide the Quantum of Pensionery Benefits payable to the member under the Employees Pension Scheme, 1995. 3. Minimum quantum prescribed for- factor pension Pension with 24 years of past service Pension with service less than24 years DEFINITION:[PARA 2] PAST SERVICE: Past Service means the period of service rendered by an existing member from the date of joining Employees Family Pension Fund till the date of exit (i.e. death or leaving service) or attainment of age of 60 years or 15th November 1995 whichever is earlier. [para 2 (xii)] BREAK IN SERVICE: The period of Break in Service is the period of Past Service for which no contributions to EFPS, 1971 were payable due to non eligibility for wages. (first proviso to para 6 of EFPS, 1971). ACTUAL SERVICE: Actual Service means the aggregate of periods of service rendered from 16th November 1995 or from the date of joining any establishment, whichever is later, to the date of exit from the employment of the establishment covered under the Act or the date of attaining the age of 58 years, whichever is earlier. [para 2(ii)]

130 PENSIONABLE SERVICE: Pensionable Service means the service rendered by the member for which contributions have been received or are receivable.[para 2(xv)] CONTRIBUTORY SERVICE: Contributory Service means the period of Actual service rendered by a member for which the contributions to the fund have been received or are receivable. [para 2(iv)] NON CONTRIBUTORY SERVICE: Non Contributory Service is the period of Actual service rendered by a member for which no contribution to the Employees Pension Fund has been received or are receivable; due to non eligibility for wages. [para 2(x)] BENEFITS OF PENSION SCHEME IN NUTSHELL An Employee is eligible for Pension after 10 years of service. The Pension is payable on attaining the age of 58 years, whether he is in service or superannuated. Early Pension at reduced rate can be availed on leaving the employment, after attaining the age of 50 years. Where an employee is totally disabled and leaving service on account of disablement, Disablement Pension is allowed. No age and service stipulation to claim the pension. Every year, the pension quantum may increase. Wherever the Pension claims are received three months before the date of superannuation, the Regional Provident Fund Commissioner will deliver the Pension Payment Order on the day of superannuation. Apart from Pension Benefit, a member can commute upto one-third of his pension and in lieu of this, he will receive a lumpsum amount equivalent to 100 times of the commuted value of pension. A Pensioner may nominate a person to receive a lumpsum amount after his death, as Return of Capital. Family Pension is payable in case of death of a member: after leaving the employment. while in employment. after drawing the pension Family Pension is payable even where the death occurs before 10 years of service. Thus, the minimum eligible service of 10 years is not applicable. On death of a pensioner, the Pension is automatically payable to the spouse (widow / widower). When a member dies as Bachelor or Spinster or where there is no spouse or children below 25 years, the Family Pension is payable to Nominee till his/her death. When there is no valid nomination, the Family Pension is payable to dependent father followed by dependent mother. In addition to Family Pension to Widow / Widower, Children below 25 years are also eligible for Pension simultaneously. It is payable to the married daughters also, below the age of 25 years.

131 On death or re-marriage of widow / widower, Children will be given enhanced pension treating such children as Orphan. On behalf of the minor children the pension is payable to guardian. Any child in a family with total and permanent disablement will receive Children Pension till death. The monthly pension is payable through Indian Overseas Bank, State Bank of India, Indian Bank, HDFC Bank and Post Offices in Tamil Nadu and Pondicherry States on the first day of every month through the Savings Bank account of the pensioner. The pension can be drawn anywhere in India. The employees with less than 10 years of service on the day of superannuation may avail the benefit of withdrawal from Pension Fund. Where an employee has not served for 10 years on the date of leaving service, he may obtain a Scheme Certificate so as to continue his membership during un-employment period and the same can be used to count the previous service as and when he joins another establishment covered under the Act. The employees who have not contributed to the Employees Family Pension Scheme, 1971 can also join the Employees Pension Scheme before attaining the age of 58 years, at their option, after paying the contribution and interest upto-to-date. The contribution to Pension Fund can be made beyond the ceiling limit of Rs.6,500/- on the joint request of the employee and the employer so as to get more benefit. The Pension quantum is determined separately for the period of service from 1.3.1971 to 15.11.1995 as fixed amount. This is known as Past Service benefit. The Pension for the service rendered after 15.11.1995 is calculated through formula namely, Pensionable Salary x Pensionable Service 70 An employee on his superannuation is entitled for Pension (through the above formula) upto 60% of the pensionable salary. (Pensionable Salary would mean, the salary drawn by the employee for a period of 12 months prior to the date of superannuation). POINTS TO BE NOTED WHILE AUDITING Work sheet for Pension. Date of Birth: As per Form 9 or Form 3 (PS) . EPF members Form 2 received before 16.11.95. EPS members Form 2 received on or after 16.11.95 Date of Birth given in Form 10D if it is less than one year to the age in Form 9. Date of Cessation of Membership: Date of leaving service. Date of Superannuation. Death in service Death away from service. Date of Entitlement of Pension: date of Superannuation. Date furnished Column 8A of Form 10D, Date of application may be treated as date of option or date first receipt of the claim in EPF Office. Rounded off Past service after regularisation if any. Wages on the date of exit in respect of Death cases otherwise only minimum pension of 450 alone.

132 Wages as on 15.11.95 Maximum Rs.3,500/- upto 30.9.94 and Rs.5,000/- thereafter. Minimum Rs.335/- para 12(5) (a) Minimum Rs.335/Minimum Rs.438/- para 12(4)(a) After 16.11.2005 Minimum Rs.335/Minimum Rs.438/Minimum Rs.635/- para 12(3)(a) Every month Maximum Pension MMP Rs.820/- Jan. 2002. WMP Rs.205/- for Rs.6500/ To be calculated and given to Auditors for checking. Percentage of Commutation opted. Form ROC option 1: One or more persons were nominated in Col. No.11. In such case 1st nominee have to be taken into account. ROC option 2: Wife should not be nominated in Col.No.11. Bank account No.: Xerox copy of Ist page of pass book of account opened in designated bank. CMP Cases: Date of Birth of children and Bank account of eligible children. Parental pension Death while in service or 10 years membership arrears from 6.3.99. OTHER POINTS TO BE NOTED 1. 2. 3. 4. 5. Where about of the member not known. Date of filing FIR note the date of disappearance. After the death of the member pensioner adopted child Children Monthly Pension not eligible. Post retiral spouse and children is also eligible for pension. Child or children legally adopted by the member eligible for pension. Permanent total disable children eligible for Pension for life time in addition to regular eligible children. 6. Left service before 1.4.93 more than 10 years. EPF and FPF settled after 1.4.93. Eligible for pension. 7. Multiple memberships An employee served in more than one establishment. 8. Bachelor died at the time of death he is orphan No valid nomination - No Pension is payable to Brother/sister. 9. NEPAL (i) SONALI SBI (ii) RAKSHAL through SRO, Gorakhpur (UP) (iii) BADANI 10. Payment of Pension through NRI account. 11. Two or more wives Seniority Date of marriage Children according to Date of Birth. POINTS TO BE NOTED FOR WITHDRAWAL BENEFIT For Past Service up to Date of Cessation 15.11.95; Actual Service from 16.11.95 or Date of Joining; If fluctuation in wages in Form 3A or Form 7(PS) breaks should not be assessed notionally in the absence of break statement; If no contribution is received for entire month, it has to be treated as break; For Table D, Actual Service minus NCP days- rounded off; For Table B, Date of Exit minus Date of Joining or 16.11.95 without deducting NCP days; Formula Pension upto 16.11.2000 Upto 16.11.2005

133 Breaks in Past service have to be regularised; However if continuous break is more than one year up to 1.4.88 it cannot be regularised under any pretext. This should be strictly followed to avoid any erroneous/over payment. In respect of defaulting establishments, the withdrawal can be allowed if the factor in Table D is not altered (Proportion of wages at exit) even after excluding the defaulted period from the total year of service. The Scheme Certificate can be issued wherever the due benefit is not payable, with due remarks on the period of default given in the Scheme Certificate. (The question of extending the withdrawal with reference to the actual period of service for which contribution received is receiving the attention of the Headquarters Office). NCP days not to be regularised; If there is abnormal fluctuation in wages, 12 months average can be taken into account, with prior permission of APFC. If there are NCP days during last month wages, the salary drawn during last 12 months divided by actual number of days worked during the last span of 12 months shall be multiplied by 30 to work out the average monthly pay; Actual Service up to the date of exit or on attaining 58 years of age whichever is earlier; For Past and Actual service, full pay last drawn have to be rounded off to next Rs.10/-; Seasonally employed actual service during the year shall be treated as full year Not attended, when employment is offered taken as NCP; EPF and EPS can be settled separately. No question of simultaneous payment: A member can draw his PF account and continue in the Pension membership; POINTS TO BE NOTED FOR ISSUE OF SCHEME CERTIFICATE As and when Scheme Certificate is received along with Form 5, it should be recorded in Form 9/Form 3 (PS) and transmitted to Pension Section / EDP for recording the data in the system. Actual salary and service are not to be rounded off. Rounding off should take place on Superannuation/Pension payable; The breaks in Past service have to be regularised as per proviso to 9(2) OF EPS, 1995; However if continuous break is more than a year up to 1.4.88, it cannot be regularised under any pretext. This should be strictly followed to avoid any erroneous/over payment; Bank account details and Advanced Stamped Receipt not necessary; If total service is more than 10 years after deducting breaks, service falls short of 10 years, withdrawal benefit should not be settled. Only Scheme Certificate or Pension is payable if otherwise entitled; Family details if not furnished in Form 2 this need not be insisted for issue of Scheme Certificate. Date of Birth as per Form 9 or Form 3 (PS) only taken into account Form 2 received before 16.11.95 for FPF member Form 2 received after 16.11.95 in respect of new members under EPS 1995 If the date of birth given in Form 10C tallies age in Form 9. (less than one year on both ways) the actual Date of Birth given by the member may be admitted; In respect of defaulting establishments, if the yearly returns, such as Form 3A or Form 7 (PS) not submitted, the fact on the period of default should be recorded on the Scheme Certificate, before issue; Pension to be payable in future will not take place in Scheme Certificate; Wherever Scheme Certificate is already issued, the member has preferred the claim in Form 10D duly surrendering the Scheme Certificate, the claim is to be verified with reference to Scheme Certificate and after ensuring its issue and also verifying the authority attested the claim, the Form 10D and its enclosures should be verified for its correctness. Thereafter Form 10D along with IDS & Scheme Certificate should be sent to Pension Section;

134 Once Scheme Certificate is issued, and transfer of provision Account of the member is received, a fresh Scheme Certificate to be issued cancelling the original received from the member; Scheme Certificate holder dies, his family is entitled for Family Pension, subject to eligibility. When pension is applied for, Original Scheme Certificate to be surrendered. CHECK LIST FOR CLAIMS IN FORM 10C (Form to be used by a member of Employees Pension Scheme 1995 for claiming Withdrawal Benefit/Scheme Certificate) 1) To check whether all columns in the claims are properly filled. 2) Whether the particulars are written clearly without any overwriting or cutting. Correction, if any, is attested. 3) Whether the member has appended his signature on One Rupee Revenue Stamp affixed in the relevant portion. (To be given where withdrawal benefit is admissible and opted for payment by cheque). 4) Whether the details of wages and period of non-contributory service were already informed through Form 3A. 5) If the member is not eligible for pension and has rendered 10 or more years of eligible service, he/she is not entitled for option but Scheme Certificate only will be issued. 6) Wherever the member is having less than 10 years eligible service, he/she may be advised to opt for Scheme Certificate instead of Withdrawal Benefit. 7) Option to be specifically stated either for Scheme Certificate or Withdrawal Benefit. 8) In case of opting for Scheme Certificate, it is not necessary to furnish the Savings Bank Account and enclosing of attested photos. 9) These points are in addition to common points furnished under Checklist for claim in Form-19. CHECKLIST FOR CLAIMS IN FORM-10D (Form to be used for claiming Superannuation Pension, Retirement Pension, Short-service Pension, Disablement Pension, Widow Pension, Children Pension and Orphan Pension). 1) To check whether the application in Form-10D has been preferred in duplicate in case pension is to be drawn in other SRO/SAO or other Region. 2) Whether all columns are properly filled in without any overwriting. 3) Whether the application in form-10D has been attested by the employer or his authorised official with his official seal and date. 4) Whether the date of birth of the member has been furnished as per records already submitted to the RPFC. 5) In case of death of the member (For Widow, Children or Orphan Pension) ensure that the death certificate is submitted in original and family members certificate is furnished. 6) The descriptive roll/finger impressions/Specimen signatures of the claimant are obtained in the prescribed forms (in duplicate) and attested by the employer. 7) Whether 3 copies of Passport Size photograph of the member with spouse (taken together/or claimant) are submitted and the employer has attested with seal on the back side of the Passport size photos duly furnishing the name and Account number of the member below the age of 25 years irrespective of their marital status. 8) Whether the birth certificate of the children of the member, is submitted in original, with one Xerox copy duly attested by the employer.

135 9) Whether the Personal marks of Identification, if any, on the hand /face or body of the claimant is furnished. 10) The monthly Pension can be disbursed to the Pensioner through the designated Banks such as State Bank of India and other Nationalised Banks or HDFC (or ICICI) or Post Offices. Please check whether the member has opened a Savings Bank Account in any Bank branch and he has furnished Savings Bank Account Number and complete postal address of the Bank in the relevant column of the Form-10D. 11) Whether the claimant has exercised any option for Return of Capital, in the relevant column of Form-10D. If so, please specify the Para such as 13(1), 13(2) or 13(3). In case of opting for Para 13(2), the nomination should be made in favour of person other than the spouse. Similarly it should be ensured that the member furnished his option for Commutation under Para 12A. 12) While furnishing family details, the relationship with the member may be furnished correctly in Form-10D. 13) Whether the particulars of wages etc. at Page 7 of the claim form is duly checked and correctly filled up by the employer. 14) Separate Savings Bank Account for the minor children may also be opened in the same branch at which the Savings Bank Account opened to the widow/widower. EXAMPLE : PENSION CALCULATION 1. From the following particulars calculate the Short Service Pension payable to Mr. X. 1) 2) 3) 4) 5) 6) Date of Birth 02.07.1943 Past Service.. 5 Years Pensionable SalaryRs.5,000/Wages as on 15.11.95... Rs.3,500/Date of Exit... 11.10.2000 Date of Application... 09.01.2001 SOLUTION SHORT SERVICE PENSION = Para 12 (1) (c)

The member has rendered eligible service of 10 years or more but less than 20 years. (a) Pension as per formula Para 12 (2) Pensionable Service Date of Exit == 11.10.2000 16.11.1995 ------------25.10. 4 -------------

(i.e.) rounded off to 5 years. 5000 X 5 ---------------70 == 142.85

But minimum pension payable as per Para 12 (4) (a) Rs.438/-

136 (b) Past Service Benefit under FPFS 71 Past Service 5 years Salary Rs.3,500/- (i.e.) more than Rs.2,500/Pension as per Table Factor as per Table B Less than 6 years Factor 1.689 85 X 1.689 Rounded off to= = 143.56 144/= Rs.85 02.07.43 58 --------------01.07.2001 16.11.1995 --------------15. 7. 5 ---------------

(c )

Total pension payable (a ) + (b) = 438 + 144 = 582/But minimum pension payable as per Para 12 (4) (b) is Rs.600/Proportionate Service Reduction : 600 X 10 = 250/----24 as per 12 (4) (b) minimum payable is Rs.325/Age reduction @ the age of 57 years Rs.325 X 97 % = 315.25 Rounded off to Rs.315/- p.m. w.e.f. 9.1.2001

137 CALCULATION OF PENSION (Para: 12 EPS 1995) --------------------------------------------------------------------------------------------------Past Service Pension Aggregate Pension Formula Pension Minimum Formula Pension Aggregate Minimum Pension Service below 24 Years ----- ? --------------------------------------------------------------------------------------------------Pension for Past Service + Pension as per Formula for Pensionable Service (Sub. to Minimum (with reference to age group, as on 15-11-1995) 53 & above 48 - 53 Below 48 - Rs.335 - Rs.438 - Rs.635

Aggregate Pension

--------------------------------------------------------------------------------------------------If it is below Rs.500/600/800

Raise to Minimum applicable. If service is below 24 years Reduce proportionately, subject to minimum of Rs.265/325/450

EMPLOYEES PENSION SCHEME, 1995 PARA 12 COMPUTING MONTHLY MEMBER PENSION

A. ON ATTAINING 58 YEARS (UPTO NOVEMBER 2005)

i. ii.

On attaining the age of Superannuation (i.e. 58 years), irrespective of No. of years of eligible service wherever the aggregate of Past Service benefit and Formula Pension works out to Rs.600/- or above, the amount thus calculated is payable as Monthly Member Pension. Wherever the aggregate of Past Service benefit and Formula Pension works out to an amount below Rs.600/-, raise the Pension to the minimum of Rs.600/- and while doing so, wherever the Eligible

138
Service is below 24 years, reduce the Pension quantum proportionately. (For this purpose, the Past Service and Pensionable Service will be construed as Eligible Service). B. i. EARLY PENSION (UPTO NOVEMBER 2005) Wherever the Pension is payable between 50-57 years of age (Early Pensioners before 58 years) irrespective of their age as at 16.11.1995, a minimum aggregate Pension of Rs.600/- only will be given. The aggregate minimum Pension would mean, the sum of total of Past Service benefit and Formula Pension. Thus in Early Pension cases (a) Calculate Past Service benefit and (b) Calculate Formula Pension (Subject to minimum of Rs.438/- upto Nov 2005). If aggregate of (a) and (b) above is equal or more than Rs.600/- that will be further reduced by 3% for each year of age that falls short of 58 years. If aggregate of (a) and (b) works out to an amount below Rs.600/-, raise the Pension to Rs.600/-. Then reduce proportionately, where the eligible service (for this purpose, the Past Service + Pensionable Service) is below 24 years. However, this will be subject to minimum Pension of Rs.325/-. Thereafter reduce 3% with reference to age that falls short of 58 years.

ii.

iii.

RETURN OF CAPITAL OPTION IN THE CASE OF DISABLEMENT PENSION

On application of explanation 3 to Para 13(1) of Employees Pension Scheme 1995, the following case has been received from one of the PF Member, the details of which are as under:The Original pension in the case is Rs.250/- and Return of Capital amount is accordingly Rs.25,000/. However the member aged 18 years and on his death the reduction @Rs.1000/- for every year by which the age falls short of 50 years (32 years) amounts to Rs.32000/-. Therefore the total amount of Return of Capital benefit is Rs.25000/-. Whereas the total amount to be deducted comes to Rs.32000/-. Wherever on the application of the above provision results in minus payment, the option for ROC in such cases may not be entertained. [CPFC Circular No.Pen/Misc/2002/68101 dated 10.12.2003]

PAYMENT OF WITHDRAWAL BENEFITS IN CASE OF DEFAULTING ESTABLISHMENT CLARIFICATION ON PARA 16A OF EMPLOYEES PENSION SCHEME 1995. Para 16A of Employees Pension Scheme 1995 provides guarantee of pensionary benefits in the event of default by the employer in remittance of contribution. According to the said provisions, none of the pensionary benefits under the Scheme shall be denied to any member or beneficiary for want of compliance of the requirement by the employer under Para 3(1) of Employees Pension Scheme 1995. Consideration of withdrawal benefits as pensionary benefits has been clarified by Ministry of Labour, Government of India vide their letter No.S-16015/5/2001-SS II dated 02/12/2003 as follows:the issue (Payment of withdrawal benefits in case of defaulting establishments) has been examined as per the provisions of the scheme and it is clarified that withdrawal benefits as envisaged in para 14 of EPS 1995 is not to be considered as one of the pensionary benefits as mentioned in para 16A of the scheme. (H.O. Letter No. Pen-2/7/Clarif/97/A/73834 dated 31.12.2003.)

139
In continuation to the above circular, it is further clarified that in respect of an establishment defaulting in remitting contribution to the Employees Pension Fund 1995 for any period, withdrawal benefit will not be paid to the member in respect of the default period. In other words, period of default shall not be counted for the purpose of calculating quantum of benefit under para 14 of Employees Pension Scheme 1995. The member is entitled to withdrawal benefits only in respect of the period for which the contributions are received.

(H.O. Letter No. Pen-2/7/Clarif/97/A/ dated 29.01.2004.) CLARIFICATION ON CHANGE OF DATE OF BIRTH OF EMPLOYEES PENSION FUND MEMBERS.
In order to avoid delay in pension payment, it has been decided by Headquarters that all Regional Provident Fund Commissioner-in-Charge of the Regions are permitted to consider the genuine cases of change of date of birth where the variation is up to a period of two years plus or minus between the age/date of birth recorded in our records and date of birth/age claimed by the member through his employer. It is reiterated that while considering all such cases the guidelines issued by this office vide circular No.Pension.3/8/Orissa/96-97 dated 8.1.02 should strictly be followed. [Hqrs letter No.Pen/3/8/OR/2003 Pt./87172 dated 16.02.2004]

140

(Superannuation during

16.11.2000 only. After 15.11.2005, please see the note on Page 2) 15.11.2005

CALCULATE YOUR PENSION S. No. 1. 2. 3. 4. 5. 6. Factors Date of Entry Date of Exit Total Service (2-1)
Non Contributory Service

Under EFPS, 71 (Old Scheme) (A) 15.11.95 DMY Past service As on 15-11-95 Upto Rs.2500 Above Rs.2500 Due as on 16.11.95

Under EPS, 95 (New Scheme) (B) 16.11.95 DMY Pensionable Service Pensionable Salary (Average for last 12 months) Rs. B/6 x B/5 = Rs. 70 or Rs.438/(whichever is more) i.e. Rs. Pension formula Pen. Salary x Pen. Service 70 :

Net Service (Rounded) (3-4) Wages (Basic + DA)

7.

Benefit
Service Wages Upto Above Years 2500 2500
Rs Rs.

8.

9.

With reference to S.No.5 Upto 80 85 and 6 above, 11 12-15 95 105 Rs.-------16-20 120 135 20 & 150 170 above Additional Benefit on 7(A) D M Y (Not applicable) Attaining 58 years on : * ----------Benefit due from 16. 11. 1995 ------------------------------------i.e less than ---------- years. See Table B factor--------------(on Page 2) Additional Benefit =Col. 7 x 8 (Rounded to Rs.----------------)[ * DOB + 58 years] Superannuation Pension A/8 + B/7= Rs.

10. If the Pension against S.No. 9 is below 600/- raise it to Rs.600/-. Where total service is below 24 years then Calculate actual Pension entitlement as below: Rs.600 x Column (A5 + B5) = Rs. ------------- (Subject to Minimum of Rs.325 24 i.e. Superannuation Pension) 11. Only for Early Pension:
Superannuation Pension Amount x Age factor with reference to age opted for Pension (Column 9/10) =Rs.

141

Age Reduction Factor: Age Factor. Years 57 56 55 54 53 52 51 50 97% 94.09 91.27 88.54 85.89 83.32 80.82 78.40

Table B Factor

Less than 1 1.049 Less than 2 1.154 Less than 3 1.269 Less than 4 1.396 Less than 5 1.536 Less than 6 1.689 Less than 7 1.858 Less than 8 2.044 Less than 9 2.248 Less than 10 2.473 Less than 11 2.720 Less than 12 2.992 Less than 13 3.292 Less than 14 3.621 Less than 15 3.983 Less than 16 4.381 Less than 17 4.819 Less than 18 5.301 Less than 19 5.810 Less than 20 6.414 Less than 21 7.056 Less than 22 7.761 Less than 23 8.537 Less than 24 9.390 Note: In case of Superannuation on or after 16.11.2005 (i) instead of Rs.438/- under B-7, mention as Rs.635/-. (ii) Instead of Rs.600 in Col.No.10 please indicate as Rs.800/-. (iii) Minimum shown in Column 10 is to be taken as Rs.450/- instead of Rs.325/-.

142

(Superannuation upto 15.11.2005 only. After 15.11.2005, please see the note on Page 144) CALCULATE YOUR PENSION (MODEL CASE SUPERANNUATED BEFORE 16.11.2005)
S.No. Factors Under EFPS, 71 (Old Scheme) Under EPS, 95 (New Scheme)

(A) 1. 2. 3. 4. 5. 6. Date of Entry Date of Exit Total Service (2-1)

Non Contributory Service

(B) 16.11.1995

01.11.1993
15.11.1995

14.0.2
----Past service:

16.11.2003 0.0.8 2 years

----Pensionable Service : 8 years Pensionable Salary (Average for last 12 months)

Net Service (Rounded) (3-4) Wages (Basic + DA)

As on 15-11-95 Upto Rs.2500 Above Rs.2500 Due as on 16.11.95

Rs. 6500/B/6 x B/5 = Rs. 743/70 or Rs.438/(whichever is more) i.e. Rs. 743/ Pension formula Pen. Salary x Pen. Service 70

7.

Benefit
Service Wages Upto Above Years 2500 2500
Rs Rs.

8.

With reference to S.No.5 Upto 80 85 and 6 above, 11 12-15 95 105 Rs. 85/16-20 120 135 20 & 150 170 above Additional Benefit on 7(A) D M Y Attaining 58 years on : * 15.11.2003 Benefit due from 16. 11. 1995 -------------------

(Not applicable)

29.11.7
------------------i.e less than 8 years. See Table B factor 2.044(on Page 2) Additional Benefit =Col. 7 x 8 (Rounded to Rs.174/-)(* DOB + 58 Years) Superannuation Pension A/8 + B/7= Rs. 917/-

9.

10. If the Pension against S.No. 9 is below 600/- raise it to Rs.600/-. Where total service is below 24 years then Calculate actual Pension entitlement as below: Rs.600 x Column (A5 + B5) = Rs. ------------- (Subject to Minimum of Rs.325 24 i.e. Superannuation Pension) 11. Only for Early Pension:
Superannuation Pension Amount x Age factor with reference to age opted for Pension (Column 9/10) =Rs.

143

APPENDIX

IMPORTANT CIRCULARS
OPTION FOR WITHDRAWAL AT THE AGE OF 55 YEARS FROM INVESTMENT IN VARISHTHA PENSION BIMA YOJANA
In the Employees Provident Fund Scheme 1952, after paragraph 68 NN, the following paragraph shall be inserted. 68NNN Option for withdrawal at the age of 55 years for investment in Varishtha Pension Bima Yojana The Commissioner or where so authorised by the Commissioner, any officer subordinate to him, any, on an application from a member in such form as may be prescribed, permit withdrawal of upto 90 per cent of the amount standing at his credit at any time after attaining the age of 55 years by the member, to be transferred to the Lilfe Insurance Corporation of India for investment; in Varishtha Pension Bima Yojana.

[Hqrs letter No. Co-ord/13(1)Notification/2000/Pt.40003 dated 20.04.2004] DECLARATION OF RATE OF INTEREST TO BE CREDITED TO THE EMPLOYEES PROVIDENT FUND MEMBERS ACCOUNTS FOR THE YEAR 2004-05 Notification under Para 60(1) of EPF Scheme, 1952 for declaration of rate of interest may be delayed. Finance and Investment Committee has therefore, advised NOT to release any interest to members accounts for the month of April, 2004 onwards till the required notification is issued by the Central Government. As regards the claims of outgoing members to be settled after 25th April 2004, these are to be settled in part till issuance of aforesaid notification. Further, no claim shall be called to be filed from the ex-member for releasing the interest for the year 2004-05 to his account when it is declared. Pending amount of interest should be released automatically along-with interest permissible under Para 60 at the declared rate of interest for the year 2004-05 immediately after its declaration. The member should be informed explicitly at the time of part settlement of his claim that interest on his account for the month of April 2004 onwards will be credited on a later date and will be paid directly to his bank account. This information may be stamped clearly in following format in English/Hindi and one regional language on the intimation letter normally sent to member to apprise him of the settlement of his claim. Your provident fund claim is being settled partly. Cheque for remaining part i.e. interest for the year 2004-05 will be dispatched to your banker automatically. You are not required to fill another claim form for this purpose. Kindly do not close your aforesaid savings Bank Account till then. Inconvenience caused is regretted. [Hqrs letter No. Invst.II/3(2)2004-05/Interest/5189 dated 26.04.2004]

LEVY OF DAMAGES FOR PRE-DISCOVERY PERIOD

144 Guidelines have been issued in the matter of levy of damages for pre-discovery period in respect of establishments covered belatedly vide Head quarters letter No.C.II/Misc./Inst./04/15921 dated 15.6.2004. 1. Levy of damages on workers : No damages shall be levied if the workers share for pre-discovery period share for the pre-discovery period has been waived. 2. Establishment which paid PF : No damages shall be levied, however to dues within the time prescribed compensate the interest loss to the EPFO, in the coverage notice. only simple interest @ 12% p.a. shall be levied. 3. Establishments which paid PF : No damages shall be levied till the date of dues beyond the date fixed in payment fixed in the coverage notice. Only the coverage notice. simple interest @ 12% upto the date mentioned in the coverage letter and damages at appropriate rates for the period of delay beyond the date fixed in the coverage letter be levied. 4. Establishments which were : Only difference of interest amount between having their own private PF 12% simple interest p.a. and the actual system before coverage and interest earned by the private PF shall be who deposited the PF in banks levied if the latter is less than 12% p.a. or finance establishments. Beyond the date fixed in the coverage notice, damages shall be levied at the appropriate rates. However, the past cases already decided may not be reopened. To avoid confusion and inconvenience in the matter of remittance of PF dues where the establishments are covered belatedly, the coverage notices shall henceforth contained instructions that payments of PF contributions and allied dues shall be made within 15 days from the date of receipt of the coverage notice.

Priority Payment of PF dues Orders of Debt Recovery Tribunal, Mumbai:

The Debt Recovery Tribunal, Mumbai has held that the EPF Organization has got priority in securing payment and also initiating recovery action for realizing its dues. The Recovery Officer of the EPFO is entitled to sell even the mortgaged properties of the secured creditors and can not be restrained from conducting the auction. The Debt Recovery Tribunal has agreed that EPF dues has got priority as contemplated under Section 11(2) of the EPF & MP Act, 1952. Ref: (i)HO Circular No. Compliance 04/Recovery/2004-05/Cir/23834 dated 23.7.2004. (ii)Misc. Appln. No.24 of 2004 in judgement dated 29.6.2004 of Mumbai D.R.T.-I.

Withdrawal of instruction for Refund of contribution to the member exiting with service less than six months under EPS-1995.
As per the provisions of Para-9 of EPS-1995 while arriving at eligible service, period of service less than six months shall be ignored and period of service of 6 months and above shall be rounded off to one year. Therefore, no benefit is payable to members exiting with less than 6 months service. No refund of contribution shall be paid to members exiting with less than 6 months service and claiming benefit. [Hqrs letter No. Pen/12/33/EPS Amend/96/Pt.V/54310 dated 04.11.2004]

REALISATION OF PROVIDENT FUND DUES FROM DEFAULTING ESTABLISHMENTS

145 All the assessing officers are requested to follow the following drill to tackle the defaulters and arrest the growth of arrears: (i) Enquiry under Section 7A should be initiated on month to month basis against all persistent and chronic defaulters. Officer-in-charge shall ensure the assessment of dues on monthly basis against all such defaulters; (ii) In case of default in payment of employees share deducted from the wages of the workers, the assessing officers shall ensure that the police complaint u/s 405 explanation (1) are filed on monthly basis without fail. It shall be the responsibility of the RC(C&R) and Officer-in-charge of the SROs/SAOs to ensure the logical end as per law to all such complaints filed with the police authorities. (iii) In case of failure on the part of the establishment to remit the dues as per the time given in the order under section 7A, the Prosecution cases u/s 14 of the Act shall be launched against the estts. and its responsible persons. It shall be the responsibility of Officer-in-charge in case of SROs/SAOs and of RC(C&R) & RC (I) in case of ROs to ensure that the Prosecution Cases are filed against the persistent and chronic defaulters. It is to clarify that the establishments which are in default of more than 10 lakhs shall come within the definition of persistent and chronic defaulters. The estts. which fail to remit the dues for three months in the financial year shall also be treated as the persistent and chronic defaulters. These instructions are in modification of the instructions issued vide Circular No. PQ Cell/1(1)87/Vol-I dated 12.5.1993 wherein the Regional Commissioners are restrained from prosecuting the sick estt. registered with BIFR without prior approval of Central Office. Henceforth, no approval of Head Office is required. (iv) The Recovery Officers and the Assessing Officers shall invoke all the actions provided in Section 8B to 8G of the Act for the realization of dues. Any failure on the part of the concerned officer to invoke timely recovery action such as attachment and auction of movable and immovable property, arrest and detention in the civil prison of the defaulting employer and appointment of receivers shall be viewed seriously. It is to emphasise that all movable and immovable properties attached uptil now should be put up for auction for the realization of dues. There should not be any un-reasonable delay in putting the property to auction after attachment of the same. RC (I) of the region and Officer-in-charge shall review the cases of establishments in more than 10 lakhs on fortnightly basis and record their observations in the concerned file of the estts. (v) In case of delay in remittances of dues, assessing officers shall, besides timely levy & recovery of damages u/s 14B of the Act shall ensure collection of interest u/s 7Q of the Act as well for delayed payment including delay in remittances of damages after the expiry of time granted in the 14B Order. [Hqrs letter No. RRC/Comp-05/18(6)05/73703 dated 06.01.2005]