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Report No. 137

2.6.3. Indifference or failure of officials to take appropriate steps.-

Another major cause for the delay in the settlement of provident fund and other retirement dues cases is failure on the part of the office of the Regional Provident Fund Commissioner to perform the statutory duties imposed upon it under the Act and the Scheme framed thereunder. The employees under the provisions of the Act and the Scheme are required to furnish a number of statutory returns to the Office of the Regional Provident Fund Commissioner. The returns so submitted are sometimes incomplete or incorrect.

Due to lack of proper scrutiny, the omissions, etc., in the returns are not detected. These come to notice only when a claim is being processed. The result is that the settlement of the claim gets delayed pending the removal or correction of the omissions/discrepancy in the statutory returns. The most glaring example of such failure to scrutinise the return is the case where the employer fails to deposit his share of the contribution towards provident fund.

Under para 38(1) of the Scheme of 1952, each employer is, within fifteen days of the close of every month, required to pay the employees' contribution together with his own contribution as well as administrative charges, if any, to the Fund by separate bank drafts or cheques on account of contribution and administrative charges.

Para 38(2) further requires that the employer shall forward to the Commissioner, within twenty-five days of the close of the month, a consolidated statement, in such form as the Commissioner may specify, showing recoveries made from the wages of each employee and the amount contributed by the employer in respect of each employee.

If such returns are properly scrutinised, the Office of the Regional Provident Fund Commissioner would immediately detect that a particular employer has not deposited his share of the contribution in respect of a particular employee or employees. This will facilitate the initiation of steps for immediate recovery of employers' share of contribution. Even if the omission on the part of the employer to deposit his share of contribution is detected, the Office of the Regional Provident Fund Commissioner quite often does not initiate any action against the employer.

The Regional Provident Fund Commissioner in the event of default of an employer in making the deposits to the fund has (i) the power to recover the same as provided under section 8 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, (ii) power to recover damages under section 14B of the Act of 1952, and (iii) power to initiate criminal proceedings for prosecution of the defaulting employer under section 14 read with section 14AC of the Act.

These powers are seldom exercised with expedition as a result of which the employees are made to suffer for no fault of theirs and are deprived of the benefits of the provident fund merely on the ground that the employers have not deposited their share of the contribution. The Supreme Court in Organo Chemical Industries v. Union of India [AIR 1979 SC 1803] had the occasion to consider the provisions of the Act and the Scheme framed thereunder.

The Supreme Court, after setting out the scheme of the Act in brief, which is principally and mainly further welfare of the workers who are employed in factories and other establishments and under which a heavy responsibility is cast on the Regional Provident Fund Commissioners to see that the provisions of the Act and the Scheme are properly followed and complied with, observed:

"This social security measure is a human homage the State pays to Articles 39 and 41 of the Constitution. The viability of the project depends on the employer duly deducting the workers' contribution from their wages, adding his own little and promptly depositing the nikle into the chest constituted by the Act. The mechanics of the system will suffer paralysis if the employer fails to perform his function. The dynamics of this beneficial statute drives its locomotive power from the funds regularly flowing into the statutory till.

3. The pragmatics of the situation is that if the stream of contributions were frozen by employers' defaults after due deduction from the wages and diversion for their own purposes, the Scheme would be damnified by traumatic starvation of the fund, public frustration from the failure of the project and psychic demoralisation of the miserable beneficiaries when they find their wages deducted and the employer get away with it even after default in his own contribution and malversation of the workers' share.

'Damages' have a wider socially semantic connotation than pecuniary loss of interest on non-payment when a social welfare scheme suffers mayhem on account of injury. Law expands concepts to embrace social needs so as to become functionally effectual".

The Madhya Pradesh High Court in Nathulal v. Regional Provident Funds Commissioner, Indore, [1984 Lab IC 1438] had the occasion to consider the question of entitlement of the employee to payment of the entire amount for the relevant period, that is, his contribution as well as the employer's contribution on the failure of the employer to credit the same to the fund. The High Court, after considering the relevant provisions of the Act and the Scheme framed thereunder relying on the judgment of the Supreme Court (quoted above), held as under:-

"We are of the opinion that the stand taken by the respondents is devoid of any substance because the employee, for no fault of his, cannot be allowed to suffer in this manners he is entitled to the payment of the entire amount for the period for which he has put up his claim in this petition.

Obviously, the petitioner had become a member of the Scheme in the hope that on retirement he would get all his dues as amount from his wages was regularly deducted by the employer and he could have no reason to imagine that the employer might not have remitted his contribution so deducted as also the share of the employer to the said fund because that is one of the allurements to the employee that on retirement in addition to his own contribution he well get much more by way of contribution of the share of his employer also because in such a case he would not get any pension from the employer but has to depend solely on his provident fund on which his livelihood in future would depend."

The Regional Provident Fund Commissioner has appealed to the Supreme Court against the judgment of the Madhya Pradesh High Court. The Supreme Court in Special Leave Petition No. 6909/84 on July 3, 1984 has stayed the operation of the High Court order pending disposal of the appeal. The result is that the employees continue to suffer and are being deprived of their legitimate right for the failure of the Office of the Regional Provident Fund Commissioners to perform the statutory duties imposed upon them under the Act and the Scheme framed thereunder.

The case of Shri R.A. Swami, mentioned earlier in para 2.5.5 above can be cited to illustrate the problem. Shri Swami has been denied the 35 per cent. of the employer's share since June 1987 on the ground that the employer has not deposited the same.



Need for creating Office of Ombudsman and for Evolving Legislative - Administrative measures Inter alia to relieve hardships caused by Inordinate Delays in settling Provident Fund claims of Beneficiaries Back




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