CITATION: 2014 (8) SCALE 272
DECIDED ON: July 2, 2014 by Hon’ble Supreme Court of India
M/s. Mathura Tea Estate (“MTE“), owned by Saroda Tea Company Ltd. (“STE“), an establishment covered by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act“), had defaulted in remitting the contributions and accumulations payable under the EPF Act and the sundry schemes formulated under that statute. Regional Provident Fund Commissioner (“RPFC“), issued notices to MTE enabling it to show cause against the imposition of ‘damages’ under Section 14B of EPF Act. MTE requested for waiver of damages, which was rejected on the predication that the said establishment was neither a ‘sick unit’ nor the subject of any scheme for rehabilitation sanctioned by the Board for Industrial and Financial Reconstruction (“BIFR“). Meanwhile, the management of MTE under the erstwhile ownership of STE was taken over by Eveready Industries (India) Ltd. (“Appellant” or “EI“), which thereafter discharged the liability of entire principal sum of Provident Fund dues pertaining to the period prior to the takeover in consonance with the Memorandum of Understanding (“MoU“) entered into between EI and STE. Significantly, the said MoU also included a clause to the effect that any damages payable for the failure to deposit the dues and accumulations under the EPF Act would be the exclusive liability of STE, i,e, Transferor Company.
Whether the appellant, EI can escape the liability for payment of dues and accumulations under EPF Act even after an explicit agreement with the Transferor Company.
The Apex Court observed that since EPF Act is a beneficial legislation it needs to be construed in the best interest of the employees and held that inter se covenants between the two entities would not insulate the new employer from the rigours of damages imposed by the EPF Act. It also clarified that even though the default in the payment of dues was made by the transferor entity, the transferee shall not stand absolved of the liabilities even if such liabilities are specifically assigned to the former by an express agreement.
Supreme Court affirmed the decision of the RPFC, and held that the Transferee Company can be made liable for ‘damages’ as the language in Section 17B specifically speaks of “contributions and other sums due from the employer”.
Author: Akshay Goel, Hidayatullah National Law University, Raipur
Image from here