Top
Begin typing your search above and press return to search.
News Updates

EPF Act : Supreme Court To Hear PF Commissioner's Appeal Against Direction To Pay Interest To Federal Bank After 3 Weeks

Shruti Kakkar
20 Oct 2021 4:42 PM GMT
EPF Act : Supreme Court To Hear PF Commissioners Appeal Against Direction To Pay Interest To Federal Bank After 3 Weeks
x

The Supreme Court on Wednesday adjourned the Special Leave Petition filed by Regional Provident Fund Commissioner challenging the KeralaHigh Court's decision directing the Commissioner to disburse the interest amount( to the tune of over Rs 53 crores) to the Federal Bank for funds retained with the Provident Fund from 1985 to 1992. Appearing for the Regional Provident...

Your free access to Live Law has expired
To read the article, get a premium account.
    Your Subscription Supports Independent Journalism
Subscription starts from
599+GST
(For 6 Months)
Premium account gives you:
  • Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.
  • Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.
Already a subscriber?

The Supreme Court on Wednesday adjourned the Special Leave Petition filed by Regional Provident Fund Commissioner challenging the KeralaHigh Court's decision directing the Commissioner to disburse the interest amount( to the tune of over Rs 53 crores) to the Federal Bank for funds retained with the Provident Fund from 1985 to 1992.

Appearing for the Regional Provident Fund Commissioner, Advocate Sandeep Jindal sought for adjournment. Accordingly, the division bench of Justices Sanjiv Khanna and Bela M Trivedi in their order noted, "At request of petitioner's counsel, relist after 3 weeks."

The special leave petition is filed against the 2016 judgment of a division bench of the Kerala High Court which affirmed the findings of a Single Bench regarding the calculation of interest by applying Para 60 of the scheme (as prescribed by the Central Government for similar payments) from the due date, till realization.

Courtroom Exchange

Representing the Federal Bank, Senior Advocate Amit Sibal submitted that the Regional Provident Commissioner had withheld the payment of interest on provident fund for 27 years.

Justice Sanjiv Khanna, the presiding judge, observed :

"Until 1992 there was ambiguity. But after 1992 the Central Government said that it was not covered. Fact of the matter is that the rate of interest which you get in PF is far better than what you get outside. The major challenge raised is with regards to the applicability of 'Para 60' of the Scheme and the liability to satisfy interest on the due amount fails. That's the grey area".

"We had in anticipation of being outside the scheme, started EPF which had a similar rate of interest which was approved by the Central Government. However the trust (Federal Bank Employees Provident Fund Trust) which was formed for PF Contributions was emptied", Sibal submitted.

Justice Khanna at this juncture asked Senior Advocate Amit Sibal as to whether the interest which the bank was demanding was equivalent to the interest deposited by the bank or more than that.

"We're not asking more than that," submitted the Senior Advocate Sibal.

"Mr Jindal now you know. You've retained the money & you're saying that you've paid the interest. It is a very unfair and unjust stand to take", remarked Justice Khanna told the PF authority's counsel.

Background

In 1992, the Central Government held that the PF Act was not applicable to the Federal Bank. Following that, the bank later decided to de-link from the Regional Provident Fund Commissioner's account and formed a separate Trust-"Federal Bank Employees Provident Fund Trust" for PF contributions. As the bank was not held to be covered under the EPF Act, the contributions made from 1985 to 1992 to the PF Commissioner had to be returned to it.

Due to delay in getting the amount transferred to the Bank from the PF Commissioner, Bank had raised a dispute with the PF Commissioner. After several correspondence, the amount was transferred to the Bank, 85% initially by cash and then 15% by way of Securities.

Since the Commissioner did not pass the eligible interest for the funds retained with PF to the bank, the bank in 1993 approached the Kerala High Court against the Regional Provident Fund Commissioner for release of the entire dues with eligible interest.

Para 60 of the Employees Provident Fund Scheme 1952

Para 60 of the Employees provides for payment of interest, to be added on to the account of the employees in the manner specified therein, to generate further interest on the due amount and also as to the fixation of the actual liability in relation to the amount payable under the compulsory bond/securities [15% of the total].

The argument of the PF Commissioner is that the bank is eligible only for simple interest @ 6% as it severed relations with PF Office.

Case Before Single Judge of Kerala High Court

In 2011, the single judge accepted the bank's claim for payment of interest as stipulated under Para 60 of the PF Scheme on the basis of the statement filed by the Chartered Accountant Commission, fixing the balance as on March 9, 2011 at Rs.46,47,58,357. The High Court also directed payment of the said amount to the Bank within two months.

Aggrieved, the Commissioner approached the Division Bench of the High Court.

Case Before Division Bench of Kerala High Court

The division bench of Justices PR Ramachandra Menon and Anil K Narendran on December 21, 2016 affirmed the findings of the Single Bench regarding calculation of interest by applying Para 60 of the scheme (as prescribed by the Central Government for similar payments) from the due date, till realization.

Contempt Petition In Kerala High Court

On February 10, 2017, the bank recalculated the total amount due as Rs. 53,51,70,347 after allowing all the deductions allowed to PF Organization by the Division Bench and addressed a letter to the Regional Provident Fund Commissioner, with statement showing detailed calculations to arrive at the above figure. In response to the above letter, Regional Provident Fund Commissioner sent a cheque for Rs.1,51,28,935 along with a letter dated February 17, 2017 stating that this was the final amount due from them.

Bank found out that the interest applied was only 6% simple per annum for the period after 30.09.1992, which was stated to be the rate of interest applicable to refund of advance Tax or TDS by Income Tax Dept., on the premise that it was the rate as prescribed by the Central Government for similar payments, as stated in the judgement of the Division Bench.

The bank had thus filed a contempt petition against the PF Commissioner. On August 14, 2017 the High Court passed an order finding prima facie contempt on the part of the PF Commissioner. Aggrieved the Commissioner had approached the Supreme Court which was dismissed by the Top Court.

Case Title: Regional Provident Fund Commissioner v. Federal Bank Limited and Others| Diary No 11980 of 2018

Click Here To Read/ Download Order



Next Story
Share it