Rs 15 lakh PF deducted but not deposited: HC allows criminal case to continue against director of company that turned insolvent

A company had deducted Rs 15.14 lakh from employees’ salaries for their provident fund for the period March 2012 to March 2013 and from May 2013 to July 2013, but didn’t deposit this money with the Employee Provident Fund Organisation (EFPO). Now, this company is insolvent.

Seeing this gross misconduct, the Employee Provident Fund inspector on July 3, 2014, filed an F.I.R bearing P.S. Case No. 155/14 against the company’s director. During the course of the police investigation, the director deposited the pending dues of the employees’ PFs and thus cleared all statutory EPF dues.

However, the Orissa High Court ruled that subsequent payment of employees' provident fund dues cannot not eliminate criminal liability for prior default, and such delayed PF payment cannot be a ground to quash criminal proceedings against the director of the defaulting company which is now insolvent.


Thus the police investigation and criminal case continued against the company’s director since the Orissa High Court refused to quash the criminal case against him, reported LiveLaw Biz.

The Orissa High Court said that the offence committed by the director is grave, endangering the right to pension and the right to life of the workers and there is no ground to quash the criminal proceedings against him.

Also read: Delayed EPF dues for 2 years? HC slaps Rs 77,000 penalty on employer under EPFO rules

The director said before the high court that the company is now insolvent and that case is with NCLT, Cuttack, which in turn had passed an approved resolution plan in February 2022. Another company has taken over their company. He also said that the provident fund dues were entirely cleared by him between July 2014 and February 2015.

Opposing his contentions, EPFO argued that EPF dues must be deposited within 15 days of the succeeding month and any delay constitutes a penal offence. Further, subsequent payment does not absolve the offence once committed.

The Orissa High Court agreed with EPFO and said that EPF dues need to be paid within the prescribed statutory period and any delay can attract penal consequences.

The high court also said that EPF dues cannot be waived off by NCLT as they lack the jurisdiction to decide EPF matters. Especially after enactment of Insolvency and Bankruptcy Code, 2016, Section 17 B remains unaltered because the EPF & MP Act was not amended to align with Insolvency and Bankruptcy code.

The Orissa High Court said: “The CBT EPF dues must be deposited mandatorily within 15 days of subsequent month and any deposit made after 15th of the subsequent month and any deposit made after 15th of the subsequent month is a penal offence. Therefore, even if the deposit has been made after the due date, the offence is already committed.”

The high court stressed on the seriousness of this offence and said it is grave offence that endangered the right to pension and right to life of the workers employed in the establishment, and there is no ground to quash the criminal proceedings against the petitioner in GR case No.487/2014, which is pending now before the learned court of J.M.F.C (R), Cuttack.

The high court dismissed this case. The court said that if this case is not dismissed then it would allow a grave offender to go free, harming public interest and weakening public trust on the law and the protection of law.