Bombay High Court Quashes Prohibitory Order Against B.T. Kadlag Constructions

Court Rules on Adherence to Natural Justice in Recovery Proceedings Under EPF Act

In a significant ruling, the Bombay High Court has quashed a prohibitory order issued by the Assistant Provident Fund Commissioner/Recovery Officer against B.T. Kadlag Constructions. The court found that the order, which restrained the company from making payments owed to Niphad Sahakari Sakhar Karkhana Ltd, was passed without adherence to the principles of natural justice as mandated under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.

The case involved the recovery of provident fund dues amounting to over Rs. 2.52 crore. The Recovery Officer had issued a prohibitory order under Section 8-F of the EPF Act, directing B.T. Kadlag Constructions not to pay the amount owed to the employer and instead remit it to the Provident Fund Commissioner. However, the court noted that this order was issued without a prior notice or the opportunity for the petitioner to file a statement on oath, which is a statutory requirement under Section 8-F(3)(i) and (vi).

Justice N. J. Jamadar emphasized the need for compliance with natural justice principles before imposing such financial liabilities. The court clarified that the prohibitory order could be treated as a notice under Section 8-F(3)(i), allowing the petitioner to respond with a statement on oath within three weeks. The Recovery Officer is then required to make a decision in accordance with law after considering the petitioner's response.

This decision underscores the judiciary's role in ensuring that procedural fairness is observed in administrative actions, especially those impacting financial liabilities under social welfare legislation like the EPF Act.

Bottom Line:

Employees' Provident Fund Act, 1952 - Provisions of Section 8-F must be strictly followed, including issuing notice and allowing opportunity for objection before issuing a prohibitory order for recovery of dues.

Statutory provision(s): Employees' Provident Fund and Miscellaneous Provisions Act, 1952 Sections 8-F(3)(i), 8-F(3)(vi), 11(2), 17-B.

B.T. Kadlag Constructions v. Employees Provident Fund Organization, (Bombay) : Law Finder Doc Id # 2810244