25% Pre-Deposit Order in ₹3.12 Crore EPF Dispute Set Aside: Jharkhand HC directs CGIT to Reconsider on Merits [Read Order]

In the recent ruling, the Jharkhand High Court set aside the Central Government Industrial Tribunal's (CGIT) order requiring the petitioner to deposit ₹3.12 crore (25% of ₹12.49 crore EPF liability) as a precondition for hearing its appeal. Thus, the tribunal has been directed to reconsider the pre-deposit application afresh or hear the appeal on merits.

The Petitioner, M/s. Kashish Developers Limited, a company registered under the Companies Act, 1956/2013, engaged in the business of real-estate and was registered under Provisions of Employees Provident Fund Organization under Employees Provident Fund Act, 1952, filed a petition against the Employees Provident Fund Organization.

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The developer challenged an order from the Central Government Industrial Tribunal No. 2, Dhanbad, which directed them to deposit 25% of an adjudicated provident fund amount of Rs. 12.49 crores as a pre-condition for their appeal to be heard.

The dispute arose from an EPF liability determined for the period April 2016 to March 2020, primarily concerning provident fund dues for labourers engaged through contractors. The Petitioner argued that they had paid contractors through banking channels, and it was the contractors' responsibility to discharge the provident fund liability, as there was no employer-employee relationship with the contract labourers.

Previously, the Tribunal had directed a 30% pre-deposit under Section 7-O of the EPF Act, 1952, which the High Court set aside on April 23, 2024, remanding the matter for reconsideration based on the "triple-test" principles: prima facie case, balance of convenience, and irreparable injury.

However, the Tribunal, in its subsequent order dated January 24, 2025, again directed a 25% pre-deposit, which the petitioner contended was a non-speaking order that failed to properly apply the triple-test. The petitioner highlighted that the Tribunal selectively considered their financial status, noting only fixed assets while ignoring low cash balances and significant loan amounts.

Section 7-o of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 explained that: Deposit of amount due, on filing appeal

“No appeal by the employer shall be entertained by a Tribunal unless he has deposited with it seventy-five per cent of the amount due from him as determined by an officer referred to in section 7A:

Provided that the Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this section.”

The Counsel for the Petitioner, Sumeet Gadodia, argued that despite the Court's remand order criticizing the non-speaking nature of the Tribunal's earlier decision, a similar order was passed merely reducing pre-deposit from 30% to 25% without applying the triple-test principles. The Tribunal selectively considered fixed assets of ₹17.75 crore while ignoring the poor financial health cash balance of ₹17.11 lakh and loans of ₹293.37 crore.

On the other hand, the Counsel for the Respondent, Rupesh Singh, argued that since the petitioner had approached the Appellate Tribunal, merit-based challenges to the adjudication order should not be entertained by the High Court.

Further, the Counsel relied on RFFC vs. Shibu Metals Workers (1965) 2 SCR 72, which submitted that the EPF Act was beneficial legislation for social security and should be construed to further its objectives. The respondent justified the adjudication order by stating that the petitioner, as Principal Employer, bears responsibility for contractor dues if the contractor fails to pay.

The High Court composed of Justice Deepak Roshan, observed that the Tribunal had indeed failed to consider the petitioner's strong prima facie case, particularly regarding the Adjudicating Authority's duty to collect relevant evidence from contractors and the contractors' primary responsibility for their employees' provident fund dues. The Court also found that the Tribunal had not adequately assessed the balance of convenience or the potential irreparable injury to the petitioner.

Consequently, the High Court set aside the Tribunal's order dated January 24, 2025. It directed the Central Government Industrial Tribunal No. 2, Dhanbad, to either reconsider the pre-deposit application by properly applying the triple-test or, preferably, to hear and decide the main appeal (EPFA Case No. 29 of 2024) on its merits within a stipulated period, with the petitioner undertaking to cooperate.

Thus, the petition was disposed of without any order as to costs.