[Cites 6, Cited by 0]
Punjab-Haryana High Court
Assistant Provident Fund Commissioner vs M/S Chandigarh Colonisers Pvt. Ltd. And ... on 29 April, 2026
CWP-17545-2012 (O&M) 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CWP-17545-2012 (O&M)
Reserved on: 04.02.2026
Pronounced on: 29.04.2026
Uploaded on: 29.04.2026
ASSISTANT PROVIDENT FUND COMMISSIONER
-PETITIONER
V/S
M/S CHANDIGARH COLONISERS PVT. LTD. AND ANOTHER
-RESPONDENTS
CORAM: HON'BLE MR. JUSTICE KULDEEP TIWARI
Present: Mr. Sanjay Tangri, Advocate
for the petitioner.
Mr. Gaurav Mohunta, Sr. Advocate, with
Mr. Deepak Jaglan, Advocate, and
Mr. Pratyush Sood, Advocate
for the respondent No.1.
***
KULDEEP TIWARI, J. (ORAL)
1. The instant writ petition is directed against the order dated
02.07.2012 passed by the respondent No.2- Employees' Provident Fund
Appellate Tribunal (hereinafter referred to as the "Appellate Tribunal"),
whereby the statutory appeal preferred by the respondent No.1 (hereinafter
referred to as the "Establishment") was allowed, and the order dated
12.09.2011 passed by the petitioner- Assistant Provident Fund
Commissioner, in proceedings under Section 7-A of the Employees'
Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter
referred to as the "EPF Act"), was set aside.
FACTUAL MATRIX
2. Concisely stated, the Establishment was brought within the
ambit of the EPF Act w.e.f. 01.02.2006 and was accordingly allotted a code
number. Upon failure of the Establishment to remit contributions towards
the provident fund, employees' provident family pension fund, and
insurance fund for the period February 2006 to November 2010, an inquiry
under Section 7-A of the EPF Act was initiated for determination of the
statutory dues payable in respect of its regular employees as well as those
engaged through contractors. The proceedings were triggered on the basis of
a report dated 20.12.2010 submitted by the Enforcement Officer's squad.
3. During the course of the inquiry, it emerged that the
Establishment had engaged 36 contractors, out of whom only 03 were
independently covered under the EPF Act. At the request of the
Establishment, the said three contractors were summoned, however, none
appeared. The Establishment also failed to produce the requisite records.
Consequently, on the basis of the material available on record, including
copies of the balance sheets of the Establishment for the period 2004-2005
to 2009-2010 and the trial balance for April 2004 to November 2010, the
petitioner assessed a sum of ₹2,15,42,175/- as payable by the Establishment
vide order dated 12.09.2011. This order caused pain to the Establishment
and propelled it to seek review thereof by filing an application under Section
7-B of the EPF Act, which was dismissed vide order dated 08.11.2011.
Thereafter, the Establishment preferred a statutory appeal under Section 7-I
of the EPF Act, which was allowed by the Appellate Tribunal through the
impugned order dated 02.07.2012, resulting in the setting aside of the order
dated 12.09.2011. Thus, the order dated 02.07.2012 constitutes the bedrock
for the institution of the instant writ petition.
CONTENTIONS OF LEARNED COUNSEL FOR THE PETITIONER
4. Learned counsel for the petitioner contends that it is the sole
responsibility of the Establishment to furnish necessary information for the
identification of beneficiary employees, as such information is peculiarly
within its knowledge and possession. It is submitted that the statutory
obligation of the EPF authorities is, in the first instance, to detect
default/evasion, assess the dues payable, and initiate recovery proceedings.
Identification of beneficiaries is a subsequent step, for which the
Establishment is required to provide adequate and relevant data, as the
authorities cannot reasonably be expected to possess such detailed records.
It is further contended that the Establishment cannot be permitted to take
advantage of its own default by withholding relevant information, and that
the absence of beneficiary details cannot preclude the EPF authorities from
assessing and recovering statutory dues.
5. Learned counsel places reliance upon Paragraph 30 of the
Employees' Provident Funds Scheme, 1952, to submit that the principal
employer bears the primary liability to pay both its own contribution as well
as that payable on behalf of employees engaged directly or through
contractors. Further, it is submitted that Section 29 of the Contract Labour
(Regulation and Abolition) Act, 1970 (hereinafter referred to as the "Act of
1970"), mandates every principal employer and contractor to maintain
registers and records containing particulars of contract labour employed, the
nature of work performed, the rates of wages paid, and such other prescribed
details. It is thus argued that the Establishment is statutorily obligated to
maintain and produce such records before the EPF authorities to facilitate
identification of rightful beneficiaries, and failure to do so disentitles it from
claiming any benefit arising from its own non-compliance. Reliance is also
placed on Rule 78(1)(c) of the Contract Labour (Regulation And Abolition)
Central Rules, 1971 (hereinafter referred to as the "Rules of 1971"), which
similarly imposes an obligation to maintain records pertaining to contract
labour.
6. Finally, learned counsel relies upon the judgment of the
Hon'ble Supreme Court in "Regional Director, E.S.I. Corporation vs.
Kerala State Drugs & Pharmaceuticals Ltd. and ors.", 1995 (Suppl. 3)
SCC 148, to contend that once an establishment is covered under the EPF
Act, the employer is liable to pay contributions in respect of all employees,
whether engaged directly or indirectly. Whether such employees are
unidentifiable today or not is, therefore, irrelevant so long as the
contribution was liable to be paid on their behalf, when they were in
employment.
SUBMISSIONS OF LEARNED SENIOR COUNSEL FOR THE
ESTABLISHMENT
7. Per contra, learned senior counsel for the Establishment stoutly
defends the impugned order and submits that no interference is warranted. It
is contended that the Establishment is engaged in the business of
construction and involves, among others, engaging independent agencies
which complete the work contracted for, along with material and other
processes. Such agencies employ their own labour and are independently
covered under the EPF Act. It is urged that these agencies do not fall within
the ambit of "contract labour" as defined under Section 2(1)(c) of the Act of
1970. Emphasis is laid on the contention that the arrangement is a contract
"for service" and not "of service", and that no contract within the meaning
of the Act of 1970 came into existence.
8. It is further submitted that identification of beneficiary
employees is mandatory for determination under Section 7-A of the EPF
Act, and the onus lies upon the EPF authorities to identify such
beneficiaries, particularly where the contractors are independently registered
under the EPF Act, thereby excluding liability of the principal employer. It
is also contended that, in terms of Rule 80(3) of the Rules of 1971, records
are required to be preserved only for a period of 03 years, and failure to
produce records beyond such period cannot invite any adverse inference.
Finally, it is contended that, in the present case, no employer-employee
relationship has been established with respect to the contract labour, and
since the beneficiaries have not been identified, the demand raised is only a
notional assessment and is not based on actual wages paid.
ANALYSIS OF THE IMPUGNED ORDER
9. A studied survey of the impugned order reveals that the
Appellate Tribunal has set aside the petitioner's order dated 12.09.2011 on
two principal grounds, which are summarized hereunder:-
(i) Prior to assessment and recovery, the EPF authorities are
under an obligation to identify the workers. The initial burden
of identification rests upon the EPF authorities and once it
discharges the said burden by producing the records of
inspection, the burden shifts to the Establishment. However, in
the present case, no such effort was undertaken by the EPF
authorities regarding identification.
(ii) The assessment period is from February 2006 to
November 2010, and in view of Rule 80(3) of the Rules of 1971,
all registers and records are to be preserved for only 03
calendar years from the date of the last entry. Consequently, no
adverse inference can be drawn against the Establishment for
non-production of records pertaining to periods beyond that
limitation.
10. Notwithstanding the above, the Appellate Tribunal itself
recorded that since the workers were engaged in connection with the work
of the Establishment, it is its responsibility to pay for the PF liability and
thereafter to recover such amounts from the contractor.
ISSUE(S) ARISING FOR DETERMINATION
11. The pivotal question of law arising for determination is
"whether the EPF authorities are, in the first instance, required to identify
the beneficiary employees before proceeding to assess and recover
statutory dues, or whether assessment and recovery constitute the primary
obligation of the EPF authorities, with identification of beneficiaries as a
subsequent step?"
12. The answer to the hereinabove formulated question is
discernible from the combined reading of Section 29 of the Act of 1970 and
Rules 78(1)(c) and 80(3) of the Rules of 1971, which are extracted
hereunder:-
"29. Registers and other records to be maintained.--(1) Every
principal employer and every contractor shall maintain such
registers and records giving such particulars of contract labour
employed, the nature of work performed by the contract labour, the
rates of wages paid to the contract labour and such other
particulars in such form as may be prescribed.
(2) Every principal employer and every contractor shall keep
exhibited in such manner as may be prescribed within the premises
of the establishment where the contract labour is employed, notices
in the prescribed form containing particulars about the hours of
work, nature of duty and such other information as may be
prescribed."
"78. Muster Roll, Wages Registers, Deduction Register and
Overtime Register.--
XX XX XX
1(c) Every contractor shall obtain the signature or thumb
impression of the worker concerned against the entries relating to
him on the Register of Wages or Muster Roll-cum-Wages Register,
as the case may be, and the entries shall be authenticated by the
initials of the contractor or his authorised representative and shall
also be duly certified by the authorised representative of the
principal employer in the manner provided in rule 73.
XX XX XX
80. (3) All the registers and other records shall be preserved in
original for a period of three calendar years from the date of last
entry therein."
13. Section 29 imposes an unequivocal statutory obligation upon
every principal employer and every contractor to maintain registers and
records containing particulars of contract labour employed, the nature of
work performed, the rates of wages paid, and other prescribed details. Rule
78(1)(c) imposes a similar obligation, while Rule 80(3) mandates
preservation of such records in original for a period of 03 calendar years
from the date of the last entry therein.
14. In the present case, the default period under assessment spans
February 2006 to November 2010, and the assessment proceedings were
initiated in 2010 itself. The Establishment was, therefore, well within the
prescribed period of limitation and under statutory obligation to maintain
and produce records for the period 2007 to 2010, which it failed to produce.
In such circumstances, the Establishment cannot be permitted to take
advantage of its own default by contending that beneficiaries must first be
identified by the EPF authorities before assessment and recovery can be
undertaken.
15. The contributions that fell due and became payable during the
relevant period are recoverable irrespective of whether the concerned
employees remain in employment. Gainful reference in this regard can be
placed upon the verdict rendered by the Hon'ble Supreme Court in the case
of Regional Director, E.S.I. Corporation (supra), categorically holding that
whether the employees are unidentifiable today or not is, therefore,
irrelevant so long as the contribution was liable to be paid on their behalf,
when they were in employment. The relevant paragraph of the said verdict
is extracted hereinbelow:-
"3. There is thus no quid pro quo between the persons insured and
the benefit available under this Act. As regards the finding that the
workmen were unidentifiable, what is forgotten is that under the act,
once an establishment comes to be covered by the Act. the employer
becomes liable to pay the contribution in respect of the employees in
his employment directly or indirectly. The contribution which had
become payable for the relevant period has to be paid even if the
employees concerned are no longer in employment. Whether the
employees are unidentifiable today or not is, therefore, irrelevant so
long as the contribution was liable to be paid on their behalf, when
they were in employment."
16. Accordingly, this Court answers the hereinabove formulated
question of law thus:
"The primary obligation of the EPF authorities is to assess
the statutory dues payable and effect recovery thereof, and the
exercise of identifying beneficiaries is a subsequent step."
17. The finding of the Appellate Tribunal that recovery cannot be
effected in the absence of identification of beneficiaries is, therefore, legally
untenable and does not withstand judicial scrutiny.
18. At this juncture, it is also apposite to observe that the obligation
to produce records before the EPF authorities rests upon the Establishment,
which bears the statutory duty to maintain such records. Where an
Establishment withholds records with a view to defy the assessment
proceedings, it is disentitled from claiming any benefit arising from such
non-production, and an adverse inference is required to be drawn against it.
19. The Appellate Tribunal, while correctly recording that the
principal employer bears primary liability for PF dues with the right to
recover from the contractor, fell into manifest error in simultaneously
setting aside the legally valid and sustainable assessment order passed by
the petitioner.
20. As regards the finding of the Appellate Tribunal concerning
Rule 80(3) of the Rules of 1971, the same is predicated upon a factual error.
The assessment was initiated in 2010 in respect of the period February 2006
to November 2010. The Establishment was, therefore, under a statutory
obligation to maintain and produce records for the period from 2007
onwards. Its failure to do so disentitles it from claiming any benefit.
21. Insofar as the contention of the Establishment that it engaged
independent agencies/contractors for the supply of finished products, and is
therefore not covered under the EPF Act, is concerned, the same is devoid
of merit. There is no material on record, either before the Appellate Tribunal
or this Court, to ascertain or evaluate the nature of the contractual
arrangements between the Establishment and such agencies/contractors.
Once the Establishment specifically asserts non-coverage of such
agencies/contractors under the EPF Act, the initial burden of proof rests
upon it to substantiate the claim by producing cogent and relevant
documentary evidence. However, in the present case, the position is
altogether different, as the Establishment has failed to produce the relevant
documents before the EPF authorities.
FINAL ORDER
22. In aftermath, the instant writ petition is allowed. The
impugned order dated 02.07.2012 passed by the Appellate Tribunal is set
aside, and the order dated 12.09.2011 passed by the petitioner is upheld.
23. Pending application, if any, stands disposed of accordingly.
(KULDEEP TIWARI)
April 29, 2026 JUDGE
devinder
Whether speaking/reasoned : Yes/No
Whether Reportable : Yes/No
