BANK ACCOUNTS OF DEFAULTING EMPLOYERS CANNOT BE PERVERSELY FROZEN BY EPFO…

The EPFO ought to ensure that indiscriminate communications to clients of defaulting employers and freezing orders of bank accounts are not written so as to jeopardies the business interests of employers.

The EPFO may take less stringent steps such as debit-freeze etc. as a first step for achieving the purpose. Freezing of bank accounts ought to be resorted to in exceptional circumstances since complete freezing of Bank accounts would stop the cycle of revenue which would also be detrimental to the EPFO itself because it would thereafter not be possible for the defaulting employers to recover revenues from their clients as well as make payment of salary/wages to its employees.

There has been a perverse tendency among the Employees’ Provident Fund officials to unnecessarily flaunt the powers vested in them. They do not hesitate to take drastic decisions in freezing the bank accounts of the defaulting employers.

This mentality has done more harm than good to the cause that they espouse for the benefit of the working class. In fact, the bank accounts should be frozen only in exceptional circumstances because that is bound to result in stopping the cycle of the revenue, which will be detrimental not only to the organisation but also to the EPFO. This step should be taken after due deliberation and consideration and not in a knee-jerk manner.

In almost every order under section 7A of Employees’ Provident Funds & MP Act determination of money contains a clause that the amount should be deposited by the employer within 15 days of the date of order whereas section 7-I of the Act provides filing of appeal before the EPF Appellate Tribunal within 60 days and another 60 days can be extended when there is a sufficient cause for not filing the appeal in first 60 days.  The judicial discipline cause for such officers vested with the powers of the Civil Court while holding proceedings under section 7A of the Act they should act like Judges.

Nevertheless, the Recovery Officers vested with the power under sections 8-F and 8-F act in the most arbitrary and most cruel manner for recovery of use prior to the time period of appeal.  They not only threaten to make recovery but also freeze the bank accounts of the employers which cause undue hardship.  The Recovery Officers do take such steps to impress upon the higher authorities.

In Vishakha Facility Management vs. The Regional Provident Fund, 2022 LLR 218 the Delhi High Court had made it clear that the freezing of bank accounts of defaulting employers ought to be done after due deliberation and consideration and not in a knee jerk manner.

The EPFO ought to ensure that indiscriminate communications to clients of defaulting employers and freezing orders of bank accounts are not written so as to jeopardise the business interests of employers. The EPFO may take less stringent steps such as debit-freeze etc. as a first step for achieving the purpose. Freezing of bank accounts ought to be resorted to in exceptional circumstances since complete freezing of Bank accounts would stop the cycle of revenue which would also be detrimental to the EPFO itself because it would thereafter not be possible for the defaulting employers to recover revenues from their clients.

In the above-mentioned case, the Petitioner company sought directions for withdrawal of letters of attachment issued by the Respondent-Regional Provident Fund Commissioner to the clients and banks of the Petitioners because they were unable to pay the amount of Rs. 50,00,000/- to the RPFC as deposit, as directed by the Court vide order dated 4th August 2021.

When enquired by the Court as to under what powers did RPFC take the action of issuing attachment letters and bank freezing letters, the RPFC submitted that the action was taken under section 8F of the Act, and certain other provisions. When further enquired as to why the orders of the Central Government Industrial Tribunal (hereinafter ‘CGIT’) dismissing the appeal due to the failure to deposit, etc. was not awaited for, the answer was that since the CGIT’s order dated 3rd March 2020 was subject to deposit of the pre-deposit amount of Rs.3,40,44,872/- and since the stay was vacated, the RPFC took the said action as per the Act.

However, On the last date i.e., 3rd September 2021, the High Court had clearly directed that all notices freezing the bank accounts would stand suspended and the letters issued to the clients of the Petitioner shall also stand suspended but none of the bank accounts has been de-frozen, except one bank account in Indian Bank.

The High Court ruled that in future the EPFO office ought to ensure that such indiscriminate communications to clients and freezing orders of bank accounts are not written so as to jeopardise the business interests of employers.

Accordingly, the Petitioner was directed to make the payment of Rs.50,00,000/-  within two weeks. If the said payment was not made, the CGIT was permitted to proceed in accordance with the law. If the Petitioner was to face any difficulties owing to the RPFC’s letters issued to the clients or to the banks, it was permitted to move an application before the Court giving the specific names of the officer and of the organisation which is still giving effect to the earlier orders passed by the RPFC. Upon such an application being moved, this Court would then consider the same in accordance with the law.