Case Study: Interest Denial on Inoperative PF Accounts – EPFO Held Liable

📌 Case

Alok Kumar Agarwal vs. Union of India

🏛 Court and Date

Delhi High Court
Justice: Hon’ble Ms. Prathiba M. Singh
Year: 2021

⚖ Relevant Law

• Para 72(6) of the EPF Scheme, 1952 – Covers interest accrual and inoperative accounts
• Para 60 – Governs general interest payment on Provident Fund balances

📚 Background

• Mr. Alok Kumar Agarwal retired in October 2014 at age 57.
• He did not file any PF withdrawal claim until December 2018 — a delay of over 36 months.
• The EPFO refused to pay interest on his PF balance for the period after December 2017, citing Para 72(6).

❓ Legal Issue

Is the EPFO justified in denying interest on a PF account if the member delays claiming it beyond 36 months post-retirement?

🔍 Key Legal Findings

• Para 72(6) clearly states: If no application is made within 36 months, the account becomes inoperative, and no further interest is payable.
• The petitioner’s claim came four years after retirement, thus violating the provision.
• However, EPFO failed to notify the petitioner about the account status or its transition to “inoperative.”
• The Court highlighted that account holders must be properly informed, especially when their funds are affected.

⚖ Judgment

• Para 72(6) was correctly applied due to the delay in claiming withdrawal.
• No interest was held payable from Dec 2017 to Dec 2018.
• However, for not informing the petitioner about the change in account status, the EPFO was directed to pay ₹1,00,000 in costs.

✅ Conclusion

• EPFO’s interpretation of inoperative status and interest cut-off was legally valid.
• But procedural fairness requires that employees must be notified when their account status changes, especially if it affects their financial rights.

💡 Key Learning

• Delay beyond 36 months post-retirement in claiming PF can lead to loss of interest.
• Employers and EPFO must communicate clearly regarding changes in PF account status.
• If the delay is not the member’s fault (e.g., returned cheque or employer issues), interest cannot be denied.
• This judgment safeguards retired employees’ rights by imposing accountability on EPFO for procedural lapses.

Download the PDF copy of this Case:

Join the community that’s changing the way businesses handle compliance in India.