Case Study: EPF Authority Cannot Impose Liability for Excluded Employees

Case:

M/s. Calcutta Club Limited v. Union of India & Ors.
WPA No. 7030 of 2008

Court and Date:

Calcutta High Court
Hon’ble Mr. Justice Ajay Kumar Gupta
Date: 22 August 2025

Relevant Law:

• Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 – Sections 7A and 7B
• Employees’ Provident Fund Scheme, 1952 – Paragraph 2(f) (Definition of Excluded Employees)
• G.S.R. 608(E), dated 22 August 2014 – Amending the wage ceiling from ₹6,500 to ₹15,000

Background:

The petitioner, M/s. Calcutta Club Limited, was registered under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
The company had four employees, one of whom, Mr. Debabrata Ghosh, was engaged as a consultant earning a monthly remuneration of ₹7,850, including consultancy fees and allowances. This exceeded the then statutory wage ceiling of ₹6,500, qualifying him as an excluded employee under para 2(f)(ii) of the EPF Scheme.

The other three employees had already withdrawn their PF accumulations before joining the company, making them ineligible for re-enrolment under the EPF Scheme.

Despite this, the Regional Provident Fund Commissioner (RPFC) issued a summons under Section 7A, alleging non-compliance and later passed an order directing payment of ₹34,884 as provident fund dues for Mr. Ghosh. The amount was debited from the petitioner’s bank account.

Legal Issue:

Whether the EPF Authority can impose provident fund liability on an establishment for excluded employees—that is, employees whose wages exceed the statutory limit or who have previously withdrawn their accumulations.

Key Legal Findings:

1. Definition of Excluded Employees (Para 2(f) of EPF Scheme)

The Court reiterated that:

• Employees who have withdrawn their full PF accumulations before rejoining another establishment are excluded.
• Employees whose monthly wages exceed the statutory limit (₹6,500 at the time, now ₹15,000) are also excluded from PF coverage.

Thus, there is no statutory obligation for the employer to make contributions for such employees.

2. RPFC’s Order Arbitrary and Mechanical

The High Court noted that the EPF Authority failed to consider:

• The petitioner’s representation dated 8 September 2007.
• The salary slips proving that Mr. Ghosh earned above the wage ceiling.

The order was passed mechanically and arbitrarily, without proper consideration of law or evidence, violating the spirit of Section 7A of the EPF Act.

3. Rejection of Review Petition under Section 7B

The petitioner’s review application was dismissed without addressing the legal position or documents submitted. The Court held that such dismissal was untenable, as review under Section 7B requires due consideration of evidence and statutory interpretation.

4. Legal Clarification on Wage Ceiling

The Court observed that prior to 2014, the wage ceiling was ₹6,500, later amended to ₹15,000 (effective from 1 September 2014). Since Mr. Ghosh’s salary was above ₹6,500, he qualified as an excluded employee, and no contribution liability arose.

Judgment:

Justice Ajay Kumar Gupta held that:

• Mr. Debabrata Ghosh was an excluded employee under Para 2(f)(ii).
• The RPFC’s order was arbitrary and without legal basis.
• The review rejection under Section 7B was improper.
• The EPF Authority cannot impose liability regarding excluded employees.

Accordingly, the Court allowed the writ petition and directed the RPFC to refund ₹34,884 to the petitioner with 7% simple interest within 15 days, failing which 10% interest would apply.

Conclusion:

The Calcutta High Court reaffirmed that EPF obligations apply only to eligible employees under the Scheme. Employers cannot be forced to contribute for those earning above the wage ceiling or who have already withdrawn their PF accumulations.

The judgment emphasizes that EPF authorities must exercise diligence before determining liability under Section 7A, and any order passed without proper inquiry or reasoning is liable to be set aside.

Key Learning:

1. Excluded Employees: Individuals earning above the statutory wage limit or who have withdrawn full PF accumulations are outside EPF coverage.
2. No Employer Liability: Employers have no statutory duty to contribute PF for excluded employees.
3. Proper Consideration Required: Authorities must examine all representations and documents before issuing orders.
4. Arbitrary Orders Invalid: Mechanical or unreasoned orders under Section 7A are unsustainable in law.
5. Amended Ceiling: Post-2014, the EPF wage ceiling increased to ₹15,000 per month, maintaining the same principle.

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