Gujarat High Court
Shekhar Chandramohan Shukul vs The Assistant Provident Fund ... on 20 August, 2025
NEUTRAL CITATION
C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1354 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
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Approved for Reporting Yes No
yes
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SHEKHAR CHANDRAMOHAN SHUKUL
Versus
THE ASSISTANT PROVIDENT FUND COMMISSIONER AND RECOVERY
OFFICER
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Appearance:
MR.VARUN K.PATEL(3802) for the Petitioner(s) No. 1
MR AV NAIR(5602) for the Respondent(s) No. 1
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 20/08/2025
ORAL JUDGMENT
1. The present petition is filed under Article 226 of the Constitution of India challenging the order dated 03.01.2020 passed by the respondent under Section 8F of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ('the EPF Act'), whereby the petitioner has been held personally liable to pay the defaulted amount.
2. Gist of the Case:
2.1. The petitioner was a Director of a company named Taj Haberdashery Products Pvt. Ltd., engaged in the business of manufacturing zip fasteners since the year 2000. The establishment was duly covered under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 ('the EPF Act') and was Page 1 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined allotted Code No. GJ/BD/21497.
2.2. The company started facing severe financial difficulties from 2011-2012 owing to adverse market conditions and other factors, compelling it to discontinue production in 2014 and eventually close down its factory. Consequently, the company surrendered its Central Excise Registration Certificate vide communication dated 25.09.2014.
Thereafter, one of the corporate creditors initiated insolvency proceedings before the National Company Law Tribunal, Ahmedabad Bench ('the NCLT'), under the provisions of the Insolvency and Bankruptcy Code, 2016. By order dated 06.01.2020, the learned Presiding Officer, NCLT, directed dissolution of the company with effect from the said date.
2.3. Meanwhile, in December 2015, i.e. prior to dissolution, the Provident Fund Department initiated proceedings for recovery of interest under Section 7Q and damages under Section 14B of the EPF Act for alleged delayed payment of provident fund contributions during the period from May 2013 to November 2015. A show-cause notice was issued to the company on 22.12.2015. Thereafter, damages under Section 14B were assessed at ₹10,98,640/- and interest under Section 7Q was Page 2 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined assessed at ₹6,71,931/-, aggregating to ₹17,70,571/-. Against the said demand, the company deposited a sum of ₹2,00,000/- in November 2017, but failed to make any further payment. Consequently, a recovery certificate came to be issued on 18.04.2018 for the balance sum of ₹15,70,575/- (₹10,98,640/- towards damages under Section 14B and ₹4,71,931/- towards interest under Section 7Q).
2.4. In connection with the above recovery, a notice of demand was issued by the respondent to the defaulting establishment on 12.09.2019. The petitioner, vide communication dated 17.09.2019, informed the respondent about the appointment of a liquidator by the NCLT. Thereafter, summons were issued to the petitioner to remain personally present on 10.10.2019, 16.10.2019, 27.11.2019 and 16.12.2019 with regard to the proposed action under Sections 8B to 8G of the EPF Act. The petitioner, through his letters dated 11.10.2019, 18.11.2019, 11.12.2019 and 18.12.2019, responded to the said summons. Notwithstanding the same, the respondent, by order dated 03.01.2020 passed under Section 8F of the EPF Act, attached two personal bank accounts of the petitioner, namely, one with ICICI Bank, Old Padra Road Branch, Vadodara, and another with Kotak Page 3 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined Mahindra Bank, Alkapuri Branch, Vadodara, for recovery of arrears pertaining to the establishment of M/s Taj Haberdashery Products Pvt. Ltd., of which the petitioner was a Director until its dissolution.
2.5. On 30.01.2020, the petitioner once again addressed the respondent, intimating about the dissolution of the company by the NCLT and requested for installments to clear the dues towards interest. Along with the said request, the petitioner also tendered a cheque of ₹15,000/- and sought release of the attached bank accounts. However, the attachment under Section 8F of the EPF Act was not withdrawn.
2.6. Being aggrieved by the recovery proceedings and the attachment order dated 03.01.2020 passed under Section 8F of the EPF Act, as well as the consequential proceedings under Section 14B of the EPF Act, the present petition is filed.
3. Heard the learned advocate Mr.Varun Patel for the petitioner and learned advocate Mr.A.V.Nair for the respondent.
4. Learned advocate Mr. Varun Patel submits that the action of the respondent in attaching the personal account of the petitioner, who was a Director of the company which now stands dissolved, is erroneous, Page 4 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined as there is no provision under the EPF Act empowering the respondent to attach the personal property of a Director for recovery against the company.
4.1. It is further submitted by learned advocate Mr. Patel that pursuant to the recovery certificate and the order with respect to damages under Section 14B and interest under Section 7Q of the EPF Act, amounting to ₹15,70,571/-, the petitioner has not received any recovery certificate or order regarding damages and interest. It is also submitted that, as per Rule 1 of the Second Schedule of the Income Tax Act, 1961 read with Section 8G of the EPF Act, the term "defaulter" refers to the employer mentioned in the recovery certificate. Section 2(e) of the EPF Act defines the term "employer". A Director of the company cannot automatically be treated as an employer unless the conditions stipulated under Section 2(e) are satisfied and unless a recovery certificate is passed by the competent authority after granting such Director an opportunity of hearing. No such recovery certificate has been issued holding the petitioner responsible as an employer.
4.2. It is further submitted by learned advocate Mr. Patel that Section 2(e) of the EPF Act defines the Page 5 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined term "employer" in two parts: the first part relates to establishments which are factories, and the second part relates to establishments other than factories. In the present case, the establishment is a factory covered under the Factories Act, 1948. Hence, under Part I of Section 2(e), the owner or occupier of the factory would be considered the employer. In the instant case, the owner of the factory is the company itself, and therefore, the petitioner, being a Director of the company, cannot be termed as an "employer" of the factory. The petitioner cannot be considered an occupier or manager under Section 7(1)(f) of the Factories Act, as he was never an employer within the meaning of Section 2(e) qua the factory owned by the company. Thus, the petitioner cannot be personally held liable to discharge the obligations of the company from his personal assets. In absence of any statutory provision holding a Director personally liable, the respondent has committed an error of law and jurisdiction in passing the impugned order.
4.3. It is further submitted that Section 14B of the EPF Act empowers the authority to levy damages in cases of default by the employer. The language of Section 14B, particularly the use of the words "may recover", indicates that the provision is Page 6 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined directory and not mandatory. Section 14B does not envisage mandatory levy of damages in every case. The existence of mens rea or actus reus to contravene the statutory provisions is a necessary ingredient for the levy and quantum of damages. The respondent has completely overlooked these aspects while passing the order.
4.4. Learned advocate Mr. Patel further submits that the company was facing severe financial difficulties and ultimately had to stop production in 2014, leading to closure of the factory. Therefore, there was no mens rea or actus reus to contravene any statutory provision of the Act. Moreover, Section 14B empowers recovery of damages not exceeding the arrears due at the time of invocation. Since the contribution had already been paid, albeit belatedly, there were no arrears on the date of invocation of Section 14B. Hence, the order under Section 14B is unsustainable.
4.5. It is further submitted that pursuant to the order dated 21.01.2020 passed by this Court, the petitioner filed an additional affidavit declaring that he owns no immovable assets and that he is running a small trading business in the name of "SaiFab Enterprise" from rented premises with eight persons employed therein. Despite this Page 7 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined Court's direction restraining coercive action, the respondent issued an attachment notice dated 17.01.2020 attaching the rented premises where the petitioner is carrying on business.
4.6. Learned advocate Mr. Patel submits that the establishment was set up and managed by the father of the petitioner, namely Chandramohan Shukul, who was also the Managing Director of the company. The petitioner was not responsible for the day-to-day affairs and had no ultimate control over the establishment.
4.7. Learned advocate Mr. Patel therefore submits that as the petitioner has already discharged the liability of PF contribution, the order imposing damages of ₹10,98,614/- under Section 14B and interest under Section 7Q deserves to be quashed and set aside.
4.8. It is further submitted that while passing the order, the department relied upon the decision in Atulya Yogendra Mafatlal v. Regional Provident Fund Commissioner and Anr., reported in 2008 (1) GLR 301 and the circular dated 19.06.2012 based thereon. However, the said decision was challenged before the Division Bench, which initially stayed its operation by order dated 06.05.2018, and subsequently permitted Page 8 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined withdrawal of the LPA as well as SCA by order dated 02.12.2015. Hence, reliance placed on Atulya Yogendra Mafatlal (supra) is misconceived as it no longer holds the field.
4.9. Therefore, the impugned order deserves to be quashed and set aside and the present petition allowed.
5. Learned advocate Mr. Nair, appearing for the respondent-authority, has submitted that the petitioner is one of the Directors of Taj Haberdashery Products Pvt. Ltd., which is an establishment covered under the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, having been allotted a PF Code. The said establishment, being a Private Limited Company, was managed by the petitioner herein as a Director, who committed defaults from March 2006 to June 2015 in depositing the provident fund contribution deducted from the wages of the employees.
5.1. It is submitted by the leaned advocate Mr. Nair that the petitioner is covered under Section 2(e) of the EPF Act, being the occupier and Director of the establishment having control over its affairs. In the old Form '5A', i.e. the ownership return required to be submitted under Para 36A of the EPF Scheme, the name of Mr. Shekhar Shukul is shown as the Page 9 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined occupier of the establishment. Column No. 11 of the said Form '5A', which pertains to particulars of persons in charge and responsible for the conduct of the business of the establishment, contains the names of Mr. C.M. Shukul and Mr. Shekhar Shukul, thereby establishing the status of the petitioner as a Director and ultimately an 'employer' as defined under Section 2(e) of the EPF Act.
5.2. The employer was duty bound to ensure prompt compliance of the provisions of the Act and the schemes framed thereunder. However, despite deducting the contribution from the wages of the employees, the petitioner failed to deposit the same with the department during the defaulting period, thereby constraining the department to initiate various proceedings, including filing of an FIR under Section 406 of the IPC for criminal breach of trust in respect of provident fund dues deducted from employees' wages for the period from October 2009 to June 2012, involving an amount of ₹6,00,916/-. This reflects that the petitioner is a habitual defaulter with a history of defaults in payment of provident fund dues.
5.3. It is further submitted by learned advocate Mr. Nair that the plea of financial and other difficulties allegedly faced by the petitioner in the year 2011- Page 10 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined 12 was never disclosed to or within the knowledge of the answering authority. It is further submitted by learned advocate Mr. Nair that the department issued show cause notice No.4025 dated 22.12.2015, covering the remittance period from 07.05.2013 to 30.11.2015. The said notice was issued for levying interest under Section 7Q of the EPF Act and also called upon the petitioner to show cause as to why damages under Section 14B of the Act should not be assessed.
5.4. It is submitted that the inquiry under Section 14B was adjourned as many as 23 times, but the petitioner, i.e. Mr. Shekhar Shukul, Director of the establishment, appeared only once on 21.08.2017. On that occasion also, the petitioner merely sought time to deposit PF dues and made no further representation against the levy of interest or proposed damages. The only communication thereafter was a letter dated 16.11.2017, accompanied with a demand draft dated 15.11.2017 for an amount of ₹2,00,000/-, which was adjusted against the interest levied under Section 7Q of the Act.
5.5. Since the establishment repeatedly failed to appear in the inquiry, the case was finally disposed of on 27.02.2018 and a demand notice was issued Page 11 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined on 01.03.2018, levying interest under Section 7Q and assessing damages under Section 14B of the EPF Act. The said order was dispatched by RPAD to the petitioner at the address of the establishment as stated on its letterhead. Therefore, the contention raised by the petitioner that he did not receive the order under Section 14B or the demand notice under Section 7Q is incorrect and baseless. Thereafter, a recovery certificate was issued on 10.04.2018 for the amount of ₹15,70,571/-, which was also sent to the address mentioned on the establishment's letterhead. However, the same was returned with postal remarks "Not Known."
5.6. It is further submitted by learned advocate Mr. Nair that during this period, an application under Section 10 of the Insolvency and Bankruptcy Code was filed by the establishment before the NCLT, Ahmedabad, for initiation of the corporate insolvency resolution process. However, the said application was subsequently withdrawn by the establishment through a withdrawal plea, which came to be allowed by the NCLT vide order dated 04.07.2018. No moratorium under Section 13 of the IBC was ever issued till 29.10.2018. Therefore, there was no bar on the proceedings for assessment or recovery of damages under Section Page 12 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined 14B of the EPF Act or for levying interest under Section 7Q of the Act.
5.7. It is submitted by learned advocate Mr. Nair that another notice was sent on 13.08.2018 to the Director's residential address available in the record, which was also returned with the postal remark "Left."
6. It is submitted by learned advocate Mr. Nair that M/s. Tirupati Syntex, being the creditors of the establishment, filed an application under Section 9 of the Insolvency and Bankruptcy Code before the NCLT, Ahmedabad, wherein the adjudicating authority vide order dated 29.10.2018 admitted the petition and appointed an Interim Resolution Professional (hereinafter referred to as "the IRP"). Accordingly, moratorium under Section 31A of the I.B. Code came into effect only from 29.10.2018. The claim of the authority was forwarded to the said IRP on 26.12.2018. Thereafter, the IRP, by communication dated 11.07.2019, informed that NCLT had pronounced an order of liquidation of the establishment on 01.05.2019. Along with the communication, the IRP attached a preliminary report regarding the affairs of the establishment, inter alia informing that the liquidator had determined and realized assets of the corporate debtor and the funds Page 13 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined available were very negligible against the liability of the corporate debtor. Therefore, the liquidator expressed inability to distribute any funds to the operational creditors, stakeholders or any other contributors of the corporate debtor. It was further informed that there were no realizable assets of the establishment and the moratorium no longer remained in force. Consequently, further recovery proceedings were initiated and notice was issued against the director on 12.09.2019, which was replied to by the petitioner on 17.09.2019 stating that the matter was pending before the NCLT and that the authority may contact the IRP. Again, the authority wrote to the IRP, who vide letter dated 16.10.2019 forwarded his final report, summarising the entire liquidation process, stating that the corporate debtor company had no non-current assets and only certain current assets which were not realisable. The report further stated that the properties of the corporate debtor were insufficient even to meet the cost of the liquidation process, that no further investigation into the affairs of the corporate debtor was required, and that an early dissolution of the company deserved to be sought by applying before the adjudicating authority under Regulation 14 of the Liquidation Process Regulations, 2016.
6.1. In these circumstances, when it became clear to Page 14 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined the authority that no recovery could be made through the liquidation process and there was no bar on carrying out recovery independently, summons were issued to the petitioner and to Mr. Chandramohan Shukul, Director of the establishment, to appear and represent their case on 10.10.2019, 23.10.2019, 06.11.2019, 27.11.2019 and 16.12.2019. On none of these occasions did the directors appear; instead, communications were sent stating that the matter was pending before the NCLT. The petitioner, though fully aware of the notices, deliberately chose not to participate or represent the case and therefore the authority had no option but to pass an order dated 20.12.2019 holding the petitioner liable as a Director of the establishment company, relying upon the judgment in Atulya Yogendra Mafatlal (supra) and the Circular dated 19.06.2012.
6.2. Pursuant thereto, an order under Section 8B of the EPF Act was passed on 03.01.2020 to recover the amount from the Bank Account of the petitioner. Since the establishment had neither deposited the PF dues nor preferred any appeal before the Appellate Tribunal, proceedings for recovery of dues were initiated by issuing an order under Section 8F of the EPF Act upon the Banker of Page 15 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined the petitioner, who is duly liable as an employer of the establishment. In order to avoid coercive action, the petitioner submitted a cheque dated 13.01.2020 for an amount of ₹50,000/-, which, upon presentation, was dishonoured with the remark "Funds Insufficient". From the petitioner's Bank Account statement, it emerges that from 03.01.2020 to 16.01.2020, there was a debit balance of ₹2,95,642/-. Therefore, it is evident that the cheque was issued with mala fide intention despite knowledge of insufficiency of funds.
6.3. Learned advocate Mr. Nair has further submitted that if an employer defaults in payment of any contribution to the provident fund, he is liable to pay, in addition, penalty and damages. Mere existence of sufficient cause for delayed payment is not a ground for exemption from payment of damages. Reliance is placed upon the decision of the Kerala High Court in Bharat Plywood and Timber Products (P) Ltd. v. Employees' P.F. Commissioner, reported in (1977) 50 FJR 74 and the Bombay High Court in Vegetable Vitamins Food Co. Ltd. v. RPFC, Maharashtra & Goa, reported in (1995) 70 FLR 102, to submit that once there is default or failure to pay contribution, the provisions of Section 14B of the Act are automatically attracted. He has Page 16 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined further relied upon the judgment of the Apex Court in Organo Chemicals Industries & Anr. v. Union of India & Ors., reported in (1979) 55 FJR 283, wherein it was held that while assessing damages, the Commissioner is bound not only to take into account the loss caused to the beneficiaries but also the default of the employer in making timely contributions, which warrants the imposition of damages. Learned advocate Mr. Nair therefore submitted that the impugned order dated 03.01.2020 was passed after following the due principles of natural justice, as evident from the fact that pursuant to the recovery certificate, notice of demand was issued to the employer, but the petitioner neither remitted the provident fund dues despite knowledge of the same, nor made any representation objecting to the notice.
7. Having considered the arguments advanced by the learned advocates for the respective parties, the moot questions that arise for consideration before this Court are: (i) whether the petitioner, who is the director of the company, can be regarded as an "employer" under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and (ii) whether the dues of the EPF Authority can be recovered from the personal property of the petitioner. For deciding the aforesaid issues raised in Page 17 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined the petition, it would be profitable to refer to the definitions provided under Sections 2(e), 8 and 8B of the Act, which read as under:
"2(e): Employer means-
(i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under clause f of sub-section 1 of section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and
(ii) in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent;"
"8-B. Issue of certificate to the Recovery Officer.-- Where any amount is in arrear under section 8, the authorised officer may issue, to the Recovery Officer, a certificate under his signature specifying the amount of arrears and the Recovery Officer, on receipt of such certificate, shall proceed to recover the amount specified therein from the establishment or, as the case may be, the employer by one or more of the modes mentioned below:
(a)attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer;
(b)arrest of the employer and his detention in prison;
(c)appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer:Provided that the attachment and sale of any property under this section Page 18 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined shall first be effected against the properties of the establishment and where such attachment and sale is insufficient for recovering the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears. (2)The authorised officer may issue a certificate under sub-
section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken."
7.1. An analysis of Section 2(e) of the Act shows that where the establishment is a factory, its owner or occupier, including the agent of such owner or occupier and the legal representative of a deceased owner or occupier, falls within the definition of an "employer." In relation to any other establishment, the person or authority having ultimate control over the affairs of the establishment would fall within the definition of an "employer." Where the affairs of the establishment are entrusted to a manager or managing agent, such manager or managing agent would also fall within the definition of an "employer."
7.2. Section 8 of the EPF Act provides for recovery of money due from the employer as arrears of land revenue. Section 8B(1) prescribes the mode of recovery, empowering the Recovery Officer to effect recovery from the establishment or employer by way of attachment or sale of the immovable or movable properties of the Page 19 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined establishment or the employer, arrest and detention of the employer in prison, or by appointment of a receiver for the management of the movable or immovable properties of the establishment or the employer. The proviso to Section 8B(1) further lays down that if the Recovery Officer intends to resort to the mode of attachment or sale of property, the same must first be directed against the properties of the establishment, and the properties of the employer shall be resorted to only if the amount realized from the sale of the establishment's properties is insufficient to recover the entire arrears.
8. In the background of the aforesaid definitions and propositions, certain undisputed facts emerging from the record are required to be narrated hereinbelow:
8.1. (1) Taj Haberdashery Products Pvt. Ltd. is an establishment covered under the Act, having PF Code No. GJ/BD/21497. The said establishment is a private limited company managed by its Directors, and the present petitioner is one of such Directors.
It is an admitted position that there was a default in depositing the provident fund contributions with the Department for the period from March 2006 to June 2015, despite the contributions having been deducted from the wages of the employees.
Page 20 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined 8.2. To suggest that the petitioner was having ultimate control over the affairs of the company, reliance is placed on Form '5A', which forms part of the record at page No.66. In the said form, under the particulars of owners, two persons, namely Mr. C.M. Shukul and Mr. Shekhar Shukul, were shown. In Column No.11, i.e., the particulars of persons who are in charge of, and responsible for, the conduct of the business of the establishment, the names of two persons were mentioned, and the form was signed by Mr. C.M. Shukul, the father of the present petitioner.
8.3. In the revised Form '5A' (page No.68), under Column No.8, the particulars of owners reflected four persons, and in Column No.10 the petitioner was shown as an occupier. The said revised form bears the date 01.02.2003. It is pertinent to note that the ownership return in Form '5A' is required to be submitted by every employer under Para 36A of the EPF Scheme, 1952.
"36A. Employer to furnish particulars of ownership Every employer in relation to a factory or other establishment to which the Act applies on the date of coming into force of the Employees' Provident Funds (Tenth Amendment) Scheme, 1961, or is applied after that date, shall furnish [in duplicate] to the Regional Commissioner in Form No. 5A annexed hereto, [particulars of all the branches and departments, owners], occupiers, directors, partners, manager or any Page 21 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined other person or persons who have the ultimate control over the affairs of such factory or establishment and also send intimation of any change in such particulars, within fifteen days of such change, to the Regional Commissioner by registered post and in such other manner as may be specified by the Regional Commissioner: Provided that in the case of any employer of a factory or other establishment to which the Act and the Family Pension Scheme, 1971, shall apply the aforesaid Form may be deemed to satisfy the requirements of the Employees' Family Pension Scheme, 1971, for the purpose specified above. Provided further that above mentioned details shall be furnished by the employer in the electronic format also, in such form and manner, as may be specified by the Commissioner."
9. The Form '5A', as mentioned hereinabove, was signed by Mr. C.M. Shukul and the status of the petitioner was shown as a Director, who, in terms of Section 2(e) of the EPF Act, falls within the definition of an employer having ultimate control over the affairs of the establishment.
9.1. It is not in dispute that in December 2015, the Provident Fund Department initiated proceedings for recovery of interest under Section 7Q of the EPF Act and damages under Section 14B of the EPF Act for the delayed payment of provident fund contributions for the period from May 2013 to November 2015. Pursuant thereto, show-cause notices were issued on 22.12.2015, and damages under Section 14B were assessed at ₹10,98,640/-, Page 22 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined while interest under Section 7Q was assessed at ₹6,71,931/-, aggregating to a total of ₹17,70,571/-. Out of the said amount, the company, through the present petitioner, paid ₹2,00,000/- in November 2017. As the balance amount remained unpaid, a Recovery Certificate dated 18.04.2018 came to be issued for recovery of ₹10,98,641/- towards damages under Section 14B and ₹4,71,931/- towards interest under Section 7Q, totaling ₹15,70,571/-.
9.2. The petitioner informed that an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IB Code) for initiation of Corporate Insolvency Resolution Process (CIRP) had been filed before the NCLT. However, the said application was subsequently withdrawn on 04.07.2018. It is an admitted position that no moratorium under Section 13 of the IB Code was ever in operation up to 29.10.2018. Thereafter, one of the operational creditors of the establishment, M/s. Tirupati Syntex, Ahmedabad, filed an application under Section 9 of the IB Code before the NCLT, Ahmedabad, which came to be admitted by order dated 29.10.2018, appointing Mr. Prakash Tekwani, Chartered Accountant as the Interim Resolution Professional (IRP). Consequently, a moratorium under Section 13(1) Page 23 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined
(a) of the IB Code came into effect from 29.10.2018. The claim of the present respondent Department was lodged with the IRP on 26.12.2018, and it was thereafter informed by the IRP on 11.07.2019 that the NCLT had passed an order of liquidation on 01.05.2019, observing that the liquidator had determined the realised assets of the corporate debtor to be negligible and insufficient even to meet the liquidation costs. Accordingly, it was conveyed that no funds were available for distribution to operational creditors, stakeholders, or other contributors.
9.3. On realising that the establishment had no assets and since no moratorium was in effect, the Department once again initiated recovery proceedings against the Director of the establishment on 12.09.2019. The present petitioner, by communication dated 17.09.2019, replied that the matter was still pending before the NCLT and requested the authority to contact the IRP. Subsequently, communication was addressed to Mr. Prakash Tekwani, Liquidator on 29.09.2019, who, by report dated 16.10.2019, stated that upon summarising the entire liquidation process of the corporate debtor, no non-current assets were found, and the current assets, though reflected, were not realisable. Thus, the liquidator confirmed Page 24 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined that no funds were available against the liabilities of the corporate debtor. It was further informed that the realisable properties of the corporate debtor were insufficient even to cover the cost of liquidation and that the affairs of the company did not require further investigation. The liquidator, therefore, recommended early dissolution under Regulation 14 of the Liquidation Process Regulations, 2016.
9.4. In view of the above, and as provided under the proviso to Section 8B(1), the authority was satisfied that the properties of the establishment were insufficient for recovery of the arrears of the Provident Fund Department. It is pertinent to note that the Central Provident Fund Authority is a statutory body functioning under the Government of India to extend social security benefits to the working class, and mandates compulsory deduction of provident fund contributions from employees' wages, with a corresponding contribution from the employer, both of which are required to be deposited in the employees' EPF accounts. In the present case, although contributions were deducted from employees' wages, they were not deposited by the employer/establishment. Consequently, the authority had no option but to proceed for Page 25 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined recovery against the personal properties of the employer. As discussed hereinabove, from Form '5A', the petitioner has himself acknowledged being the owner, in charge, and responsible for the conduct of the business of the establishment.
10. In the considered opinion of this Court, no error can be said to have been committed by the authority in taking action by attaching the personal properties of the petitioner, who is a Director, for recovery of the dues of the establishment. The contention of the petitioner that he had no knowledge of the proceedings initiated by the authority is without merit. The record reveals that the Department had issued various notices to the petitioner, and on at least one occasion the petitioner had participated in the proceedings, as is evident from the order-sheet produced at page 126 of the petition memo, wherein the petitioner had requested the authority to grant some time for deposit of the dues.
11. It further emerges that the said notices were issued at the very address which was reflected on the letterhead of the petitioner's communication, wherein he had informed the authority to approach the NCLT.
12. In the considered opinion of this Court, once the Page 26 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined petitioner has participated in the proceedings, it is not thereafter open for him to contend that no summons were issued directing his personal appearance. Such a contention is wholly untenable. The last contention raised by learned advocate Mr. Patel for the petitioner is that the circular dated 19.06.2012, which provides for holding the director personally liable for recovery of PF dues and for effecting recovery from his personal property, is based on the judgment rendered by this Court in Special Civil Application No.19075 of 2007. It is submitted that since the said petition was subsequently withdrawn before the Division Bench, the said judgment cannot be made applicable.
13. In the considered opinion of this Court, even if the said judgment is treated as inapplicable, in view of the fact that the liability of the petitioner flows from the statutory provisions themselves, the said contention cannot come to the rescue of the petitioner. Therefore, no error can be said to have been committed by the authority in holding the petitioner liable for recovery of the dues of the Provident Fund Authority.
14. This Court has also taken into consideration various decisions of different High Courts, namely, the Page 27 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined decision of the Punjab and Haryana High Court in Mohan vs. Regional Provident Fund Commissioner and Ors., the decision of this Court in Letters Patent Appeal No.1746 of 2010, and the decision of the Bombay High Court in Vimalkumar Ravji Shah vs. Employees Provident Fund Organisation and Others, wherein it has been held that the wide import of the term employer under Section 2E of the Act must be taken into consideration. The said expression encompasses all persons who are in control of the affairs of the establishment, including the Managing Director of the company. In cases where Form '5A' is submitted mentioning the names of persons having control over the affairs of the company under Para 6A of the Scheme, proceedings under Section 8B of the EPF Act can validly be initiated for recovery of the dues from their personal properties or by effecting detention of such persons.
14.1.Reliance has been placed by the learned advocate Mr. Patel on the decision of the Apex Court in Employees' State Insurance Corporation v. S.K. Aggarwal and Others, reported in (1998) 6 SCC 228. The said case arose under the Employees' State Insurance Act, 1948, wherein the Apex Court held that the Page 28 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined definition of "principal employer" under Section 2(17) of the Act, 1948 uses the words "owner" and "occupier" disjunctively. The Court further referred to Section 100 of the Factories Act, 1948 and observed that even under the Factories Act the legislature has clearly contemplated that, in the case of a factory, a company itself can be the "occupier." Therefore, when the owner of the factory is the company, it is the company which is the "principal employer" and not its director.
14.2. While considering the decision of the Madhya Pradesh High Court in ESI Corporation v. Kailashchandra, reported in 1989 Lab IC 760 (MP), it was held that when there is a default in payment of contribution by a company, the Managing Director or the Directors cannot be made personally liable, and that the contribution can be recovered only from the company as the "principal employer." The learned advocate has also relied upon the decision of the Bombay High Court in Vimalkumar Ravji Shah v. The Employees' Provident Fund Organisation and Others, W.P. No.407 of 2003, reported in 2009 (5) Mh.L.J. 209, as well as the decision rendered by the Madurai Bench of the Madras High Court in R. Balachandran v. Tmt. B. Ramdev Sundari, Page 29 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined W.P. (MD) No.11546 of 2020. In the latter case, relying on the judgment of the Apex Court under the ESI Act, it was held that where the offence is committed by a company, every person who, at the time of commission of the offence, was in charge of and responsible for the conduct of the business of the company, as well as the company itself, shall be deemed to be guilty of the offence. However, it was further observed that such words are not found in Section 8 of the EPF Act, which only provides that money could be recovered from the "employer." Therefore, the notice-cum-order issued under Section 8F of the Act against the Director was set aside and the petition was allowed.
14.3.Learned advocate Mr. Patel has relied upon various decisions of this Court, namely, M.R. Choksi vs. State of Gujarat rendered in Special Civil Application No.243 of 1991, Different Solution Marketing Pvt. Ltd. vs. Assistant Commissioner of Commercial Taxes and Ors., reported in (2017) 99 VST 218, and Paras Shantilal Savia vs. State of Gujarat, reported in (2021) 94 GSTR 460. In the considered opinion of this Court, the aforesaidReliance has been placed by the learned advocate Mr. Patel on Page 30 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined the decision of the Apex Court in Employees' State Insurance Corporation v. S.K. Aggarwal and Others, reported in (1998) 6 SCC 228. The said case arose under the Employees' State Insurance Act, 1948, wherein the Apex Court held that the definition of "principal employer" under Section 2(17) of the Act, 1948 uses the words "owner" and "occupier" disjunctively. The Court further referred to Section 100 of the Factories Act, 1948 and observed that even under the Factories Act the legislature has clearly contemplated that, in the case of a factory, a company itself can be the "occupier." Therefore, when the owner of the factory is the company, it is the company which is the "principal employer" and not its director. decisions would not come to the aid of the present petitioner, as they were rendered in the context of the Gujarat Sales Tax Act, 1969 and the VAT Act, where the object and purpose of the legislation are entirely distinct from that of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. In that background also, the impugned order cannot be set aside.
14.4.As discussed above, the petitioner, being shown as the owner as well as the occupier in Form '5A' provided under paragraph 36A of the EPF Scheme, Page 31 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025 NEUTRAL CITATION C/SCA/1354/2020 JUDGMENT DATED: 20/08/2025 undefined 1952, would be liable to pay the dues of the EPF Authority.
15. This Court has referred the decision rendered by the Apex Court in the case of Checkmate Services Private Limited vs. Commissioner of Income Tax, reported in (2023) 6 SCC 451 wherein the Apex Court has held that as under:
"35.It was urged that Section 43B spoke of sum payable by the employer or the 'employer's contribution', payable by the employer without deduction from the salary of the employee. Employees' contribution was remitted to the fund by the employer, and they were deducted from the employees' salary. Such deduction was statutorily enabled. Deduction from the salary of the employee, no doubt, was the responsibility of the employer, as was the remittance, to the fund. That nevertheless, did not change the basic nature of the contribution, which was of the employee. A contribution deducted from the employee's salary and deposited by the employer, could not be termed as employer's contribution. A distinction existed so far as contributions payable under the EPF Act and the ESI Act. The employer's contribution had to be paid by the employer itself. In that case there was no deduction from the employees' salary. The employee's contribution, on the other hand, was to be deducted from the salary payable to the employee into the relevant fund.Page 32 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025
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16. In the considered opinion of this Court, the decisions relied upon by Mr.Patel of other High Courts were rendered in the context of the ESI Act, 1948. The provisions of the ESI Act, 1948 and those of the EPF Act, 1952 are substantially different. The EPF Act is a beneficial piece of social welfare legislation, enacted with the object of promoting and securing the well-being of employees. Therefore, adopting the argument advanced by the petitioner would result in a narrow interpretation of the provisions, which in turn would defeat the very object and purpose of the Act.
17. In view of the foregoing discussion, this Court does not find any substance in the submissions advanced on behalf of the petitioner. The petition, being devoid of merits, is accordingly dismissed.
(M. K. THAKKER,J) M.M.MIRZA Page 33 of 33 Uploaded by M.M.MIRZA(HC01407) on Fri Aug 29 2025 Downloaded on : Fri Aug 29 23:41:54 IST 2025