EPF Organisation EO/AO Guide

April 3, 2018 | Author: Ramesh Chidambaram | Category: Search And Seizure, Criminal Procedure In South Africa, Search Warrant, Prosecutor, Fine (Penalty)
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NATIONAL ACADEMY FOR TRAINING AND RESEARCH IN SOCIAL SECURITY READING MATERIALHANDBOOK FOR EOs/AAOs The role of Enforcement Officer under the Compliance 2001 is more important. Similarly the role of Assistant Accounts Officer under the modernisation program is also equally important. The present training programme focuses on the role of Enforcement Officer/Assistant Accounts Officer for the better implementation of the provisions of Act and Schemes. The topics included are key functional areas in Compliance and Recovery and gives a fairly detailed description of the duties and responsibilities of officers at the middle and senior level. The topics on “Compliance 2001”, “CCTS”, Provisions relating to Levy of Damages and Exemption are of utmost importance. This booklet is not a substitute for the Act and Scheme or the Manuals but is intended only as a reference guide to retrieve useful information in times of need so that, field officers can discharge their functions and duties more effectively and systematically. This handbook is a sincere attempt on the part of Zonal Training Institute, EPFO, Chennai to compile all relevant issues and the latest Instructions are appended at the end of the book. However, this handbook is not a substitute to the statute or manuals. 2. The valuable guidance and suggestions received from many serving and retired officers and officials of EPFO and their expertise in the field offices made this book a valuable reference book. It is hoped that the users will be benefited by this hand book for their efficient performance of the training. 2 HANDBOOK FOR EOs/AAOs CONTENTS – PART II S.No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. Topic Inspectors – Role, function and powers Compliance 2001- Salient features Role of APFCs Compliance C.C.T.S – Object & Scope - Preparatory Action. C.C.T.S – Salient Features – Compliance Default Codes C.C.T.S – Input & output – Monitoring Report. Assessment of dues under Section 7A – Section 7B and 7C EPF Appellate Tribunal Penal Provisions Levy of Penal Damages Application of Section 7Q EPFO – Recovery Machinery Penal Provisions to exempted establishments – Application. Drill for conduct of Inspection of Un-exempted Establishment Drill for conduct of Inspection of Exempted Establishment Terms and conditions of exemption under EPF Scheme Holding of Securities in Demat Form EPF System of Accounts Revised Banking Arrangements Pattern of Investment of funds Settlement of PF Claims EPS 1995 – Benefits – Dos and Don’ts in processing the claims – Scrutiny of Form 10C and 10D Pension Disbursement – Reconciliation – Disbursing Agencies – Life Certificate Settlement of EDLI Claims – Case Study Procedure of crediting Interest Nomination – Importance – Handling of death claims in the absence of Nomination Issue of PF Annual Statement of Accounts Transfer of PF Dues on grant/cancellation of exemption Transfer value of Pension Fund from Exempted to Unexempted or Unexempted to Exempted Fund on Grant/Cancellation of Exemption under EPS1995 Page No. 1-9 11-18 18-24 25-27 28-30 31-33 34-42 43-50 51-65 65-75 76-77 78-94 94-96 97-98 98-99 99-103 103-109 109-113 113-117 117-121 122-128 128-142 142-149 150-155 155-158 158-162 162-168 168-170 171-173 APPENDIX I IMPORTANT CIRCULARS 3 1 INSPECTOR Powers and functions of Enforcement Officer under Section 13 of the Act – Action by EO with regard to Annexure ‘A’ & Annexure ’B’ Appointment of Inspectors: There are two kinds of Inspectors, one appointed by notification under Section 13 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 merely to exercise certain powers mentioned in that section. The others are officers of the Employees’ Provident Fund Organisation or outside thereof who could be appointed as Inspectors for exercise of powers referred to above. The former is appointed under Employees’ Provident Funds (Staff and Conditions of Service) Regulations, 1962 and fall under the distinct cadre of Enforcement Officers. The Central Provident Fund Commissioner, Regional Provident Fund Commissioners, Assistant Provident Fund Commissioners and Enforcement Officers are notified as Inspectors under Section 13 of the Act. A notification regarding appointment of Provident Fund Officer and Enforcement Officer to be “Inspector” under Section 13(1) of the Act is issued. Duties and responsibilities: The chief duties and responsibilities of an Inspector are: (a) to bring under the purview of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 every establishment which attracts the application of the Act by reason of requisite employment strength and its nature of activity; (b) to recommend the coverage of establishment under section 1(4) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 on the joint request of the employer and the majority of the employees of the establishment provided the establishment is not liable to implement the Act; (c) to bring under the ambit of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, establishment participating in Common Provident Fund in which one or more than one establishment is already covered under the Act; 2. To secure full compliance by the employer of that establishment with the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes framed thereunder; To attend to the problems of employers arising in the process of compliance and to the grievances of employees including rendering service through the Service Centre, if any set up, and where he cannot solve the problem or redress the grievances, to report the case to the Regional Provident Fund Commissioner for further action; To conduct surveys when asked to, assess coverage potential to new categories of establishment; 1. 3. 4. 4 5. To supply various prescribed forms to the employers on their request and educate them about their proper completion and punctual submission to the Regional/Sub-Regional Office; to report to the Regional Provident Fund Commissioner, evasion, abuse, violation, defect or abnormality noted in the implementation of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes framed thereunder; To serve the warrant on the defaulting employer in recovery cases and attach and sell the property of the defaulting employer and to assist the Recovery Officer. To attend to prosecution cases; To conduct the prosecution cases as Assistant Public Prosecutors. All the Enforcement Officers are notified as Assistant Public Prosecutors. To ensure that the establishment exempted under Section 17(1) / 17(1C) / 2(A) of the Act / the establishment, where its individual/class of employees exempted under paragraph 27 / 27A of Employees’ Provident Fund Scheme, 1952 or paragraph 28 of Employees’ Deposit Linked Insurance Scheme, 1976 as the case may be, is complying with the relevant provisions of the Act/Scheme and also the conditions governing the grant of exemption stipulated by the appropriate Government or Central Provident Fund Commissioner or Regional Provident Fund Commissioner, as the case may be. To serve summons/warrants on the accused in respect of prosecution cases launched, to enable quick results in larger interests of the Organisation; and To obtain the requisite documents or particulars or verification of facts, etc., that are required by Regional Office/ Sub-Regional Office for rendering effective service by keeping liaison between the establishment and the office. He shall arrange to obtain and forward the final settlement claims and pension claims of retiring employees two months in advance of their retirement. The Regional Provident Fund Commissioner incharge of the Region shall fix a target for each Enforcement Officer in the matter of applicability of the Act to the establishments and enrolment of members, for each year and the progress will be monitored on monthly basis through the respective Regional Provident Fund Commissioners. the Enforcement Officers should ensure compliance of the target fixed; To verify and certify the past accumulations dues transferable by the establishment on account of application of the Scheme either due to coverage or on cancellation of exemption. To carry out such other functions as may be assigned to him/her by the competent authority. 6. 7. 8. 9. 10. 11. 12. 13. 14. Powers of Inspectors (Enforcement Officers): The Inspector has been given the following statutory powers (vide Section 13 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952), to enable him to discharge his duties effectively: (a) (b) To require any employer or any contractor from whom any amount is recoverable under section 8A of the Act to furnish such information, as he may consider necessary; At any reasonable time and with such assistance as he may require to enter and search any establishment or any premises connected with it and require any one found incharge of it to produce for his examination any accounts books, registers and other 5 documents which have bearing on the employment of persons and payment of wages in the establishment; (c) to examine with respect to any matter relevant to the aforesaid purpose the employer or any contractor from whom any amount is recoverable under Section 8A or his agent or servant or any other person found in-charge of the establishment or any premises connected therewith or whom the Inspector has reasonable cause to believe to be the employee of the establishment; to make copies of or take extracts from any book, register or other documents, maintained in relation to the establishment and, where he has reason to believe that any offence under this Act has been committed by the employer, seize with such assistance as he may think fit, such book, register or other document or portion thereof as he may consider relevant to that offence; to exercise such other powers as the Schemes may provide. (d) (e) Search and Seizure – Scope and Powers of Inspector: Section 13 of the Act empowers an Inspector for search and seizure to secure compliance from the establishment. It is essential for every public servant to be well aware of his powers. This knowledge of powers helps him in discharging his duties more efficiently. Similarly, he can thereby avert the danger of exceeding limits of powers. Acting beyond the limits of powers can cause lot of problems including litigations. Similarly, if the public servant is not aware of his powers, he will not be able to achieve the results which he otherwise could have achieved by exercise of his powers. One of the powers of the Provident Fund Inspector defined under Section 13(1) of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is that of search and seizure. This power was not available to the Inspectors in the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the Act”) as it originally stood. However, the same was conferred on them by an amendment made by Act 28 of 1963). The Inspector can at any reasonable time carry out search, if necessary. He can also seize the documents connected with an offence under the Act, which he has reason to believe to have been committed. For carrying out the search and seizure, the assistance as deemed fit by the Inspector can be obtained. If it is felt that the law and order problem is likely to be created, the assistance of local police can also be taken. The power of search of the premises is to be exercised sparingly and with discretion and as a last resort. Moreover, before carrying out the search it is desirable that the Regional Provident Fund Commissioner should be informed about the circumstances and his permission obtained to carry out the Search. If the employer refuses to produce the records before the Inspector, he should be persuaded to produce the same and even then if he fails to produce, the power of search and seizure as the case may be, may be exercised. Section 13(2B) says that the provisions of Code of Criminal Procedure, 1973, shall, so far as may be, apply to any search or seizure under that Section as they apply to any search or seizure made under the authority of warrant issued under Section 94. From the reading of this Section, it appears that it is not necessary to obtain warrant before carrying out the search. But the procedure for search is laid down in Code of Criminal Procedure, 1973 has to be scrupulously followed. The relevant provisions of Code of Criminal Procedure, 1973 in this regard are those under Section 38 and Section 100. Section 100 of Code of Criminal Procedure, 1973 reads as follows: 6 “Persons in charge of closed place to allow Search: (1) Whenever any place liable to search or inspection under this Chapter is closed, any person residing in, or being in charge of, such place, shall, on demand of the officer or other person executing the warrant, and on production of the warrant, allow him free ingress thereto, and afford all reasonable facilities for a search therein. (2) If ingress into such place cannot be so obtained, the officer or other person executing the warrant may proceed in the manner provided by sub-section(2) of Section 47. (3) Where any person in or about such place is reasonably suspected of concealing about his person any article for which search should be made, such person may be searched and if such person is a woman, the search shall be made by another woman with strict regard to decency. (4) Before making a search under this Chapter, the officer or other person about to make it shall call upon two or more independent and respectable inhabitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do. (5) The search shall be made in their presence, and a list of all things seized in the course of such search and of the places in which they are respectively found shall be prepared by such officer or other person and signed by such witnesses; but no person witnessing a search under this Section shall be required to attend the court as a witness of the search unless specially summoned by it. (6) The occupant of the place searched, or some person in his behalf, shall, in every instance be permitted to attend during the search, and a copy of the list prepared under this Section, signed by the said witnesses, shall be delivered to such occupant or person. (7) When any person is searched under sub-section (3), a list of all things taken possession of shall be prepared and a copy thereof shall be delivered to such person. (8) Any person who, without reasonable cause, refuses or neglects to attend and witness a search under this Section, when called upon to do so by an order in writing delivered or tendered to him, shall be deemed to have committed an offence under Section 187 of the Indian Penal Code (45 of 1860).” While carrying out the search it is absolutely essential that at least two independent witnesses are present. Sub-section (4) of Section 100 says that the officer carrying out the search shall call upon 2 or more responsible inhabitants of the locality in which place the establishment is situated or any other locality, if no such inhabitant is available or willing to give witness for search. The emphasis is on the neutrality and respectability of the witnesses. Such witnesses should be unprejudiced and independent and able to inspire the confidence of the Court if such a case is put up for trial. Trial, of course, applies mostly to cases investigated by police and Income Tax authorities, etc. It is desirable that these independent witnesses should be requisitioned from other Government department like ESIC, Office of Labour Commissioner, Factory Inspectorate, etc., wherever available. Such witnesses will be mostly unprejudiced, respectable and independent. 7 Before carrying out the search the Inspector should disclose his identity and that of the witnesses to the employer or occupant of the premises, as the case may be. He should then call upon the occupier to immediately produce the relevant documents or records. If he fails to do so the search of the premises can be carried out in order to trace the documents or records in question. It is essential that the occupant of the premises should remain present can be allowed to watch the search. After the search is over, a “panchanama” should be drawn on the spot incorporating therein the time of the commencement of the search, the time when it was over, the particulars of the documents, records found or seized, description of the place from where it was found or seized, and other details of the search. The seized documents, records or things should be suitably marked for identification. Generally, the signatures of the witnesses with date are obtained on the documents, records or things seized. The panchanama should be signed by the witnesses and the officer carrying out the search on the spot. A copy thereof should be delivered to the occupant of the premises and his signature obtained on the copy retained by the Inspector. Even if no documents are found, ‘nil’ panchanama should be drawn. If during the course of the search some other objectionable material like foreign currency, significant amount of unaccountable cash, unlicensed arms, etc., is found the appropriate authority should be informed immediately. If the employer or the occupier of the premises where search is to be carried out does not allow the Inspector and search party to enter the premises, resort can be taken to the provisions of Section 47(2) of Code of Criminal Procedure, 1973. Under this provision, if, even after disclosure of identity, authority, purpose and the demand of admittance duly made, the ingress cannot be obtained, it shell be lawful to break open any out or inner door or window of any house or place where search is to be taken. But, if such a place is in the actual occupancy of a female, who as per custom, is purdanshin, the officer carrying out the search shall, before entering such apartment, afford her every reasonable opportunity to withdraw and may then break open the apartment and enter it. Provision has also been made in Section 47(3) of Code of Criminal Procedure, 1973 to take care of the situation where the officer who has legally entered to carry out the search is detained or locked inside. In such an event he has the power to break open the door, window, etc., in order to liberate himself and the search party. It is obvious that the situation described above, viz., seeking ingress by making open the doors or lock or seeking to come out when locked inside will very rarely arise. The Inspector should be tactful to avoid such situations. If such a situation is likely to arise the assistance of local police must be taken before proceeding for search. As regards the seizure it is clear that this power is available only in respect of the books, register or other documents or portion thereof as are relevant in respect of any offence under the Act which the Inspector has reason to believe to have been committed by the establishment. It is necessary to prepare a seizure memo, on the spot, in respect of the seized documents. The seizure has also to be done before two independent and respectable witnesses. The seizure memo should contain the details of date, place and time of seizure, the signature, name of the persons from whom seized, the description of articles seized, the signature and name of the person from whom seized, the names of witnesses and their signatures, designation and full address and signature of the officer carrying out the seizure. The seized documents should also be marked for identification and signed by the witnesses with date. A copy of seizure memo should be delivered to the person from whom the documents were seized and his acknowledgement should be obtained for having received the copy. It is observed that a feeling of helplessness is often expressed by the Enforcement Officers regarding reluctance or non-cooperation of the employers in the 8 matter of production of record. If the situation so warrants, the officers can take resort to their power of search and seizure in the manner stated above. This will have desired effect and the employers will also have the fear of authority of Inspectors. To sum up: Use the power of search and seizure sparingly and with discretion. Use it only when persuasion fails. Apprise your Regional Provident Fund Commissioner about the circumstances and preferably obtain his permission to carry out search. Take the assistance of local police before proceeding for search, if law and order problem is visualised. Take two independent respectable and unprejudiced witnesses preferably two Government servants from departments like ESI Corporation, Office of Labour Commissioner, Factory Inspectorate, etc., as panchas. Section 94 of Code of Criminal Procedure, 1973 (Old Section 98), inter alia, provides“that if a District Magistrate, Sub-Divisional Magistrate or Magistrate of the First Class (JMFC) has reason to believe that any place is used for depositing or selling stolen property or for depositing, selling or producing any objectionable article described in this Section, he may by warrant authorise any police officer above the rank of a constable to: (a) enter such place with such assistance as may be required; (b) search the same in the manner specified in the warrant; (c) to take possession of any property or article found there, which he reasonable suspects to be one for which search was carried out. Section 99 of Code of Criminal Procedure, 1973 states that provisions of Section 38, 70, 72, 74, 77, 78 and 79 shall so far as may apply to all search warrants issued under Section 93, 94, 95 and 97. Contents of Panchnama 1. Name and designation of the officer carrying out search 2. Name, designation and full address of witnesses. 3. Date and time of commencement of search. 4. Date and time of completion of search. 5. Description of what the panchas saw, viz., how the search was actually carried out, names of members of search party, what documents/records were seized from which place, that the articles seized where marked for identification, the employer or the occupier of the premises was present and watched the proceedings of search. If no seizure made then the description of documents found for examination and places from where found, etc. 6. Panchnama to be drawn on the spot. 9 7. Panchnama to be signed by the Inspector carrying out search and by the witnesses on the spot. 8. Copy thereof to be delivered to the employer or occupier of the premises and his signature obtained in token of having received the same. Seizure Memo (Under Section 13(2)(d)/13(2A) of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.) 1. 2. 3. 4. 5. Date of seizure Time of seizure By whom seized From whom seized Place from where seized : : : : : Particulars of articles seized Signature of the person from whom seized: Signature of witness with full name, designation and address: (1) (2) Signature of the Inspector (Enforcement Officer): Action by EO with regard to Annexure ‘A’ and Annexure ‘B’: Preparation of Annexure ‘A’ is the prime responsibility of Compliance Section. This should be prepared carefully and where the visit of the Enforcement Officer to the establishment is absolutely necessary and the defaulting establishments should necessarily be included in the Annexure ‘A’. In addition, the requirement of accounts branch, if any, should also be included. The Annexure ‘A’ should be prepared preferably on weekly basis and provide the number of establishments atleast 7 establishments per day. This will take care of the actual and effective inspection that can be conducted by the Enforcement Officer. The establishments listed in the Annexure ‘A’ should be supported by an authority letter for each establishment under the signature of the Assistant Provident Fund Commissioner of the circle. No Enforcement Officer is expected to visit the establishment without the authority letter. There is no regular inspection of establishments by the Enforcement Officer. The determination of dues under Section 7A also depends upon the receipt of Form 12-A from the establishments. Wherever the default in submission of Form 12A is detected through CCTS Reports, the Enforcement Officer should be directed to procure the same. Role of EO in filing prosecution: 10 In order to facilitate the accord of sanction to prosecute any defaulter, the Enforcement Officer should furnish the Regional Provident Fund Commissioner a detailed report, touching on the following points: (i) Name of the establishment. (ii) Nature of the legal composition of the management, viz., Sole Proprietorship concern, Partnership firm, Limited Company, etc. (iii) Name and designation of the employer (where the person committing offence is a company, name of the person who was in-charge and responsible to the company at the time when the offence was committed as well as of the company), if the fact indicates that the offence has been committed with the consent or convenience or is attributable to any neglect on the part of any Director or Manager, Secretary of the company name of such Director, Manager, Secretary and other Officer also be indicated. (iv) Address of the person(s) against whom prosecution is to be launched. (v) Facts constituting the offence (Section of the Act/Paragraph of the Scheme). (vi) Evidence (witness as well as records) for supporting the case. Once the prosecution is sanctioned the complaints should be filed in the Court within seven days along with the sanction of the Regional Provident Fund Commissioner. A proper record of hearings, adjournments and consultations, if any, with the Public Prosecutor or Private Lawyer should be maintained for each case, or a group of cases to be disposed of jointly. Mere making of notes of hearing, adjournment in the respective file is not enough. He should intimate the progress of the case(s) to Regional Provident Fund Commissioner after each hearing. The employer’s action in violation of the provisions of the Act / Schemes should be carefully brought out before the Court. Where the employees’ contribution after having been deducted has not been paid, the fact that such Act constitutes Criminal Breach of Trust should be stressed before the Court to drive home the seriousness of the offence. Section 14AA provides for enhanced punishment for certain offences after previous conviction for similar offence. While filing the complaint, the fact of previous conviction, if any, for similar offence should be brought to the notice of the Court. He should also press for enhanced punishment under Section 14AA of the Act. He should request the Court for awarding a portion of the fine as compensation to the prosecution expenses as contemplated under Section 357 of the Code of Criminal Procedure, 1973. Section 357 of Code of Criminal Procedure, 1908: (1) When a Court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part, the Court may, when passing judgement, order the whole or any part of the fine recovered to be applied-(a) in defraying the expenses properly incurred in the prosecution; 11 (b) in the payment to any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the Court, recoverable by such person in a Civil Court; (c) when any person is convicted of any offence for having caused the death of another person or of having abetted the commission of such an offence, in paying compensation to the persons who are, under Fatal Accidents Act, 1855 (13 of 1856) entitled to recover damages from the person sentenced for the loss resulting to them from such death; (d) when any person is convicted of any offence which includes theft, criminal misappropriation, criminal breach of trust, or cheating, or of having dishonestly received or retained, or of having voluntarily assisted in disposing of, stolen property knowing or having reason to believe the same to be stolen, in compensating any bona fide purchaser of such property for the loss of the same if such property is restored to the possession of the person entitled thereto. (2) If the fine is imposed in a case which is subject to appeal, no such payment shall be made before the period allowed for presenting the appeal has elapsed, or, if an appeal be presented, before the decision of the appeal. (3) When a Court imposes a sentence, of which fine does not form a part, the Court may, when passing judgement, order the accused person to pay, by way of compensation, such amount as may be specified in the order to the person who has suffered any loss or injury by reason of the act for which accused person has been so sentenced. (4) An order under this section may also be made by an Appellate Court or by the High Court or Court of Session when exercising its powers of revision. (5) At the time of awarding compensation in any subsequent civil suit relating to the same matter, the Court shall take into account any sum paid or recovered as compensation under this section. As soon as the final orders are passed by the Court, he should immediately make a report to the Regional Provident Fund Commissioner giving a gist of the order. He should take steps to obtain a copy of the order at the earliest. (To leave the task of obtaining a copy to the Public Prosecutor or Private Lawyer, if one has been engaged, may result in getting the appeal, if any, time barred). Under no circumstances, he should with hold the sanction and delay the filing of complaints except on written direction from the sanctioning authority, withdrawing the sanction accorded. The Enforcement Officer should not Act on oral directions in such cases. The Courts should be prayed not to grant requests for adjournments so that the employees of the establishment are not put to hardships due to delay in the realisation of dues. Wherever a portion of fine is awarded to the Organisation as compensation, prompt action should be taken to collect the same from the Court and to deposit in EPF Account No.02. Wherever the employer did not comply with the orders of the Court in the remittance of dues within the stipulated period, the Court should be approached for invoking the provisions of Section 14C (2) of the Act for awarding enhanced punishment. 12 Any difficulty or abnormal delay in the trial or disposal of prosecution should be reported to the Regional Provident Fund Commissioner, for such action as may be deemed necessary. The progress of prosecution cases should be watched through the special Register prescribed for this purpose. The Enforcement Officer should fully acquaint himself with the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and Schemes and the procedures. Role of Enforcement Officer in Recovery Machinery: Section 8 to 8G of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, deals with recovery of Provident Fund and other dues. The Enforcement Officer should fully acquaint himself with the provisions of the Act and procedure contained in the Chapter on Recovery Machinery. He should assist the Recovery Officer in the recovery matter. For this purpose, he should obtain the latest bank account details of the establishments, details of debtors, business etc. and he should submit the same to the Assessing Officer/Recovery Officer. He should also obtain the latest Form 5A. 2 COMPLIANCE 2001 – INTRODUCTION – SALIENT FEATURES INTRODUCTION TO COMPLIANCE: In terms of securing compliance with Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Compliance Wing of the Organisation need to ensure (1) (2) (3) (4) (5) (6) (7) (8) (9) Timely coverage of all coverable establishments. Timely allotment of Code Number for a covered establishment. Timely enrolment of all eligible employees to Provident Fund. Timely deduction and remittance of dues to the funds. Timely detection of default for recovery and penal action. Timely levy of damages. Timely grant of exemption. Timely inspection of establishments. Timely action on legal matters. 13 (10) Infusing and sustaining hope, faith and conviction in the minds of subscriber-members. Default Management - Recovery of dues: To fulfil the mission of the Organisation and the objectives of the Act and Schemes, the default management and the recovery of dues are the key factors. To achieve this, the steps to be taken by the Enforcement are – (a) Determine the dues under Section 7A of the Act. (b) Realise Current Demand through the modes of recovery under Section 8F of the Act. (c) Issue Recovery Certificates to the Recovery Officer to realise the dues by attaching the movable/immovable properties and arresting the employer and his detention in prison. (d) In the case of default of employees’ share of Provident Fund contributions, first information reports are to be filed with the Police authorities in terms of Section 406/409 of Indian Penal Code. (e) Ensure the frequent visits by Enforcement Officer to the defaulting establishments. (f) Defaulters should be brought to the notice of the employees’ Union and the employers’ Organisation. (g) Furnish the list of defaulters to the Banks so as to insist clearance certificate on Provident Fund and other dues before considering sanction of loans/advances to the establishments. (h) Furnish the list of defaulters to the Income Tax authorities so as to enable them to examine the question of allowing relief, etc. (i) In genuine and deserving cases instalment facility be allowed to defaulting employers to clear the dues. (j) Recovery of interest under Section 7Q of the Act. (k) Levy of damages on all belated payments in terms of Section 14B read with relevant provisions of the Scheme(s). (l) Approach the Executive Magistrate to bind the accused employers for good conduct under Section 110 of Code of Criminal Procedure, 1973. (m) Prosecution of defaulters, invoking Section 14 of the Act. (n) Wherever the punishment awarded by lower Courts are meagre and inadequate, appeals to be made to secure enhanced punishments. (o) Display the list of ten highest defaulters with the names of the establishments and the amount in default through a Notice Board, prominently placed at the entrance of the Regional/Sub-Regional Offices/Inspectorates. Set-up: The Head Office at Delhi is responsible for securing ‘COMPLIANCE’ under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 including - 14 (a) (b) (c) (d) (e) conduct of survey for the purpose of inclusion of more industries and class of establishments under the purview of the Act; to propose amendments to the provisions of the Act for effective enforcement. to assist the Committee on exempted establishment. to process the applications seeking exemption from the operation of the Scheme(s). to monitor, review and assist the regions in the matter of recovery machinery, default management, legal cases and Appellate Tribunal and to issue suitable guidelines and procedural aspects in regard to the implementation of the Act. to look into the grievances/complaints on Enforcement through squad of inspectors. (f) The Headquarters Office shall obtain the requisite data on various enforcement matters for inclusion in the organisation’s Annual Report for its presentation to the Central Board of Trustees, Employees’ Provident Funds and placing it before the Parliament. In the regions headed by Regional Provident Fund Commissioner, Grade I, he is assisted by Regional Provident Fund Commissioners, Grade II, with definite assignments namely, Enforcement, Recovery, Legal, Exemption, etc. The District Offices are located wherever the concentration of establishments are there and manned by Enforcement Officers for effective field functioning. The District Offices in certain selected areas is also designated as Service Centres to guide and assist the employers in complying with the provisions of the Act and Schemes and, in addition, render service to the subscribers in getting their benefits under the Schemes framed under the Act, expeditiously. The Assistant Provident Fund Commissioner and Enforcement Officers are also vested with the powers of enforcement to assist the Regional Provident Fund Commissioner in their respective sphere so as to ensure proper enforcement of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Every Regional Office / Sub-Regional Office should set up an exclusive section for each of the following functions: 15 (1)Compliance Section - i) Intelligence Section (Applicability of the Act) ii) to handle unexempted establishments, including securing Compliance from Establishments, monitoring of Enforcement Officers and inspection of establishments, default management, enforcing penal provisions, etc. -to process the exemption applications and monitor the performance of exempted funds. -to initiate action to levy and realise Penal Damages and interest under Section 7Q, wherever due. -to initiate action to recover the arrear dues including arrear interest due under Section 7Q. -to handle Court cases, Appellate Tribunal and Writ Petitions. -to perform the functions under Section 13 of the Act by the Enforcement Officers. Considering the need, the above nature of work may be handled separately in each Section or combined in one or more Sections, set up to handle all the above matters. However, the procedure prescribed in respect of each nature of work should be strictly followed. (2)Exemption Section (3)Damages Section (4)Recovery Section (5)Legal Section (6)‘Inspector’ Note: 16 Flow Chart of Compliance Machinery: Authorities empowered to enforce the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. CENTRAL P.F.COMMISSIONER (Chief Executive) Addl. CENTRAL P.F.COMMISSIONER (Compliance) REGIONAL P.F.COMMISSIONER (Region) Regional P.F.Commissioner (Sub-Regional Office) Regional P.F.Commissioner (Compliance & Recovery) Regional P.F.Commissioner (Exemption) Regional P.F.Commissioner (Legal) Assistant P.F.Commissioner (Compliance & Recovery) Inspectorates Survey & Application of Act Monitoring Enforcement / Inspection Default Management – 7Q Penal Action Recovery Proceedings Legal / Tribunal / Consumer Forum Enforcement Officers Service Centers COMPLIANCE 2001 – AN INTRODUCTION “Compliance 2001” programme was introduced in the year 2000-2001. The main objective of the programme is:what is claimed as establishments brought under the purview of the Act are in effect brought under Compliance fold: what is claimed as members become contributing members and in their accounts contribution realised and interest thereon gets credited and individual annual statement of account issued in fulfilment of the statutory obligation Strategy: To achieve the above objective, the compliance (enforcement) wings of the field offices has been reoriented and restructured. All enforcement functions have been consolidated at the level of a Circle Officer (Assistant PF Commissioner) with appropriate complement of Enforcement Officers and support staff in each circle. Targets have been fixed for each Circle Officer in areas of detection of default, disposal of 7A cases, recovery and in enforcing compliance against the non-complying establishments. The purpose was to coordinate, focus and channelise the entire machinery and concentrate on delinquent employers so that members who are or claimed to be their employees are given the benefits under the Schemes as per their rights. Work distribution system in the compliance function area was restructured, streamlined and the concept of area inspectors abolished. The primary objective being to focus on all non-complying establishments with proper accountability. Computer software was developed to cull out the progress achieved in converting an establishment from noncomplying to a complying level and at the same time ensuring credit of money into the subscriber account. The above issues are discussed at length in the following chapters COMPLIANCE 2001 – SET UP OF COMPLIANCE WING- PLAN OF ACTION AND IMPLEMENTATION To fulfill the ‘Mission’ of EPFO and to achieve its objectives, an effective and sound compliance machinery is essential. The compliance wing of an office covers the area of application of the Act to eligible establishments, entertaining voluntary coverage, securing compliance, grant of exemption, default management, enforcing penal provisions of the Act, levy of damages, monitoring performance of Enforcement Officers, Recovery, Tribunal and Legal matters and furnishing of authentic and accurate MIS data for ABP return. The Compliance Section is required to attend the following items of work so as to enforce the provisions of the EPF & MP Act and the schemes framed there under: 18 1. Formation of circle and intelligence circle. Attaching officers to each circle. The circle is headed by the Assistant Commissioner, who will be assisted by the Enforcement Officers for the field performance. The Assistant P.F. Commissioner will have a cross functional responsibility with reference to accounts as well as enforcement matters. The list of establishments falling in each circle should be maintained. Maintenance of centralized register for covered establishment, on close of each month to arrive at the actual number of live establishments dealt in the office. The Code Number Register in the section should also be maintained up to date. The establishments which are brought under the purview of the Act are required to be closely monitored atleast for a period of 6 months to watch their compliance through CCTS reports. This is with a view to arrest the tendency on the part of newly covered establishments in committing default. The file relating to applicability kept in the Compliance Section should bear a fly leaf on the front inner cover to highlight the review made on the file by the Supervisors periodically. Maintenance of ‘History sheet in respect of each establishment. A ‘History Sheet’ is an effective tool and serves for monitoring. It should necessarily be maintained for each establishment in a Register Form so as to record the basic details of the establishments with reference to coverage data, Form 5A, Bank accounts, default position, penal/legal action initiated etc. Alternatively, the History Sheet may be maintained along with the Coverage File. Supply of guidelines to establishments seeking voluntary compliance. Scrutiny of proposal/voluntary compliance applications received from establishments. Issue of letter allotting the Code No. of establishments within three days, by fax and speed post. Allotment of EPFO business number to each establishment. To ensure disposal of application for allotment of code number, a register should be maintained in the prescribed manner. The allotment of code number to an establishment with full details should be fed to the computer so as to update the establishment master. On assigning code number, simultaneously the accounts group should also be earmarked so as to achieve the purpose and ensure compliance. While accepting the Demand Draft alongwith the application for allotment of code number, it is also necessary to collect the Form 9(Revised), 5,10, 12A upto the current month and also nomination forms of the members. The receipt of these documents should be entered into computer before its transmission to accounts branch. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 19 14. The coverage file should be reviewed and any wanting information/documents/clarification in regard to membership or the wages etc. should be obtained through correspondence and wherever required the establishment may be asked to appear for the enquiry under Section 7A and the dispute settled. The services of the Enforcement Officer should not be utilized for filing deposition, presenting the case during enquiry Under Section 7A, except in case of absolute necessity and with the prior permission of the Regional Commissioner concerned. Assisting the establishment in determining the dues to be deposited in different accounts through Demand Draft. Filing of separate challans for each month. A register to watch the conduct of 7A enquiries till the assessment of dues should be maintained. In addition separate register for current demand and arrear demand should be maintained so as to extract the details of the amount assessed, amount realised in each month. Preparation of Annexure ‘A’ is the prime responsibility of Compliance Section. This should be prepared carefully and where the visit of the Enforcement Officer to the establishment is absolutely necessary and the defaulting establishments should necessarily be included in the Annexure ‘A’. In addition, the requirement of accounts branch, if any, should also be included. The Annexure ‘A’ should be prepared preferably on weekly basis and provide for the visit of atleast 7 establishments per day. This will take care of the actual and effective inspection that can be conducted by the Enforcement Officer. The establishments listed in the Annexure ‘A’ should be supported by an authority letter for each establishment under the signature of the Assistant Provident Fund Commissioner of the circle. No Enforcement Officer is expected to visit the establishment without the authority letter. There is no regular inspection of establishments by the Enforcement Officer. The determination of dues under Section 7A also depends upon the receipt of Form 12-A from the establishments. Wherever the default in submission of Form 12A is detected through CCTS Reports, the Enforcement Officer should be directed to procure the same. Registers such as Recovery Register, Register of Prosecution, Register of Tribunal cases, Register of 406/409, Register of Writ Petitions, Register of BIFR cases, Register of Attachment/Release of Properties, Claim Petition Register, Register on 8F cases, Register on 110CrPC cases are to be kept and updated. Generation of reports on compliance from the computer through CCTS Software. Forwarding of letter and damages statements (including 7Q) to the establishment. Issue of summons, assessment order etc. The CCTS report should be thoroughly scrutinized with the assistance of Enforcement Officer before its release. 15. 16. 17. 18. 19. 20. 21. 22. 23. 20 24. To ensure prompt action in collecting the Form 12A through Enforcement Officer, after 15 days of issue of 7A orders letter to banker should be sent under Sec.8F wherever due. To ensure filing of complaints under Sec.406/409 of IPC. Invoking the provisions of the Section 8B, issue of authority letters etc. Transfer of current demand to arrear demand on first April of each year. To assist the Assistant P.F. Commissioner in conducting minimum number (i.e.50) of 7A enquiries and also to assist the maintenance of DCB register at his level. Pursue Court cases and furnishing parawise comments promptly. To obtain the list of inoperative establishment and to follow it up through the Enforcement Officer for securing compliance. The floppy on IEMS progress should be sent to Head Office every month Identifying the closed establishment in the Computer under category 88. Furnishing of statistical data on various enforcement activities, submission of returns and reports. The Enforcement Officer is expected to visit the office on weekly basis and meet the Assistant Provident Fund Commissioner concerned and to submit the Annexure ‘B’ and discuss the issues for follow up action. On receipt of the Annexure ‘B’ from Assistant Provident Fund Commissioner with his remarks and directions, follow up action should be taken by the compliance section immediately. Tackling of defaulters: It should be the prime concern of the Compliance Section. All the defaulting establishment should be got inspected for the purpose of conduct of 7A enquiries. With reference to Forms 12A, (after due scrutiny and acceptance) on the day of enquiry the assessment order is to be finalised, irrespective of the fact that whether the employer appears or not. The Drill prescribed for the conduct of 7A enquiry, maintenance of DCB Register and watching of acknowledgement on 7A order etc. should be closely monitored by the Compliance Section. After 15 days from the date of issue of 7A order the file should be reviewed with reference to 7A register for follow up action. Action should be initiated under Section 8F and to direct the Enforcement Officer to lodge a complaint under Section 406/409 for defaulting employees’ share of provident fund contributions. Depending upon the gravity of the case all penal action should be initiated on due date and to determine whether the dues are realizable or unrealizable. Realisation of dues through Section 8F should be closely watched. Court cases and prosecution cases should be pursued closely. All legal cases should be 25. 26. 27. 28. 29. 30. 31. . 32. 33. 34. 35. 36. 21 reviewed every month. The data for ABP Return should be extracted only from the concerned registers kept in the Compliance Section. These registers should be closed on monthly basis under the signature of Assistant Provident Fund Commissioner. The cases that are pending with the EPF Tribunal and Consumer Forum etc. are to be examined for follow up action. 37. All Court cases should be attended by the Enforcement Officer and the Report obtained for updating the History Sheet. At the end of each month a report from the Enforcement Officer is required to be obtained to determine the follow up action taken on the defaulters and realisation of current and arrear demand etc. Wherever the penal damages and interest under Section 7Q are to be realized the Enforcement Officer should be deputed and action initiated. Unless the compliance is secured by the Compliance Wing it may not be possible for the accounts branch to give compliance by issuing the Statement of Accounts etc on due dates. Thus the successful functioning of an office is solely depending upon the effective role of officials in the Compliance Wing. 38. 3 ROLE OF APFCs COMPLIANCE Issue of Annexure ‘A’ (copy enclosed) alongwith the authority letter, (duly signed by the Asst. Commissioner) to the EOs with reference to CCTS report, IEMS report, defaulters list, major defaulters, Defaulters current and arrear demand, non-submission of Form 12A, non-submission of Form 3A and 6A, Pending Court case etc. This should be sent for a week/15 days. The EO on his visit to the office on weekly day should handover the Annexure B alongwith the acknowledgement on the authority letter issued to the establishment to the Assistant Commissioner. It is desirable to collect the tour diary also from the EO, on weekly basis. To submit the Annexure ‘B’ (copy enclosed) to the Assistant Commissioner on the day of EOs visit so as to provide necessary guidance to EOs for further follow up action. To review the performance of EO, a review report is to be obtained in the format suggested (enclosed) The response from employers on CCTS report should be carefully examined and necessary action to be taken. To display the top ten major defaulters of the office, duly updated every month. Similarly the model employers list (numbering ten) should also be displayed and this should be communicated to the accounts group for extending speedy service and issue of PPO and other benefits on the day of superannuation of the PF members. 22 The penal damages section should maintain the register for issue of notice with reference to CCTS report, conduct of enquiry, issue of levy order, watching of compliance through schedule of receipts and to take follow up action with reference to current and arrear demand through EOs maintaining the summary register to show the number of enquiries conducted, amount levied, amount realized etc. While levying damages the amount due towards 7Q reflected through CCTS report should also be conveyed to the employers. The amount of interest under Section 7Q with effect from 1.7.1997 should also be watched for its realization. A separate review should be under taken in respect of past cases, i.e. with effect from 1.7.97. To furnish the MIS/ABP(revised) return to the MIS section accurately. The dues towards pension contribution from the exempted establishment should not be clubbed with the amount due from the exempted establishment to the Board of Trustees. A proper monitoring should be kept on the exempted establishments on PF/Pension/EDLI duly maintaining a register. The monthly and annual report should be watched properly and follow up action to be taken. The clarification etc. sought for by the establishment should be dealt on priority. Action under Section 7A, 14B and other penal provisions should be initiated promptly in respect of exempted establishments. The intelligence wing of the enforcement should be geared up; the references received should be given due importance and priority. All applications under Section 1(4) should be scrutinised and forwarded to Head Office. To enable Regional Commissioner to have a supervisory check on 7A orders and other enforcement areas necessary assistance should be extended duly submitting the files for verification/scrutiny. All the exempted establishments should be inspected only at the level of Assistant Commissioner, no Enforcement Officer should be deputed for this work directly or to assist the Assistant Commissioner. As there is a ban on issue of relaxation under Para 79 of EPF Scheme, an establishment seeking exemption should comply as an unexempted establishment till the establishment is notified, granting exemption. However, specific cases of intricate nature should be dealt as per the guidelines issued by the Head Office. 23 To maintain the establishment files properly and to ensure updation of Form 5A in respect of each establishment. To provide necessary assistance to the EOs in performing recovery action promptly. To maintain the DCB register for inspection charges preferably through computer. The work ‘Compliance’ means and includes – “Compliance on the part of the employer in terms of payment of dues and submission of returns” and “Compliance on the part of EPFO in compilation of annual accounts and issuance of annual PF statement through Form 23” Since the progress on IEMS is monitored through Computer and special efforts should be made to secure compliance. The collection of Form 12A to the extent of 90% of the establishment is the responsibility of the Assistant Commissioner. The Enforcement Section should assist him in complying this direction of the Head Office and to meet the requirement, the service of the Enforcement Officer should be availed with positive result. The prompt submission of monthly and annual returns by the establishment is the responsibility of the Enforcement Officer and the Enforcement Section. Any omission in this regard cannot be categorised as ‘employers fault’, but the ‘fault of Enforcement Section’. CATEGORIZATION OF ESTABLISHMENTS All the establishments covered and members serviced have been categorized on the following basis. Operative Establishments – Establishments having at least one member with balances in his account. Inoperative Establishments – Establishments which have no connected records for members in the members master database in the computer system or establishments which do not have even a single member with any balance in his account. Active Members – Members having some balance in their account and in whose case contributions have been received at least once in the last three years. 24 Inactive Members – Members having some balance in their accounts but in whose case no contributions have been received at least once in the last three years. Non Existing Members – Members in whose respect no records are available in the member master file viz. those members in whose case no contribution has ever been received. The software classified the establishments and members into following three categories. Category -1(Inoperative/Non Complying Establishments) The expression refers to all the un-exempted Establishments covered on or prior to 31.03.2002 but has NO membership as on 31.03.2003. This may be either due to the noncompliance by the establishments from the date of coverage or due to the default in updation of accounts by the field office concerned from the year of coverage. Category – 2(Operative Establishments with stagnated compliance) The expression covers all the un-exempted Establishments with membership but with stagnated compliance for the last three accounting years i.e., from 2000-2001 onwards and hence, annual accounts are NOT updated beyond 1999-2000. Category – 3(Operative Establishments with continued compliance) The expression includes All the un-exempted establishments with membership where annual accounts are updated at least up to 2000-2001. All the un-exempted establishments covered during the period from 1.4.2002 to 31.3.2003 for which the annual updation is expected during the financial year 2003-2004. Category – 9(Closed/defunct/In-actionable) Establishments The term refers to all the establishments which are certified to be defunct/closed/in-actionable after due verification. These establishments are identified by the specified codes (101 to 109) fed in to the establishment master. ENFORCEMENT OFFICERS PERFORMANCE REVIEW BEFORE APFC AND RPFC (weekly) E.O.’S NAME | REVIEW PERIOD | CIRCLE | ACCOUNTS GROUP | | | -----------------------------------------------------------------------------------------------------------------------------CONTRIBUTION & | ARREAR DEMAND CURRENT DEMAND OTHER DUES | | Due | | Collected | | Balance | (Also review of | top 10 defaulters) | ------------------------------------------------------------------------------------------------------------------------------ 25 -----------------------------------------------------------------------------------------------------------------------------PENAL DAMAGES & 7Q | ARREAR DEMAND CURRENT DEMAND | P.D. 7Q P.D. 7Q | Due | | Collected | | Balance | -----------------------------------------------------------------------------------------------------------------------------NO. OF DEFAULTERS | NON SUBMISSION NON REMITTANCE WITH REFERENCE TO | OF F/12-A OF DUES CCTS REPORTS | (including current | month) | Due | | Collected | | Balance | -----------------------------------------------------------------------------------------------------------------------------8F ORDERS | NO. OF ESTABLISHMENTS | Due | | Issued | | Balance to be issued | | Balance to be realized | | -----------------------------------------------------------------------------------------------------------------------------ACTION U/S 8B | Due | | Action taken | -----------------------------------------------------------------------------------------------------------------------------CASES PENDING – COURT/ | (furnish details) TRIBULAN / CONSUMER | FORUM | | | | Progress | | -----------------------------------------------------------------------------------------------------------------------------NON SUBMISSION OF | FORM 3A & 6A BY THE | ESTABLISHMENTS | | Due | | Received | | Balance with action taken | ------------------------------------------------------------------------------------------------------------------------------ 26 -----------------------------------------------------------------------------------------------------------------------------IEMS | | Due for compliance | | Secured | | Closed Report | | Balance | | -----------------------------------------------------------------------------------------------------------------------------VISIT TO ESTABLISHMENTS | Due as per ANNEXURE A - | | Visited w.r.t. ANNEXURE B - | ------------------------------------------------------------------------------------------------------------------------------ (ENFORCEMENT OFFICER) REVIEWED APFC RPFC 23 Name of the E.O. COMPLIANCE CIRCLE______________ Remarks 6 ANNEXURE-A Duty Assigned for the week From ___________ To __________ S.No. 1 Code No. 2 Name and address of the Establishment 3 Nature of the work to completed by the E.O. 4 Details of Action taken by the E.O. with Supporting Reports of I.R./Cov. Proposal etc. 5 NOTE: This format will be completed in triplicate 2 copies will be handed over to the EO who will complete the assigned work and return one copy duly completing column 5 & 6 supported by Inspection Report, Prosecution Proposal, Coverage memo, etc. and any other documents required Estt. wise details in Annexure ‘A’ (one sheet should be used for one code no.) should be submitted along with the report. 24 NAME OF THE E.O.: ANNEXURE - B COMPLIANCE CIRCLE-1/CIRCLE-2 DUTY ASSIGNED FOR THE WEEK FROM ______________ TO ___________ NAME AND ADDRESS OF THE ESTABLISHMENT: CODE NO.: NATURE OF THE WORK TO BE COMPLETED BY THE E.O. DETAILS OF ACTION TAKEN BY THE E.O WITH SUPPORTING REPORTS OF I.R. REMARKS. NOTE: This format will be completed by the E.O. Separate sheet should be used in respect of each establishment duly supported by inspection report, investigation proforma, prosecution proposal, etc. 25 4 COMPUTERISED COMPLIANCE TRACKING SYSTEM- CCTS OBJECT AND SCOPE: Doubts were being expressed on the number of establishments under the purview of the EPF & MP Act 1952 and the membership therein reported by the Organisation. The reporting method being followed by the Organisation had largely been manual and prone to errors. There was no scientific tool to arrive at the correct statistics. It was against this background that a “System Assisted Membership Audit Software” was conceived and developed at the Head Quarters Office in 1999-2000 to arrive at the correct statistics in relation to the establishments covered by Employees’ Provident Fund Organisation and membership therein. An elaborate exercise was mounted to obtain the relevant databases from the field offices and the same were processed through the said software. The results thrown by the audit exercise compelled a thorough analysis of the reasons for the poor compliance status from the un-exempted establishments. The analysis broadly indicated that: • There has been a steady deterioration over a period of years in the basic function of maintenance of DCB Register, which was key for early default detection and remedial action; this must have been the most significant factor which resulted in the current state of poor compliance. The Accounts Groups to whom the ownership of DCBR is given, were made responsible for the timely detection and communication of the defaults to the compliance wing on monthly basis; the duty which was honoured in exception rather than as a rule. Ideally, the compliance wing should not have been made dependent on the Accounts Groups for detection and communication of defaults. The fact that the computerization in the EPFO effectively disregarded this vital function, must have contributed to the situation, thus leaving enough scope for fraudulent practices. • • Consequently, a DCBR Software package for computerised maintenance of DCB Register was developed in-house and was distributed to all the field offices in May 2000. The scope and functionality of the software was enhanced and CCTS Software Version 1.0 was distributed in October, 2000. To ensure its effective implementation, eight workshops were conducted on Zonal basis (two each at Calcutta and NATRSS, New Delhi and one each at ZTI, Chennai, Ahmedabad, Ujjain and Regional Office, Hyderabad) where the functionaries of the field offices from compliance and EDP wings were given sufficient exposure. During the last one year of implementation of CCTS, constructive feed back has been received from various field offices. 26 The functionality of CCTS Version 2.0 broadly encompasses the following aspects. System assisted DCBR maintenance duly supported by dealing assistant wise monthly DCBR and establishment wise yearly DCBR. This function includes the basic audit function on monthly returns and remittances. System assisted remittance monitoring where by the actual remittances received are judged against the expected remittances and the exceptions are reported. System assisted Compliance tracking duly supported by necessary monitoring reports to the compliance circles and Accounts Groups and also monthly communications to the defaulting employers. Establishing a scientific information cum monitoring tool both for the field offices as well for the Head Quarters Office (the functionality of erstwhile IEMS software has been merged into the CCTS Version 2.0) System Assisted Compliance Audit function in terms of Head Quarters letter No.E.III/18(9)2001/Compliance/2001 Dated 16.8.2001 and E.III/18(9)2001/ Compliance 2001 dated 31.8.2001. System Assisted preventive vigilance function in a limited sense (by generating exception statements/communications). CCTS – PREPARATORY ACTION 1. ADDRESS FIELDS OF MODULE 105, CAPS/CAMPS, 95 WITH PIN & DISTRICT FIELD IS UPDATED IN RESPECT OF EACH ESTABLISHMENT. CORRECT CIRCLE NO. IS GIVEN – MODULE 115 INOPERATIVE ESTABLISHMENTS ARE ENTERED AS 88(CIRCLE NO.) RATE OF CONTRIBUTION IS CORRECTLY FILLED IN. EXEMPTION STATUS IS CORRECT OF EACH ESTABLISHMENT UNDER “ESTABLISHMENT CATEGORY”. D.O.C. IS CORRECTLY ENTERED IN MODULE 105. NAME/DESIGNATION/TELEPHONE NO. OF ASSESSING OFFICER ENTERED IN MODULE 12O. IN-ACTIONABLE ESTABLISHMENT STATUS UPDATED IN MODULE 110 WITH REFERENCE TO CORRECT CODE. 2. 3. 4. 5. 6. 7. 8. 27 S.NO. CAT-I ESTABLISHMENTS WHERE NO ACTION LIES 1. ESTABLISHMENTS CERTIFIED AS CLOSED AFTER DUE VERIFICATION ESTABLISHMENTS ALREADY DE-COVERED IN THE PAST. ESTABLISHMENTS GONE OUT OF THE PURVIEW OF THE ACT SUBSEQUENT TO THE COVERAGE DUMMY ESTABLISHMENTS CREATED FOR PRACTICAL SITUATIONS INCLUDING RECORDS WHICH ARE CREATED BY MISTAKE /DATA ENTRY ERRORS. ESTABLISHMENTS EXCLUDED UNDER SECTION 16 ESTABLISHMENTS WITH ALL THE ACCOUNTS ALREADY SETTLED AND NO LONGER IN EXISTENCE ESTABLISHMENTS PERTAINING TO OTHER FIELD OFFICES OF THE REGION. SECTION 2A ESTABLISHMENTS (BRANCH ESTABLISHMENTS) IN RESPECT OF WHICH COMPLIANCE IS REPORTED TO DIFFERENT FIELD OFFICE ESTABLISHMENTS WHERE APPLICATION OF THE ACT HAS BEEN JUDICIALLY STAYED CORRECTNESS OF DATA ENTRY IN CRAS - 100% CODE 101 2. 102 3. 103 4. 104 5. 6. 105 106 7. 107 8. 108 9. 109 10. 11. SUPPLY WORK LOAD TO DEALING ASSISTANT IN ACCOUNTS & COMPLIANCE CIRCLE THROUGH MODULE 810 ACCOUNTABILITY FOR DATA ENTRY ERRORS – D.E.O./L.D.C. (REGULAR/RECURRING TASKS) (PERFORMANCE MANAGEMENT (RO & HQ) -REPORTS) COMPLIANCE AUDIT OPERATIONS FUNCTIONAL RESPONSIBILITIES IN EDP MODULE OPERATIONS IN EDP CENTRES 12. ACTIVITY SEQUENCE – II ACTIVITY SEQUENCE – III ACTIVITY SEQUENCE – IV ACTIVITY SEQUENCE – V ACTIVITY SEQUENCE – VI 28 5 CCTS – SALIENT FEATURES 1) 2) 3) 4) DEALING ASSISTANT-WISE MONTHLY DCBR. ESTABLISHEMNT-WISE YEARLY DCBR. AUDIT FUNCTIONS ON MONTHLY RETURNS AND REMITTANCES MONITORING OF ACTUAL REMITTANCES WITH REFERENCE TO EXPECTED REMITTANCES – EXCEPTIONS ARE REPORTED. COMPLIANCE TRACKING THROUGH REPORTS TO COMPLIANCE CIRCLES AND ACCOUNTS GROUPS/SECTION (APRIL TO CURRENT MONTH) COMMUNICATION (SOFT NOTICE) TO DEFAULTING EMPLOYERS BUILT IN IEMS. (MODULE 850) SCIENTIFIC INFORMATION CUM MONITORING REGIONAL OFFICE/HEADQUARTERS SUMMARY. REPORTS TO 5) 6) 7) 8) 9) PREVENTIVE VIGILANCE FUNCTION, IN A LIMITED SENSE THROUGH EXCEPTION STAFF/COMMUNICATION 10) GENERATION OF NOTICES ON DUES UNDER SECTION 7Q & 14B 10A) GENERATION OF NOTICES ON 7A/14B 11) TRACKING OF COMPLIANCE OF 100 MAJOR ESTABLISHMENTS OF EACH OFFICE. 12) MONITORING 7A/7Q/14B PAYMENTS AGAINST DUES UNDER SECTION 13) PERFORMANCE MEASUREMENT AND RATING OF EACH COMPLIANCE CIRCLE 14) DA WISE STATISTICAL REPORTS AS ON 1.4.2001 FOR ACCURATE REPORTING AND MONITORING. 15) MONITORING OF CATEGORY 3 ESTABLISHMENTS. 16) PERFORMANCE MEASUREMENT REPORTS FOR BOTH THE LOCAL OFFICERS AND HEADQUARTERS – ANNUAL ACCOUNTS, CLAIM DISPOSAL AND COMPLIANCE 29 17) SEGREGATION OF CLOSED/DEFAULT ESTABLISHMENT (88). 18) FORM 5/10 DATA COLLECTED THROUGH MODULE 110. 19) TRANSFER OF PAYMENT DATA TO CAMPS, 1995 – WITHDRAWALS STATEMENT 20) ESTABLISHMENT STATUS ON EACH ESTABLISHMENT – ANYTIME FOR 7A/14B 21) TO LOCATE CODE NO. OF ESTABLISHMENT WITH REFERENCE TO NAME OF ESTABLISHMENT. 22) IEMS INTEGRATED WITH CCTS. COMPLIANCE & DEFAULT CODES CODE 00 01 DEFAULT FULL COMPLIANCE DEFAULT IN RETURNS SUBMISSION AND ALSO IN PAYMENT DEFAULT IN RETURN SUBMISSION AND PAYMENT IS AFTER DUE DATE DEFAULT IN RETURN SUBMISSION ONLY DEFAULT IN PAYMENT ONLY PART PAYMENT OF DUES WITHIN DUE DATE PART PAYMENT OF DUES AFTER DUE DATE FULL PAYMENT OF DUES BUT AFTER DUE DATE NOT RELEVANT (SIGNIFIES THE RECEIPT OF DUES PERTAINING TO THE PREVIOUS/ SUBSEQUENT PERIOD DURING THE MONTH) 02 03 04 05 06 07 NR NF NOT FOUND IN THE ESTMSTR. POSSIBLE DATA ENTRY ERROR IN FORM 12A/CHALAN/ ESTMSTR 30 WHEN TO GENERATE MONTHLY CCTS REPORT? CCTS Report generated in the month of August i.e. dues and remittances relating to the month of June. The Input Documents for CCTS: 1) Remittance details through CRAS. 2) Monthly dues through Form-12-A/Form-6 (PS)/Form-4 (IF)/Annexure from PF Exempted Establishments. Input-1: Details of Remittances:The due date for remittances of EPF dues ----------- 15th of the following month. i.e. for the month of June it is payable on15th July (within the grace period of 20th July). The remittances made in a base branch, for example on 20th is expected to reach the respective link branch by 22nd / 23rd July. The scroll duplicate challan and Bank Statements are expected to be sent by State Bank of India to the Regional Provident Fund Commissioner before 30th/31st. The duplicate challans received in cash is processed and sent to EDP for data entry for the purpose of CRAS. After reconciling the CRAS with the Bank Statement the CRAS data is ready for use as input for CCTS. Thus by second/third of August the input for CCTS is already stored. Input-2: Details of dues:The due date for receipt of monthly dues details from employer is 25th of the following month i.e. for the month of June, 25th July-which are normally expected to reach by 31st July/1st of August. These documents received in Tappal Section are sent to EDP for data entry and thus the input data is completed by 4th of August. The CCTS report for the wage month of June, generated on 5th of August is expected to reflect the true picture to some extent. If the CCTS report is generated prior to this date it may show the prompt employers as defaulters and the consequence result. Before generating the CCTS, the job pending in EDP towards input data should be verified and not to follow the date as a matter of routine. 31 6 CCTS – INPUT AND OUTPUT – MONITORING REPORTS IEMS SOFTWARE: The latest version of the IEMS Software is being released by the Information Services Division to provide for monitoring category-III establishments, I.S. Division vide their letter No. CC-17 (2)2000/SWD/5229 dated 26.6.2001 have separately issued detailed instructions regarding certain category of inoperative establishments which are no longer in existence and which can be practically removed from the work load shown for each office. In this connection, each office/regions were requested to send the floppies furnishing the particulars relating to the category code of the inoperative establishments in category-I, which the offices sought to remove from their workload in IEMS programme. Even each floppy is to be accompanied by a hard copy of the contents of the floppy and a signed declaration in writing by the officerin-charge with the following words:“I have personally verified all available records pertaining to those inoperative establishments which are either no longer in existence or are not coverable under the Act as per the categories mentioned in the Head Office letter No.CC-17(2)2000/SWD/5229 dated 26.6.2001 and only those establishments are included in the floppy which is being sent to Head Office.” A copy of the print out of the floppy, which is being sent to Central Office should be kept as office copy with the officer-in-charge along with a hard copy of this declaration. Based on the certificate issued by each of the officers in charge of the offices in the regions, RPFCs of the regions may also submit a certificate in writing to the following effect:“All efforts have been made to incorporate only those inoperative establishments which are no longer in existence or are not coverable under the Act statutorily while recommending for its removal from the database to the Head Office as per the categories of establishments mentioned in Head Office letter No.CC-17(2)2000/SWD/5229 dated 26.6.2001. Officers-in-charge of the SROs/SAOs of this region have duly certified this fact in respect of the data furnished pertaining to their offices.” RPFCs Incharge of the regions are requested to ensure that a copy of the certificate submitted to each of the Officer-in-charge of SROs/SAOs is kept with them for their records, for future reference. 32 CCTS PROGRAMME: The procedure to be followed in implementing the CCTS programme effectively is laid down below:1) Every month, the CCTS programme shall be operated between 7th and 10th and the printouts taken. The following printouts are to be taken (i) Letters to defaulting employers, (ii) Letters to employers who have not submitted Form 12A, (iii) Letters to employers where there is significant drop in membership or in remittance. All the above categories of letters are to be sent to the respective employers every month. For this purpose each office of the organisation may make arrangements with the post office for arranging the dispatch of bulk mail of notices/letters generated under CCTS. Department of Post run a scheme called ‘Business Post’, which may be used in this regard. In small SROs or those SROs where compliance from the establishments are reasonably upto date and as a consequence, the notices generated are comparatively less, they can use their normal dispatch section to dispatch the notices to the employers. In order to facilitate easy dispatch of the notices, the CCTS programme will generate the address of the employer at the end of the notices. Dispatch Section need to fold the notices in such a way that the address portion alone is visible outside and dispatch it under book post after the stapling together the remaining portion. By this method there should not be any necessity for putting the notices in envelopes and writing the addresses manually. 2) Assistant Provident Fund Commissioner-in-charge of the circles should monitor this activity of dispatch of notices pertaining to their circles every month. 3) Wherever the notices generated are very large in number especially in metro areas and other major industrial centres, the offices can make an arrangement for dispatching the notices through bulk mail, since the post offices undertake to do this job in many towns and cities by charging a specific fee for each activity. While making arrangements with the post offices, they may be informed that these notices need not be put into envelopes and there is need for writing of addresses since the address portion will be printed at the bottom of the notices and the notices need to be folded in such a way that the address portion is easily visible outside and staple together the letter and send it by book post. The number of such notices handed over to the post office for bulk mail may be entered in a register for cross checking later when the post office claims the bills for bulk dispatch. When an employer who has received such a notice for non remittance of dues reports that he has already made the remittance and furnishes the date of remittance of photocopy of challans such letters will be sent to the Cash Section where one of the clerical staff can be instructed to verify the cash book to check up whether the remittances mentioned by the employer are in fact received by the Organisation and credited by the Employees’ Provident Fund Organisation’s accounts. In case any 33 discrepancy is found the cash section should enter the details of remittances furnished by the employer such as the amount remitted account number wise, date of remittance, bank name & branch in which the amount is remitted etc. in a register called “CCTS follow up Register” and follow it up with the bank to locate the payment. The CCTS Program will also generate a separate list of those cases where action under Section 7A is to be initiated compliance circle wise. It would be the responsibility of the Assistant Provident Fund Commissioner-in-charge of the circle to interact with the EDP Section and obtain such a list by 10th of every month. The code number and name of the establishment and the period for which 7A has been suggested by the CCTS programme should be incorporated in the Pendency Register of Inquiries under Section 7A/14B. The Assistant Provident Fund Commissioner-in-charge of the compliance section should within a week issue 7A summons to the employer. In the summons issued to such defaulters, the period for which inquiry is launched may be mentioned as “From ______________ onwards”. Such inquiries should be completed as expeditiously as possible and in any case within a period of three months when the assessment orders are issued due up to the previous month or the month prior to that should be assessed without waiting to issue another notice for the subsequent months. If nobody comes up on the appointed date, the assessing officer should decide the case immediately and after the issue of orders under Section 7A, the entry pertaining to the establishment should be rounded off indicating the date of issue of speaking order. The Regional Provident Fund Commissioner-in-charge of the Compliance & Recovery in Regional Offices and the Officer-in-charge of SRO/SAO will be responsible for the successful implementation of the CCTS Software. Regional Provident Fund Commissioner-in-charge of the Compliance and Recovery in the region may, if necessary visit the SRO/SAO periodically and review the implementation of the CCTS programme. Alternately, the implementation of the CCTS programme should also be reviewed during the O & M meetings conducted by the Regional Provident Fund Commissioner-in-charge of the regions. The performance appraisal of Regional Provident Fund Commissioners-incharge of Compliance and Recovery as well as that of the Assistant Provident Fund Commissioners-in-charge of the circles will depend on their performance in the matter of implementation of CCTS, disposal of 7A and 14B inquiries as the case may be. 34 7 ASSESSMENT OF DUES UNDER SECTION 7A, 7B & 7C INQUIRY UNDER SECTION 7A: In order to determine the money dues from any employer and to decide the dispute arising out of the applicability of the Act an inquiry under Section 7A can be conducted and the employer must be given a reasonable opportunity to represent his side. The Central Provident Fund Commissioner, any Addl. Central PF Commissioner, any Deputy Provident Fund Commissioner, any Regional PF Commissioner, or any Assistant PF Commissioner may by order conduct the inquiry for the above said purposes. On conclusion of the inquiry under Section 7A a well reasoned Speaking Order should be issued with clarity and precision in as much as issues involved are identified and specified and the arguments put forth by the employers are analysed and decided. An order so passed should have the basic ingredients of the Speaking Order and it should not allow scope for adverse view by any of the judicial forums. For systematic and uniform approach and in order to remove ambiguity the following procedures need to be followed during the inquiry under Section 7A. 7A Inquiries: Where the returns in Form 12A have been received it is not necessary to conduct inquiry under Section 7A for quantification of dues. Action under Section 8B and 8F can be taken against such establishments. Immediately on detecting a default a politely worded letter to each defaulter should be issued requesting and reminding the employer to remit the dues. If no response is received or no remittance is received from the employer, a second reminder should be issued to the employer. Both these letters shall be signed and issued by the Assistant P.F.Commissioner in-charge of Enforcement pertaining to that establishment. If no remittance is recorded by the end of the second month a show cause notice should be issued to the defaulter initiating 7A inquiry. The details of initiation and disposal of case shall be maintained the Pendency Register. All pending cases of 7A may be assigned to Assistant Provident Fund Commissioners who shall enter all cases in the separate register. 7A authorities should exercise their authority while determining the dues to quantify the correct amount. The amount assessed must be realistic and usually based on necessary documents. For achieving the above object, the assessing authorities have been provided ample powers under Section 7A for 35 enforcing the attendance of person and examining him on oath, requiring discovery and production of documents, receiving evidence in affidavit and thereafter commissions for the examination of witnesses. All these powers are provided in the corresponding provisions of the Code of Civil Procedure. These powers must be exercised in a proper way according to the demand of situation for compelling the attendance of concerned person and for procurement of documents. The summary of the hearing must be recorded for every date of hearing with details of documents filed/statement recorded. The compliance position of direction of previous hearing if any must also be recorded on order sheets. While conducting the inquiries it has to be borne in mind that the quasijudicial authority under Section 7A acts on behalf of the department based on the records available and is expected to pass a judicious order as per the provisions of Law. The case of the Department shall be represented by the Enforcement Officer before the Assessing Officers. The Assessing Officer shall pass the order on the basis of the documents filed by the representatives of the Establishment and Department. The assessing officer shall also supply copies of the proceedings to the establishment through its representative in the enquiry. The assessing officers are quasi judicial authority-Hence the principles of natural justice must be followed strictly in each and every case. The essence of natural justice is to afford reasonable opportunity to the Employer to present/defend his case and also to afford an opportunity to him to peruse the documents, if any, procured from other sources by the Organisation. The assessing officer must keep himself in touch with the relevant law including some Labour law Journal. The reading of judgements of Hon’ble High Courts and Supreme Court will develop the skill of examining and analysing the issues. Documents collected from sources other than from the employer are to be made available for the perusal of the employer or his counsel at the time of inquiry. The report of the enforcement officer may also be allowed to be perused by the employer or his representative at the time of inquiry in order to satisfy the principles of natural justice. The Assessing Officer should go through the books of accounts for correctness of the details furnished and also detect any amount due from the employer that has escaped notice including instances of non enrolment of members or delayed enrolment of members. It shall be ensured that the person responsible for the affairs of the establishments/owners of the establishment or a representative duly authorised by the establishment/employer only represents the establishment. 36 The contentions made in writing and oral submission must be considered and properly dealt with in the order. Any judgement relied upon must be quoted with proper citation. While issuing orders under Section7A care should be taken to ensure that it is a speaking order. The preliminary part of the order should contain the background of the case, details of initiation of the proceedings, adjournments, if any, with the reasons etc. Details of responsible persons who attended inquiry shall invariably be noted in the order. On completion of the inquiry the details of assessments will be duly recorded under the signature of Assessing Officer in the Demand and Collection Register Column No. 1 to 9 shall be recorded on Left Hand Side of Register while 10 to 14 shall be recorded on Right Hand Side of Register. It will be the responsibility of the Assessing Officer to exercise powers under Section 8F and recover the entire assessed dues as expeditiously as possible after the assessment is over and in any case before the end of the financial year. Assessing officers will also maintain all above register with up to date entries therein. The mode of payment and date of realisation shall be recorded under the dated signature of the assessing officer in the register. At the end of the financial year, recovery certificates shall be prepared, for any Current Demand pending realisation, recording the reasons for nonrealisation, and forwarded to the Recovery Officer before 5th of April. However, in exceptional cases for realisation of the Current Demand, a special recovery certificate, mentioning the reasons for issuing an out of turn recovery certificate to the recovery officer after obtaining concurrence from RPFC-II in case the Assessing Officer is Assistant Provident Fund Commissioner and RPFC-I where the Assessing Officer is Regional Provident Fund Commissioner - Gr.II may be issued. ROLE OF APFC UNDER DEFAULT MANAGEMENT Responsibility of Assessing Officers and default management: The Central Office has formulated various strategies on default management and prescribed various control registers in managing the default of current as well as arrear demand which are to be scrupulously adopted. The demands raised as a result of orders under Section 7A during the financial year will be categorized as current demand. This definition will apply to both exempted/unexempted establishments. Current Demand: The responsibility to realize the current demand is that of the officer passing order under Section 7A/14B, i.e., the officer having jurisdiction over the case in this regard. 37 The target for recovery of current demand is 100% of realizable demand raised during the financial year, i.e., from 1st April to 31st March. Assessing Officers are to open separate control registers for keeping control over cases initiated under Section 7A/14B and a register for controlling the work relating to realisation of current demand. Regional Provident Fund Commissioners shall review the control registers on a monthly basis and suitably instruct, guide an control the pendency position with each Assessing Officer as well as work relating to recovery of current demand. The two control registers, viz., Blue Book – for controlling pendency and disposal of actions under Section 7A; Red Book—for controlling the creation and recovery of current demands, 1. and 2. should be maintained upto date on a day to day basis and the same should be subject to surprise check by supervisory officers at the level of Regional Provident Fund Commissioner-I and Regional Provident Fund Commissioner-II. Performance of Assessing Officers in the speed of disposal of 7A actions as well as the realisation of current demands raised is to be kept under constant review by supervisory officer at the level of region/central office in order to evaluate the overall performance and record in Annual Confidential Reports, as well as consider the suitability of such officers for enforcement work. The Assessing Officers should establish effective linkages with the accounts wing in relation to cases under their jurisdiction for timely identification of default cases for initiation of action under Section 7A and to receive/verify feed back on realisation of the demand raised. On last date of the financial year, all the Assessing Officers should take stock of the cases where current demand (realizable and unrealizable) has remained outstanding and initiate recovery action on the last day of the financial year. It may be understood that normally no recovery certificates are to be issued by the Assessing Officers during the currency of the financial year and the certificates are to be issued on the last day of the financial year itself. Only in exceptional cases after recording reasons in writing in the appropriate file, the Assessing Officer may issue a recovery certificate even in relation to current demand if that will expedite the recovery of the current demand. It may be clearly understood that this would not shift the responsibility for realisation of current demand to the Recovery Officer. The Assessing Officer will continue to be responsible for such demand and will continue to reflect it in their position of outstanding demand upto the close of the financial year. This concession is made only so as to make the additional resources and powers of Recovery Officer available to the assessing officer. It goes without saying that in all such cases, the assessing officer will give close personal support to the Recovery Officer in terms of information/intelligence relating to the defaulter as well as with supporting manpower for effecting the recovery. 38 In all such exceptional cases, certificate is to be issued only after obtaining clearance of the Regional Provident Fund Commissioner-I. As far as the Recovery Officer is concerned, he is required to act in relation to current demand only if the assessing officer is providing close support both in terms of intelligence as well as manpower for effecting the recovery. Particulars about such current demands where certificate has been received will be kept by the Recovery Officer in a separate register which will be closed at the end of the financial year when the unrealized demand stands transferred to arrear demand. Arrear Demand: All demand that has remained unrealized, both realizable and not immediately realizable, during the financial year, be categorized as “arrear demand” on commencement of the next financial year. It includes arrears of contributions, interest under Section 7Q and damages under section 14B, for both exempted and unexempted establishments. All demands which fall within the definition of arrear demand, whether reported or not, should be accounted for by the respective assessing officer and a certificate in relation to these issued to the Recovery Officer so that 100% of the arrear demand stands covered by Recovery Certificates and the Recovery Officer stands fully vested with jurisdiction over the entire arrear demand in each region. All Recovery Officers should update their control registers for the management of arrear recovery demand. The Regional Commissioner(I) should personally satisfy himself that the registers are upto date and ensure that all the arrear demand in the region stands covered by certificates. Recovery of arrear demand also remain the overall responsibility of assessing officer in relation to cases under their jurisdiction. Of course, the ultimate responsibility for default management, current as well as arrear demand, in the region rests with the Regional Provident Fund Commissioner-I. Hence, it is expected that all assessing officers under the close supervision and control of Regional Provident Fund Commissioner-I will be giving the necessary support in terms of intelligence and information to the Recovery Officer in relation to arrear demand related to them so that the Recovery Officer can function effectively and help liquidate the arrear demand. Thus the ultimate analysis will only improve the default management of the assessing officers in relation to their respective jurisdiction. The whole purpose of broad banding the apparatus for recovery work is to establish and effective and aggressive default management regime. It is in this context that the policy should be constantly reviewed so that exercise of quasi judicial powers and accountability are effectively integrated and performance of the Enforcement Wing is kept under constant scrutiny and review. The Blue/Red Book should be closed every month and summary extracted for reporting in monthly CAP return duly reconciled with the information contained in the “Register of defaulting establishments” maintained by the Enforcement Section. 39 Regional Provident Fund Commissioner and Assistant Provident Fund Commissioner as Assessing and Recovery Officers: As the Regional Provident Fund Commissioner and Assistant Provident Fund Commissioner have been notified as Recovery Officers, they should take action under Section 8F and also under Section 8B and 8G for the recovery of arrear dues assessed by them for the current demand and also for the arrear demand. Need for timely action: As the EDP Section will generate the list of defaulters every month, immediately after generation of Schedule of Receipts by using the software, Computerised Receipt Accounting System (CRAS), there will not be any difficulty in identifying the defaulters. Where the CRAS is not put into operation, it should be put into operation immediately. In addition, the Enforcement Officer is required to inspect the defaulting establishments every month and to send a special report. The action against the defaulter should be initiated in the month following the month in which contributions, administrative charges, etc., due for payment by the establishment and the show cause notice under Section 7A of the Act should be issued at the latest by the end of that month. If the action is initiated every month it will be easier to recover the amount. If the establishment is allowed to accumulate the arrears and take action after several months, it will be difficult to recover the amount from the defaulter, as a defaulter who is not in position to pay the dues for a month, will not definitely be in a position to pay the dues for several months. If the timely action is not taken against the defaulter every month, as stated above, it should be viewed seriously and the responsibility for such delay should be fixed and the disciplinary action should be initiated against them. In order to have continuous and effective monitoring of default, the following procedure is prescribed: (1) The assessment and recovery of dues in respect of the top 10 defaulters of the Region shall be the responsibility of the RPFC in charge of the Region and shall be under his original jurisdiction. If all actions have been taken in respect of any such establishment and the amount becomes NIL, the next 10 defaulters shall fall within his original jurisdiction. (2) A separate file will be maintained in respect of each defaulting establishment having an arrear of rupees one lakh and above. These files will have folder with points for quick review and monitoring. These will be maintained by Regional Provident Fund Commissioner (Gr.I), Regional Provident Fund Commissioner (Enforcement and Recovery), Assistant Provident Fund Commissioner (Enforcement and Recovery) etc., based on quantum of default. (3) The establishment of having default of rupees ten lakh and above will be reviewed and monitored by Regional Provident Fund Commissioner in charge of the Region every month. (4) Review of establishment having default of rupees five to ten lakh will be done by Regional Provident Fund Commissioner (Enforcement and Recovery) or Officerin-charge, Sub- Regional Office and Assistant Provident Fund Commissioner 40 (5) (6) (7) (8) (9) (Enforcement & Recovery), respectively. This will be in addition to overall responsibility of review of the entire work of recovery. Review can be on points as to whether: (a) Regular inspections of defaulting establishments have been made by the inspecting officers. (b) All actions as required under Section 8B to 8F of the Act have been taken. (c) Prosecution cases under Section 14 of the Act have been filed and followed up vigorously. (d) Action under Section 406/409 IPC has been taken. The Regional Provident Fund Commissioner (Enforcement & Recovery) should review the performance of each Assistant Provident Fund Commissioner (Enforcement & Recovery) every month. Recovery has to ensure that all effective steps have been taken for recovery of arrears in respect of each Recovery Certificates. If any administrative restrictions and directions had been issued from Central Office, restraining recovery process, such directions may be treated as withdrawn. An accurate and authentic defaulters list with position as on first April, every year should be prepared and updated every month. The ten biggest defaulters for particular year with position as on first April of each year (both under exemption and unexempted sector) be identified. Strong action for recovery be taken. Names of these 10 biggest defaulters be prominently displayed in Regional and Sub-Regional Offices at the prominent entry place. The progress report of recovery in respect of these ten establishments of the Region need to be submitted every month to Central Office separately along with status and efforts made for recovery. Name & Address of the establishment Code Number Total amount in default Default since (10) Besides above, penal action as provided under Section 14 of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 be taken against the defaulting employers. (11)Action under Section 406/409 of the Indian Penal Code for non payment of employees’ share of contributions deducted from the wages of the employees should also be taken vigorously excepting in case of Public Sector Undertakings of Central and State Governments. (12)It must be ensured that action as above is taken in case of all defaulting establishments. Regional Provident Fund Commissioner (Enforcement & Recovery) will send weekly report to Regional Commissioner (Recovery), Head Office on the format prescribed. REVIEW OF ORDERS PASSED UNDER SECTION 7A Scope for review: (i) Section 7B provides for review of an order passed under Section 7A subject to the conditions specified therein the review under this section 41 is envisaged not only on an application which may be filed by the aggrieved party but also suo-moto on similar grounds. (ii) Where an order under Section 7A is passed against an employer ex parte, he may, within three months from the date of communication of such order, apply to the officer for setting aside such order and if he satisfies the officer that the show cause notice was not duly served or that he was prevented by any sufficient cause from appearing when the inquiry was held, the officer shall make an order setting aside his earlier order and shall appoint a date for proceeding with the inquiry. (iii) However no such order shall be set aside merely on the ground that there has been an irregularity in the service of the show cause notice if the officer is satisfied that the employer had notice of the date of hearing and had sufficient time to appear before the officer. (iv) Where an appeal has been preferred under this Act against an order passed exparte and such appeal has been disposed of otherwise than on the ground that the appellant has withdrawn the appeal, no application shall lie under this sub-paragraph for setting aside the exparte order. (v) No order passed under this paragraph shall be set aside on any application under paragraph (ii) above unless notice thereof has been served on the opposite party. Review of exparte order: Under Section (4) of Section 7A of the Act, ex-parte order can be reviewed subject to the following conditions: 1. The employer should have applied within three months from the date of communication of such order to the officer for setting aside exparte order. 2. The employer should satisfy the officer that his absence was due to nonservice of the show cause notice or he was prevented by sufficient cause from appearing when the enquiry was held. 3. Upon satisfaction in the manner stated at (2) ibid the officer may after serving notice on the opposite party make an order setting aside his earlier order and appoint a day for proceeding with the enquiry. 4. No exparte order shall be set aside merely on the ground that there has been irregularity in the service of the show cause notice, if the officer is satisfied that the employer had notice of the date of hearing and had sufficient time to appear. Conditions for Review: Any person aggrieved by an order made under sub-section (1) of section 7A but from which no appeal has been preferred under Act can obtain a review of such order in the following manner under Section 7B, subject to the following conditions: 1. The application for review is to be made in Form 9 prescribed in paragraph 79A of the Employees’ Provident Funds Scheme, 1952. 2. The period of limitation for filing an application for review is 45 days from the date of making of the order under Section 7A. 42 3. No appeal should have been preferred/filed by aggrieved person under this Act. 4. The review can be sought on the grounds of – a) Discovery of new and important matter of evidence which after the exercise of due diligence was not within his knowledge or could not be produced by him at the time when the order was made; or b) On account of some mistake or error apparent on the face of the records; or c) For any other sufficient reason. Procedure for review: Upon filing application for review where it appears to the officer receiving an application for review that there is no sufficient ground for review, he shall reject the application forthwith. Where the officer is of the opinion that the application for review should be granted, he shall grant the same provided that – a) No such application shall be granted without previous notice to all the parties to enable them to appear and be heard in support of the order in respect of which review is applied for; and b) No such application shall be granted on the ground of discovery of a new matter of evidence which the applicant alleges was not within his knowledge or could not be produced by him when the order was made without proof of such allegation. Appeal against review order: No appeal shall lie against the order of the officer rejecting the application for review, but an appeal under this Act shall lie against the order passed under review as if the order passed under review were the original order passed by him under Section 7A. Section 7C - DETERMINATION OF ESCAPED AMOUNT: Section 7C of the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 deals with the determination of escaped amount. Normally the Section 7C is invoked on account of any complaint received from Trade Union or other Aggrieved party or where department is itself has detected short assessment of dues or any amount has been escaped while determining the dues either under Section 7A or Section 7B. While conducting an enquiry under Section 7C an opportunity should be given to the employer to represent his case. The action under this Section could be invoked only with 5 years from the date of communication of the Order passed under Section 7A or 7B of the Act. 43 8 EPF APPELLATE TRIBUNAL With the amendment to the Act by the Amendment Act 33 of 1988, Section 19A has been deleted and provisions for set up of an Appellate Tribunal has been incorporated under the Act. Sections 7D to 7O of the Act, which lays down the mode of set up of an Appellate Tribunal, the powers of the Appellate Tribunal, etc., with effect from 1.7.1997. Constitution of Tribunal: The Act has been amended by the Amendment Act 33 of 1988, empowering Central Government to constitute one or more EPF Appellate Tribunal to enable any person aggrieved by (1) Notification issued by the Central Government (2) Orders passed by the Central Government applying the provisions of the Act (a) to any establishment employing less than 20 persons (proviso to sub-Section 3 of Section 1 of the Act) (b) to apply the provisions of the Act to any establishment seeking voluntary coverage under Act (Section 1(4) of the Act). (c) to any establishment having common provident fund with another establishment to which the Act becomes applicable (Section 3 of the Act) (3) order passed by any authority, i.e., Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner, as the case may be (a) on the applicability of the Act to any establishment; (b) on determination of dues from any employer under the provisions of the Act and Schemes framed there under (Sections 7A, 7B and 7C of the Act); (c) on levy of damages under Section 14B of the Act; to appeal against any such notification or order. The Central government has constituted the EPF Appellate Tribunal with effect from 1.7.1997 to exercise the powers and discharge of the functions conferred on it by the Act in respect of establishments situated within the territories of India, vide notification No.V-20025/1/96/SS-II dated 30.06.1997. The Tribunal shall sit in Delhi. The act and procedures before the Tribunal shall not be called in question in any manner on the ground of any defect in the constitution of the Tribunal. Presiding officer: The power to appoint the Presiding Officer of the Tribunal vests with the Central Government. The persons to be appointed as Presiding Officer of the 44 Tribunal should be, or has been or is qualified to be a Judge of a High Court or a District Judge. The Central Government has appointed the Presiding Officer of the Tribunal with effect from 1st July, 1997, vide notification No.V-20025/1/96-SS-II dated 30th June, 1997. The order of the Central Government appointing any person as the Presiding Officer shall not be called in question in any manner. The Presiding Officer shall hold office for a period of five years from the date on which he enters upon his office or until he attains the age of sixty two years, whichever is earlier. Procedure of Tribunal: The Tribunal shall have the power to regulate its own procedure in all matters connected with its exercise of powers and discharge it functions, including the place of its sittings. The Tribunal is vested with all powers, which are vested with the authority under Section 7A of the Act for the purpose of discharging its functions. The proceedings before the Tribunal shall be deemed to be a judicial proceedings within the meaning of Section 193 and 228 or for the purpose of Section 196 of the Indian Penal Code. The Tribunal shall be deemed to be a Civil Court for all the purposes under Section 195 and Chapter XXV of the Code of Criminal Procedure, 1973. It is deemed to be a Civil Court for the above purpose only. But it is not a Civil Court. Transfer of 19A cases: All applications under Section 19A, which are pending with the central government before its repeal shall stand transferred to the Tribunal, as if, such applications were appeal preferred to the Tribunal. Deposit of amount due on filing appeal: The Tribunal shall not entertain any appeal unless the employer has deposited with it, seventy-five per cent of the amount due from him, as determined by the Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner as the case may be, under Section 7A. The Tribunal may, however, waive or reduce the amount by recording the reason in writing for such waiver or reduction. Assistance by Legal Practitioner: The appellant may either appear in person or may take the assistance of a legal practitioner of his choice to present his case before the Tribunal. The Central government or a State Government or Central Provident Fund Commissioner or Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner or any other authority under the Act may authorise one or more legal practitioners or any of its officers to Act as Presenting Officer and present the case before the Tribunal. EPF Appellate Tribunal (Procedure) Rules, 1997: Under sub-Section (1) of Section 21 of the Act the Central Government is vested with the powers to make rules to carry out the provisions of the Act. The Central Government has made EPF Appellate Tribunal (Procedure) Rules 1997, 45 covering the procedure for filing appeals, scrutiny of appeals, time-limit for filing appeals, etc. These rules came into effect from 21st June 1997. As the Act provides for appeal to the Tribunal by the aggrieved person, against the notification issued by the Central Government or the order passed by the Central Government or order passed by the authority under Sections 7A, 7B, 7C and 14B there will be no occasion for the Central Government or EPF authorities to appeal to the Tribunal. They will only be respondents in the appeals. Only the employer will be the appellant and he will be filing the appeal. Orders of the Tribunal: The Tribunal, after giving the parties to the appeal an opportunity of hearing, may pass such order as it thinks fit. It may confirm, modify or cancel the order appealed against, or may refer the case back to the authority, which passed the Orders, with such directions, as it may think fit, for a fresh adjudication or order, as the case may be after taking additional evidence, if necessary. It may at any time within five years from the date of its order amend its orders passed earlier to rectify any mistakes apparent from the record, if such mistake, is brought to its notice by the parties to the appeal. An amendment which has the effect of enhancing the amount due from, or otherwise increasing the liability of, the employer shall not be made under sub-Section (2) of Section 7L, unless the Tribunal has given notice to him of its intention to do so and has allowed him a reasonable opportunity of being heard. It shall send a copy of the order passed to the parties to the appeal. Any final order passed by the Tribunal in disposing off an appeal shall not be questioned in any Court of law. The parties to the appeal may, however, approach the High Court by way of writ petition, if a substantial question of law is involved. On facts, there is no further legal remedy for any appeal once a decision is given by the Tribunal. Procedure for filing appeals: An aggrieved person against the orders passed by the Central Government under proviso to sub-Section (3) or sub-Section (4) of Section 1 or Section 3 or Section 7A or 7B (except an order rejecting an application for review referred in sub-Section (5) thereof) or Section 7C or Section 14B may prefer an appeal to the Tribunal. The appeal to the Tribunal should be presented in Form I, appended to EPF Appellate Tribunal (Procedure) Rules, 1997, by the Appellant in person or by an agent or by a duly authorised legal practitioner to the Registrar or any other officer authorised in writing by the Registrar to receive the same or be sent by registered post with acknowledgement due addressed to the Registrar of the Tribunal. The appeal should be presented in triplicate in a paper book form along with one unused file size envelope bearing full address of the respondent. Where the number of respondents is more than one, as many extra copies of the appeal in paper-book form as there are respondents together with unused file size envelopes bearing the full address of each respondent should be furnished by the appellant. Where the number of respondents is more than five, the Registrar may however permit the appellant to file the extra copies of the appeal at the time of issue of notice to the respondents. 46 The appellant should attach to and present with his appeal a receipt slip in Form II appended to the EPF Appellate Tribunal (Procedure) Rules, 1997 which should be signed by the Registrar or the Officer receiving the appeal on behalf of the Registrar in acknowledgement of the receipt of the appeal. On receipt of appeal petition in Form I appended to the EPF Appellate Tribunal (Procedure) Rules, 1997 the Registrar or any other person authorised by him should endorse on every appeal the date on which it is presented or deemed to have been presented and should sign the endorsement. If the appeal, on scrutiny, found to be in order, it should be duly registered and given a serial number. If it is found to be defective, the defect noticed is formal in nature, the Registrar may allow the party to rectify the same in his presence. If the said defect is not formal, in nature, the Registrar may allow the appellant such time to rectify the defect, as he may deem fit. If the appellant fails to rectify the defect within the time limit, the Registrar may by order and for reasons to be recorded in writing, decline to register the appeal and inform the appellant accordingly. The appeal should ordinarily be filed by the appellant with the Registrar of the Tribunal within whose jurisdiction:(i) the appellant is residing for the time being, or (ii) the cause of action has arisen, or (iii) the respondent or any of the respondents against whom relief sought, ordinarily resides; Every appeal filed with the Registrar should be accompanied by a crossed demand draft on a nationalised bank or Indian postal order, for rupees two hundred, drawn in favour of “The Registrar of Tribunal” and payable at the station where the Tribunal is situated (at present at New Delhi only). The appeal should be preferred within 60 days from the date of issue of the notification or order against which the appeal is preferred. However, if the Tribunal is satisfied that the appellant was prevented by a sufficient cause from preferring the appeal within the time limit, it may extend the time limit by a further period of 60 days. The Tribunal shall not entertain the appeal unless the appellant has deposited to the Tribunal, 75% of the amount due from him as determined under Section 7A, 7B, 7C. The Tribunal may, however, for reasons to be recorded in writing, waive or reduce the amount to be deposited. The appeal filed should set forth concisely under distinct heads the grounds for such appeal. Such grounds should be numbered consecutively. An appeal, including any miscellaneous application should be typed in double space on one side on thick paper of good quality. 47 Documents to be submitted along with an appeal: The following documents should be submitted along with the appeal petition: (1)An attested copy of the order against which the appeal is filed; (2)Copies of the documents relied upon by the appellant and referred to in the appeal; (3)An index of documents. These documents may be attested by a legal practitioner or by a Gazetted officer. Each documents should be marked serially as Annexures A1, A2, A3 and so on. If, the appeal is filed by an agent of the appellant a document authorising him to act as agent, should be appended to the appeal. If an appeal is filed by a legal practitioner it should be accompanied with a duly executed “vakalat nama”. An appeal should be based upon a single cause of action. If it seeks one or more reliefs that they should be consequential to one another. Notices or processes to be issued by the Tribunal may be served by any of the following modes or as directed by the Tribunal: (1)service by party itself. (2)by hand delivery (dasti) through process server; (3)by registered post with acknowledgement due. If it is served by the party himself by hand delivery (dasti), the appellant should file with the Registry of Tribunal, the acknowledgement, together with an affidavit of service. The Tribunal may, however, taking into account the number of respondents and their places of residence or work and other circumstances, direct that notice of the appeal shall be served upon the respondents in any other manner including any manner of substituted serve, as it appears to the Tribunal just and convenient. The Tribunal may, in its discretion, having regard to the nature and urgency of the case, direct the service of the notice on the Standing Counsels appointed as such by the Central Government or any State Government or any other authority under the Act. The notice issued by the Tribunal should, unless otherwise ordered, be accompanied by a copy of the appeal along with a copy of the paper-book. The appellant should pay fee for the service or execution of process, not exceeding the actual charges incurred in effecting the service, as may be determined by the Tribunal. The fees for the service or execution of process, not exceeding the actual charges incurred in effecting the service, as may be determined by the Tribunal should be remitted within one week of the date of the order determining the fee or within such extended time as the Registrar may permit. 48 If the Tribunal is satisfied that it is not reasonably practicable to serve notice of appeal upon all the respondents, it may, for reasons to be recorded in writing, direct that the appeal should be heard notwithstanding that some of the respondents have not been served with notice of the application. No appeal shall, however, be heard unless: (1) Notice of the appeal has been served on the Central Government or the State Government or the Central Board or if such Government or Board is a respondent; (2) Notice of the appeal has been served on the authority which passed the order against which the appeal has been filed; and (3) The Tribunal is satisfied that the interests of the respondents on whom notice of the appeal has not been served are adequately and sufficiently represented by the respondents on whom notice of the appeal has been served. In the case of death of a party during the pendency of the proceedings before the Tribunal, the legal representatives of the deceased party may apply within thirty days of the date of such death for being brought on records as necessary parties. If no application is received, within 30 days, the proceedings against the deceased party shall abate. However on good and sufficient reasons the Tribunal on application from the legal representative, may set aside the order of abatement and substitute the legal representatives. Powers and Functions of Tribunal: The Tribunal shall notify to the parties the date and the place of hearing of the appeal in such manner as the Presiding Officer may by general or special order direct. The Tribunals shall draw up a calendar for the hearing of cases and, as far as possible, hear and decide cases according to the calendar, within six months from the date of its registration. The Tribunal shall have the power to decline an adjournment and also to limit the time for oral arguments. If the appellant does not appear on the date fixed for hearing the appeal, or any other date of its adjournment, the Tribunal, in its discretion, either dismiss the appeal for default or hear and decide it on merit. If however, the appellant files an appeal within thirty days from the date of dismissal and satisfies the Tribunal that there was sufficient cause for his nonappearance on the date of hearing, the Tribunal shall make an order setting aside the order dismissing the appeal and restore the same. Where, however, the case is disposed on merit, the decision shall not be reopened except by way of review. If the respondent, i.e., Central Government or Central Provident Fund Commissioner or Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner does not appear on the date fixed for hearing the appeal, the Tribunal in its discretion may adjourn the hearing or hear and decide the appeal exparte. 49 If the appeal is decided ex-parte, the respondent may apply to the Tribunal for an order to set aside. If the Tribunal is satisfied that the respondent was prevented by any sufficient cause from appearing on the date of hearing, the Tribunal may make an order setting aside the ex-parte order, and shall appoint a day for proceedings with the appeal. Where the ex-parte order, the appeal is of such nature that it cannot be set aside as against one respondent only, it may be set aside as against all or any of the other respondents also. The tribunal may, if sufficient cause is shown, at any stage of proceedings, grant time to the parties or any of them, and adjourn the hearing of the appeal. The order of the Tribunal shall be in writing and it shall be signed by the Presiding Officer. The order shall be pronounced in the Open Court. The final Order passed by the Tribunal should be communicated to the Appellant and to the respondent concerned either by hand delivery or by registered post free of cost. If they require the copy of any documents or proceedings, they shall be supplied on payment of fees as may be fixed by the Presiding Officer. Powers and Functions of the Registrar of Tribunal are enumerated in Rules 24 and 25 of the EPF Appellate Tribunal (Procedure) Rules, 1997. Role of Regional/Sub-Regional Office: On receipt of copy of the appeal petition from the Tribunal, the Regional/Sub-Regional Office should make necessary entries in the Register of Tribunal Cases. Thereafter counter should be prepared covering all the contentions raised in the appeal. The Regional Office or Sub-Regional Office or office of the Central Provident Fund Commissioner or Central Government, as the case may be, should file in triplicate the reply to the appeal and the documents relied upon in paper book form with the Registry within one month of the service of notice of the appeal on them. In their reply, they should specifically, admit or deny or explain the facts stated by the appellant in his appeal and may also state such additional facts as may found necessary for the just decision of the case. It should be signed on all pages and verified as a Counter Affidavit by the Assistant Provident Fund Commissioner or Regional Provident Fund Commissioner or Central Provident Fund Commissioner or Central Government, as the case may be, or any other person duly authorised by them in writing in the same manner as provided for in Order VI, Rule 15 of the Code of Civil Procedure, 1908 (5 of 1908). The documents referred to in the reply should also be filed along with the reply and the same should be marked as R1, R2, and so on. They should also serve a copy of the reply along with the documents on the appellant or his legal practitioner, and file the proof of such service in the Registry of the Tribunal. 50 The Regional Provident Fund Commissioner may represent himself or he may depute an officer not below the rank of Assistant PF Commissioner to represent the case before the Tribunal. If a complicated question of law is involved, the Regional Provident Fund Commissioner may entrust the case to the Standing Counsel to represent the case before the Tribunal. The case file should be handed over to the Officer, who will present the case before the Tribunal, after obtaining due acknowledgement, well before the date of hearing, not less than a week before the date of hearing, to enable him to study and present the case, before the Tribunal. In case, the case is entrusted to the Standing Counsel, the file should be handed over to him on obtaining the due acknowledgement. The officer, who appears before the Tribunal should record a brief note on the day to day proceedings of the hearing on the Note side the file. In case of adjournment the date of next hearing should be recorded in the file, the Register of Tribunal Cases and Diary of Hearing. On the final orders of the Tribunal, Legal Section should study the orders and-Where the Orders are in favour of the Organisation the decision of the Tribunal along with a copy of the Order should be communicated to the Enforcement Section. On its receipt, the Enforcement Section should lodge a claim to the Tribunal for the amount deposited by the employer, if any, and simultaneously should initiate action to recover the balance amount due from the employer. Where the Orders are against the Organisation, Regional Office should examine, in consultation of the Standing Counsel, whether it is a fit case for filing a Writ Petition in the High Court. Where the Tribunal order is against the notification or orders issued by the Central Government, the matter should be referred to the Central Government, through Central Provident Fund Commissioner. Where the case is remitted back, a copy of the order of the Tribunal should be sent to the Enforcement Section. On its receipt Enforcement Section should take necessary action to issue notices to the employer, rehear and finalise it, as directed by the Tribunal. The Legal Section in Central Office/Regional Office shall obtain the orders of the Tribunal deciding the future cases. 51 9 PENAL PROVISIONS Introduction The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is one of the social security legislations and therefore invariably provides for the consequences which would follow, if any, of its provisions are violated. Such provisions are called penal provisions. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 also contains penal provisions which were amended in the year 1973 and 1988 so as to make it more stringent and thereby to ensure its proper implementation. With a view to ensure expedite action of invoking the penal provisions, the power to prosecute (which was initially vested with Central and respective State Governments) was delegated, effective from 1.11.1973, to Central Provident Fund Commissioner and Regional Provident Fund Commissioners. The penal action should be initiated promptly by the Compliance Sections, in the following contingencies: Non-payment of dues (part or full) assessed under Section 7A of the Act; non-submission of statutory return as reported through the defaulters list / CCTS Report and defaulters list of annual returns in Form 3A and 6A or Form 7 & 8 and the Enforcement Officers report; non-transfer of past accumulation dues; contravention or non-compliance on any provisions of the Act/Schemes, both by exempted and Unexempted establishments; for giving false statement and false representation with a view to avoid any payment. The Penal provisions should be invoked through, a) Filing prosecution, b) filing complaint with the police for criminal breach of trust, and c) filing application under Section 110 of The Code of Criminal Procedure, 1973. OFFENCES UNDER THE EPF & MP ACT AND THE SCHEMES THEREUNDER: SECTION 14 PENAL PROVISIONS: Provisions of Section 14 have been made stringent with the new amendments, which have come into force with effect from 1.8.1988. The gist of the various penal provisions and the amendments introduced and the enhanced punishments prescribed are given below: (1) Section 14(1) : Punishment for making a false statement or representation or for causing to be made any such false statement or representation with a view to avoid any payment under the act and the three Schemes is imprisonment upto one year or with fine of Rs.5000/- or with both. 52 (2) Section 14(1A) : a) Punishment for non-payment of provident fund contributions: b) for non-payment of inspection charges in the case of exempted establishments under Section 17(3): c) for non-payment of administrative charges under Employees’ Provident Fund Scheme in Account No.2 is imprisonment upto 3 years but it shall not be less than one year and fine of Rs.10,000/- in the case of default in payment of employees contribution which has been deducted by the employer from the employees wages and in other cases, it shall not be less than six months, and a fine of Rs.5,000/-. The Court is empowered to impose a sentence of imprisonment for a lesser term for adequate and special reasons to be recorded in the judgement. It may be noted that the Courts power to impose a fine in lieu of imprisonment has been taken away by this new amendment. Under this section the Courts are bound to give minimum fine of Rs.10,000/irrespective of the amount in default in case there is any default in payment of employees contribution deducted from their wages and offences are proved. In case the Court wants to give a lesser punishment, the court has to record specifically the special reasons or other adequate reasons for which it considers it necessary to impose a lesser sentence and such lesser sentence can be given only in respect of imprisonment and not in the quantum of fine. (3) Section 14(1B): a) Punishment for non-payment of Employees Deposit Linked Insurance contributions b) for non-payment of Employees Deposit Linked Insurance administrative charges c) for non payment of Employees Deposit Linked Insurance Inspection charges is imprisonment upto one year but the court shall award a minimum imprisonment of six months and a fine upto Rs.5000/- for the offences under this section. However, here also the Court has got discretionary powers to award a lesser sentence of imprisonment for adequate and special reasons to be recorded in the judgment. Section 14(2) : This is an enabling provision which enables the Government of India while framing the Schemes to incorporate suitable provisions for punishments for any offences. The ambit of this section is quite wide in as much as it provides for punishment to any person who defaults in complying with any of the provisions contained in the three schemes. Thus, not only the default in payment of contribution but also the non submission of returns or any other requirements under the Schemes can be brought under the purview of this section read with the relevant sub clause of Para 76 of the EPF Scheme. Punishment provided under this Section is imprisonment upto one year or with fine which may extend upto Rs.4000/- or with both. (4) (5) Section 14(2A) : In the case of exempted establishments if they are not complying with any of the provisions of the Act or any of the conditions subject to which exemption was granted under Section 17 they can be prosecuted under this Section. Punishment provided is imprisonment upto six months but shall not be less than one month and shall also be liable to pay a fine upto Rs.5000/-. There is no discretion for the Court under this section to award lesser sentence if the accused is guilty. 53 (6) Section 14AA : Under this Section those who have been convicted previously for any offence under the Act and the three schemes are liable for enhanced punishment. Punishment is imprisonment upto five years but which shall not be less than two years and shall also be liable to a fine of Rs.25000/-. Unlike in Section 14(1A) or in Section 14(1B) there is no discretion for the Court under this section to impose a lesser sentence of imprisonment and the Courts are bound to give a minimum sentence of imprisonment for two years and a fine of Rs.25,000/- OFFENCES UNDER EMPLOYEES’ PROVIDENT FUNDS SCHEME: Paragraph 76 of the Scheme enumerates the following offences: Deduction from wages/salary of a member the whole or any part of the employer’s contribution; Failure to submit any return of contribution/statement or submission of a false return/statement/document; Obstruction of an Inspector or an Officer in discharge of his duties; Non-compliance with any other requirement of the EPF Scheme. a) b) c) d) OFFENCES UNDER EMPLOYEES’ FAMILY PENSION SCHEME: i) ii) Non-remittance of Family Pension contribution to Account No.10 at the State Bank of India; Non-submission of various returns prescribed under paragraphs 13,15 and 16 etc. OFFENCES UNDER EMPLOYEES’ DEPOSIT LINKED INSURANCE SCHEME: i) ii) Non-remittance of Employees’ Deposit Linked Insurance contribution as per Para 8 of the Scheme. Non-submission of various returns prescribed under Para 10 of the Scheme. The penal provisions are given in a tabular statement on Page 62 & 63 for easy reference. NON-PAYMENT OF EMPLOYEES’ SHARE OF CONTRIBUTIONACTION (OFFENCE) UNDER 406, 409 IPC Criminal Breach of Trust The Explanation-1 below Section 405 of Indian Penal Code provides that - “A person being an employer of an establishment whether exempted under Section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, or not, who deducts the employees contribution from the wages payable to the employees for credit to a Provident Fund or Family Pension Fund shall be deemed to have been entrusted with the amount of contribution so deducted by him and if he makes default in the payment of such contributions so deducted to the said fund in 54 violation of the said law, shall be deemed to have been dishonestly used the amount of said contributions in violations of directions of law as aforesaid” Thus where an employer after deducting the employees’ share from their wages fails to remit the contributions so deducted within a specified time, he shall be deemed to have committed an offence of criminal breach of trust as explained in Section 405 of the Indian Penal Code, which is punishable under Section 406 and 409 of the Indian Penal Code. The Enforcement Officers need not wait for the sanction of the Regional Provident Fund Commissioner for prosecution of the accused for the above offence. Before initiatiing action, it should be ascertained that the wages for the relevant period of default of employees’ share, has been paid to the members. They may lodge a complaint (FIR) direct with the police authorities within whose jurisdiction the offence of criminal breach of trust is alleged to have been committed by the accused employer after collecting all basic documentary evidence such as Form 12A salary registers, etc., so as to build up a strong case against the accused. Case filed under this provision cannot be withdrawn by the Employees’ Provident Fund Organisation. A special feature on cognizable offence under section 47 of Cr. PC is that a police can arrest a person concerned in such offence without a warrant from the Magistrate. SECURITY FOR GOOD BEHAVIOUR FROM HABITUAL OFFENDER – Section 110 CrPC, 1973: For punishing the erring employer and to get compliance from him an enforcement officer can take the recourse of the provisions of Section 110 CrPC,1973, which provides as under: “When an Executive Magistrate receives the information that there is within his local jurisdiction a person who habitually commits, or attempts to commit, or abets the commission – of any offence under the Employees’ Provident Funds and Family Pension Act, 1952” (Section 110 (f)(i)(c) of CrPC) Such Magistrate may in the manner provided require such person to show cause why he should not ordered to execute a bond, which secures for his good behaviour for such period, not exceeding 3 years as a Magistrate thinks fit. Accordingly a good behaviour bond can be obtained from the erring employers. Section 138 – Negotiable Instrument Act: Normally, the employers of the covered establishments are advised to make remittance into State Bank of India through cheque alongwith the prescribed single challan. Out of such cheques some are dishonoured due to insufficient fund available at the bank. When a cheque is dishonoured and the intimation is received from the bank, immediate necessary action need to be taken to realize the amount. Assistant Commissioner, in charge of enforcement section should issue a show cause notice to the employer informing him the ill fate of the cheque and require the employer to pay the amount due by DD. The said notice has to be issued to the employer within 15 days of the receipt of the dishonour intimation from the bank. In case of non-adhering to the direction given in the notice a prosecution complaint need to be filed before the first class magistrate court within one month after the notice period. It should be noted the issue of the notice within 15 days is mandatory. The forms prescribed under the Negotiable Instruments Act are required to be followed. 55 RETURN OF OWNERSHIP IN FORM 5A (REVISED) – IMPORTANCE: The Return of Ownership of the factory/establishment in Form 5A to be filed by the employer under paragraph 36-A of the EPF Scheme is a starting point in the implementation by a covered unit. Its importance as a basic document need not be emphasized. The Provident Fund Inspectors are well advised to collect this return (in duplicate) from the Occupier/Managing Director/Proprietor/Managing Partner/Secretary or other responsible Officer of the factory/establishment at the time of investigation for coverage and forward one copy (in original) of the same to the Regional Office alongwith the Inquiry Report and the other copy may be retained by them on their file for future reference. Under Compliance Programme, the intelligence section which handles issue of code number should ensure receipt of Form 5A alongwith other prescribed returns. Care should be taken to get the correct entries entered in the form so that only those persons responsible for the affairs of the factory/establishment are brought on record. The Provident Fund Inspectors should also keep a close watch over subsequent changes in the managerial set up so that as and when changes take place, they have to get fresh declaration of ownership in duplicate for record. While launching/recommending prosecution of the employer only such persons who are responsible for the commission of the offence shall be impleaded in the recommendation such as Secretary/Managing Director/Director in the case of a company, Partners/Managing Partners in the case of a Partnership firm, Manager in the case of factory, Sole proprietor in the case of a Proprietory concern and the Head of the Department in the case of Departmentally run establishment. EOs are advised to make it a point to call on the person or persons shown in Form 5A at the time of every visit and to bring the observations in Part II of Inspection Report. PRELIMINARIES FOR INITIATING PROSECUTION: On detection of a default in remittance or submission of returns for a period exceeding two months, a report in the prescribed form has to be sent to the Regional P.F. Commissioner concerned for obtaining sanction of prosecution under Section 14AC of the Act after issuing a show cause notice to the accused employer for default. ii. On receipt of sanction of prosecution and after the amount is determined under Section 7A of the Act, a written complaint should be filed by the Provident Fund Inspector in the competent Court of Law within 7 days of such receipt of sanction alongwith such documents as copies of Form 5A submitted by the employer, of notification issued under Section 14AC of the Act delegating the powers of sanction to the Regional commissioner, of sanction order and a copy of the show causes notice issued on the accused employer. i. iii. A list of documents/witnesses which/who are to be cited/summoned in the course of the prosecution should also be filed alongwith the complaint. The complaint to be filed by the Inspector under Section 200 of Cr.P.C. need not however bear the Court Fee Stamp as he is exempted from Court Fee Stamps as a Public Servant. iv. 56 NOTE:a) Under Section 25 of the Cr.P.C.1973, all the Inspectors appointed under Sec.13(1) of the Act, have been appointed as Assistant Public Prosecutors for purpose of conducting EPF cases in the Courts of Magistrates. b) A set proforma prescribed for preparing the complaint may be used by the Complainant Inspector with suitable changes wherever required for preparing and complaint; c) Sanction, once given, should under no circumstances be returned or withdrawn even when the accused employer makes good the default by subsequent remittance and returns. d) In cases of habitual defaulters, special prayer should be made before the Court for awarding the maximum punishment including imprisonment prescribed under the Act. e) Alongwith every complaint under Section 14AA, a certified copy of the previous judgement should be attached. JOINDER OF CHARGES : The Inspectors are well advised to file separate complaints before the Court in respect of not more than 3 offences of the same kind committed within a span of 12 months as required under 218 and 219 of Cr.P.C. Each of the following is a separate offence for the purpose of Section 218 of Cr.P.C. Misjoinder of charges would run the risk of dismissal of the complaint. i. Non-remittance of PF or Pension or E.D.L.I. contribution for each month is a separate offence. ii. Non-remittance of inspection charges or Administrative charges for each month is a separate offence iii. Non-submission of monthly returns/annual returns/contribution card/nomination /declaration /initial return in Form 9 (EPF) or in Form 3(PS) etc., is a separate offence. It may be noted that separate complaints should be filed in respect of Provident Fund – Inspection charges and Adm. Charges (14-1A) Deposit Linked Insurance Fund (14-1B) Under Sec.14AA in case of repeated offences of all the above cases. If any of the above complaints are filed jointly, Provident Fund Inspector runs the risk of Misjoinder of charges. PERSONS LIABLE TO BE IMPLEADED IN THE COMPLAINT The following persons are liable for offences under the Act and the various schemes framed there under. As such they may be impleaded in the complaint filed before the Court. i. Where the accused is a company, a) The Company itself, b) Every director/Managing Director/Manager/Secretary responsible officer of the Company; Where the accused is a partnership firm; a) The firm itself, b) Every Partner including the Managing Partner. 1) 2) 3) or other ii. 57 iii. c) Manager or other occupier of the Factory/establishment Where the accused is a Proprietory Concern. a) The Proprietor himself; Where the accused is a departmentally run Government or Semi Government under taking; a) The Heads of Departments; iv. It may however be noted that while prosecuting official Receiver/Liquidator of a Company/Firm being wound up/closed, prior sanction of the Court by which such Liquidator/Receiver was appointed may be obtained. Where an offence is committed by a Company and it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other officer of the Company, such Director or Manager or Secretary or other officers shall be deemed to be guilty of the offence and are liable to be proceeded against and convicted. Law therefore presumes that all such persons are guilty of the offence committed by the Company. Burden is however upon such persons to prove that the offence was committed without their knowledge or that they exercised due diligence to prevent the commission of the offence. Company, for the purpose of Section 14 of the Act, includes partnership firm (see citation : State Vs. Bhadami – 1959 Cr. L.J. Page 68) LIMITATION OF TIME FOR PROSECUTION OF THE ACCUSED EMPLOYER: (Please see Section 468 (B) There was a conflict of judicial opinion in the matter whether the offences prescribed under this Act are continuing offences or are barred by limitation prescribed under Section 468 of the Code of Criminal Procedure 1973. The Madras High Court has laid down in M/s. Premier studs and chaplets Co., and others – Vs. State (56 FJR 611) that the duty to pay the contribution or to submit the return still remains and continues till the contributions are made or the returns submitted. Therefore a failure to pay the contribution or to submit the return is a continuing breach of duty which continues till it is performed and the non performance of such a duty from day-to-day is a continuing wrong. Therefore, the offences under this Act will come under the ambit of Section 472 of Code of Criminal Procedure which defines a continuing offence. The Section 472 states as follows:- In the case of a continuing offence, a fresh period of limitation shall begin to run at every moment of the time during which the offence continues. The matter has however been set at rest by the Supreme Court ins their judgement dated 17.9.1984 in Criminal Appeal No.372 of 1984 in Provident Fund Inspector, Chandigarh, Vs. M/s. Delhi Faridabad Textile Mills case wherein it has been held that refusal to pay Provident Fund and to submit returns is a continuous offence and every day the breach continues a fresh cause of action arises. The field officers however, should launch prosecution proceedings against erring employers promptly. THE PROVIDENT FUND INSPECTOR AS A PUBLIC SERVANT: The Provident Fund Inspector appointed under Sec.13 of Act is a public servant within the meaning of Sec.21 of the Indian Penal Code. 58 RIGHTS OF PUBLIC SERVANT: As a public servant he enjoys certain rights and privileges and incurs certain liabilities under the law. His rights and privileges may be enumerated as follows:i) Obstructing a public servant in the discharge of his duties is an offence under Section 186 of the I.P.C. Similar provisions exist in Para 76(6) of EPF Scheme; ii) Assaulting a public servant while discharging his duties are offences under the following heads; a) Voluntarily causing grievous hurt Sec.333 IPC b) Voluntarily causing hurt Sec. 332 IPC c) Assault under Sec. 353 IPC d) Giving false information to a public servant in order to cause him to take action against any other person is an offence – Sec. 182 IPC e) Personal appearance at the time of filing the complaint under Sec.200 Cr.P.C. may be exempted at the discretion of the Magistrate; f) The complaint filed by the Inspector is exempted from Court fee rules The following are the liability of a Public Servant: i) Taking gratification other than legal remuneration in respect of his official act is an offence under Sec.161 IPC; ii) Obtaining valuable things without any consideration from person concerned in a proceeding is an offence under Section 165 IPC. PROCEDURAL LAW : 1. There are two type of cases, summons and warrants case (Sec.4(c)) Cr.P.C. Warrant case means a case relating to an offence punishable with imprisonment exceeding two years. Summons case is a case relating to an offence punishable with imprisonment of two years or less. Offence under Sec.406 of IPC is punishable with imprisonment of three years. It is therefore triable as a warrant case. 2. There are two types of offences: Cognizable (Section 2(c) Cr.P.C.) and noncognizable (Section 4(c) Cr.P.C.) Cognizable offence is an offence for which a police officer can arrest an offender without a warrant. Non-cognizable offence is one in which a police officer cannot so arrest. Offences under EPF Act and Scheme are non-cognizable offences except an offence relating to default in payment of contributions by the employer (Sec.14 AB) and offence under Sec.405 of IPC is a cognizable offence. 3. Offences under EPF Act and Scheme framed there under are not compoundable (Schedule II Cr.P.C.) Offence under Sec.406 of IPC is compoundable only when it relates to Rs.250/- or less (Schedule II Cr.P.C.) NATURE OF CASES UNDER THE ACT AND THE SCHEME: The offences under the Act and the Scheme for which the accused employers are charged with belong to the class of cases which are called ‘summons cases’. The Court on receipt of complaint under Section 200 Cr.P.C. will issue a process for appearance of the accused before the Court for answering the charge through the police officers. The summons issued through the Police officers for service on the accused are at times returned to the Court without service for various reasons. The Court, in that event, may ask the complainant to get the summons served on the 59 accused. When an Inspector is asked to serve summons on the accused, he has to adopt the following course of action for service summons. i) It should be served on the person summoned by personal service by delivering the duplicate of the summon after getting the receipt signed on the back of the other copy. ii) Where the person summoned cannot be found, the summons may be served by leaving a duplicate copy with one of the adult members of his family residing with him and the persons who receives the summon may acknowledge its receipt by signing on the back of the other copy. iii) Where both the above modes of service fail, the Inspector shall affix one of the duplicate of the summons to some conspicuous part of the house in which the person summoned ordinarily resides. iv) Where the person summoned is a Corporation, service of summons may be effected by serving it on the Secretary/Local manager or other principal officer of the Corporation or by letter sent by registered post addressed to the Chief Officer of the Corporation When all the modes of service fail even after exercising due diligence, a prayer may be made to the Court for issue of warrant (bailable on non-bailable) for arrest of the accused under Section 70 Cr.P.C. The warrant of arrest is sent through Police Officer. Some times, even warrant of arrest would fail to get the appearance of the accused. In such cases the complainant should make a strong prayer before the Court for issue of proclamation against the accused and attachment of the properties belonging to him under Section 82 and 83 Cr.P.C. No. of offences in one trial: Section 218 Cr.P.C. states that for every offence there should be a separate trial. Sec.219 Cr.P.C. is an exception to this general rule. Under Sec.219 three offences of the same kind committed within 12 months can be tried together. Nonpayment of contributions for each month is an offence. Therefore, there can be one trial for non-payment of contributions, Administration Charges and for not sending returns for any one month can be tried together under each Scheme separately. Conduct of trial 1. Offence under EPF & MP Act and Scheme are triable as summons case or warrant case depending upon the period of imprisonment prescribed. 2. Summons cases are triable in accordance with Chapter XX of the Cr.P.C. The procedure is as under:a) When an accused appears before a Court and the case is taken up for hearing a plea of the accused whether he pleads guilty or not to the charge to be taken (Sec.251) b) If the accused pleads guilty to the charge and the Court accepts it, he is convicted and sentenced (Sec.252) c) If the accused pleads not guilty, evidence is to be led by the prosecution. d) Order of evidence is as follows: i) The complainant is to be first examined in brief. He will then be cross examined by the accused. Thereafter he is to be re examined by the prosecution to remove all doubts arising out of the cross examination (Sec.138 IPC) 60 ii) Other witnesses will then be called by the prosecution and similarly examined. iii) After the evidence of prosecution the Court is to examine the accused under Sec.313 Cr.P.C. The accused can put in written statement on his behalf at this stage. iv) The accused is then to examine any witnesses on his behalf if he so desires. v) If the accused leads evidence then he has to argue first. The prosecution will then reply. If no evidence is led by the accused, the prosecution has to argue its case first and the accused replied. vi) The court is then to deliver judgement. If the Court convict the accused, the Court can impose a sentence of imprisonment against him as prescribed in the Act. CONVICTION/ACQUITTAL/APPEAL/REVISION: There is a basic difference between discharge and acquittal under the Cr.P.C. Chapter XX of the Cr.P.C. which deals with trial of summons cases provides for conviction/or acquittal of an accused. The accused on appearance before the Court may either plead guilty of the charges or seek trial. In case where the accused does not plead guilty the Court will proceed to hear the prosecution (Inspector) and take all evidence on his behalf and subsequently will hear the accused. The Court, upon taking the evidence finds the accused guilty, it shall pass a sentence according to law. If it finds the accused not guilty, it can record an order of acquittal. Nonappearance or death of the complainant or withdrawal of the case can also result in acquittal of the accused under Sections 256 and 257 Cr.P.C. Court can also discharge an accused under Section 258 Cr.P.C. where it has not jurisdiction to try a case even after taking evidence such as when the case is barred by limitation. In cases of acquittal, the complainant can file an appeal before the High Court under Section 378 Cr.P.C. after obtaining special leave to appeal within 6 months of the order of acquittal. Similarly, the complainant can file a revision petition either before the High Court or before a Sessions Court under Section 397 Cr.P.C. in cases of discharge ordered under Sec.258 Cr.P.C. The Enforcement Officers are therefore advised to be thorough with the procedures contained in Sections 251 to 258 under Chapter XX of the Cr.P.C. Certified copy of every order of the Court shall be collected so that at the time of filing prosecution under Sec.14AA, there is no difficulty in leading the evidence of earlier conviction. PAYMENT OF COMPENSATION UNDER SECTION 357 Cr.P.C.: The Court on convicting the accused under Sec.255, may order, at its discretion under Section 357, any part of the fine (to be imposed on the accused) to be applied among other things. i) in defraying the expenses properly incurred in the prosecution; ii) in payment of compensation for any loss or injury to the complainant. The Inspector is, therefore, advised to make specific prayers for awarding expenses in the complaints (being incurred by them) which shall include traveling expenses from their Headquarters to the Court on each day of appearance incidental 61 expenses such as typing, cost of papers and all other expenses incidental thereto. Prayers shall also be made for awarding compensation from out of fine being imposed on the accused which shall be equivalent to the amount due and outstanding from the accused towards Provident Fund and other dues for the period for which such complaints are filed in the Court. Normally, Court will be reluctant to pass order for such compensation unless it is strongly prayed for. The Provident Fund Inspectors should, therefore make it a point to specifically include prayers for compensation in all complaints filed against the accused. Absence of complainant: If on the day of any hearing of the complaint, the complainant remains absent, the Court may dismiss the complaint and acquit the accused. However, the Court may dispense with the attendance of complainant and proceed with the trial of the case (Sec.247 Cr.P.C.) It is hoped that the above guidelines would enable the Inspector to successfully conduct all cases under Sec.14 of the EPF and MP Act, 1952 as well as under Section 406/409 of I.P.C. They are advised to go through the guidelines carefully and equip themselves with all the important features of the Cr.P.C. They may however contact the Regional Office for any further guidance in the matter. Recovery of Statutory dues form Central Public Sector Undertakings(CPSU)/State Government Public Sector Undertakings(SPSU): The Head Office has reviewed the defaulting position of CPSUs and the steps to be taken to recover the dues expeditiously. It has been decided that all the legal action against CPSUs to be initiated to recover the dues. However, it is instructed that complaints u/s 406/409 of IPC should not to be filed. Similarly while exercising the powers of recover u/s 8B recourse should not be taken to the powers of arresting the senior officers of the CPSUs. Excepting the above all other coercive provisions in the Act & Scheme may be invoked for recovering the dues from the CPSUs. Many of the Public Sector Undertakings depend on grants etc. from the Government for their survival and payment of statutory dues including PF dues. Hence, the matter may have to be taken up with the concerned authorities at the appropriate level, to make them realize the importance of PF dues and the consequences of not remitting such dues i.e. levy of damages and interest alongwith penal actions such as arrests and prosecutions. Apart from this, you should also build pressure on PSUs to recover the dues. Coercive actions like attachment of bank accounts, sundry debtors and immovable property if taken regularly and in all cases will definitely yield positive and substantial results. To give effect to this strategy the following actions are required to be taken :1. Initiation and completion of assessment of all the outstanding dues in respect of all the defaulters on a war footing to ensure its completion by 31.3.2003 so that a clear picture emerges about the total default in this sector. In all cases of the Central and State PSUs, dues must be determined and other levies imposed so that the quantified position of arrears is correctly reflected in our workload. We are in a regime of disinvestments, various packages are under contemplation and if we do not project the actual liability position correctly 62 the same will not be factored in any financial arrangement set up for such PSUs. It should be made very clear to all the Assessing Officers that they should complete the assessment in all cases of Central and State PSUs on priority basis. 2. No action plan or strategy can be contemplated and / or executed unless there exists a robust database which gives clear picture and is capable of constant updation. You should therefore initiate immediate steps for preparation of a comprehensive and scientific database which should be ably to clearly reflect the total amount to be recovered with clear distinction in the employees’ and employer’s Share and other charges payable categorization of the establishment with regard to unit being registered with BIFR or other such relevant points like stay by court etc. alongwith the details of the possible sources from where the dues can be recovered e.g. Bank accounts, details of sundry debtors and properties etc. in respect of each establishment and keep an account of all the actions taken so far with regard of each establishment in default for recovery. Constant monitoring and updation of this database with regard to any further addition in default on account of damages and interest leviable and further default committed, if any, and scheme being sanctioned if the unit is registered with BIFR. Constant interaction with BIFR or the Official Liquidator, as the case may be, by officers fully equipped with the provisions of statute and case laws to strengthen their case. Constant and persistent efforts to get the stay, if any, granted by any court, vacated. Simultaneous action to take up the matter with the respective Governments/Ministries under whose control the PSU functions. Initiation of recovery action specially attachments of bank accounts, sundry debtors and immovable properties etc. 3. 4. 5. 6. 7. PENAL PROVISIONS Act – Sec. (1) Offender (2) Offence (3) Imprisonment (4) Fine (5) Avoiding payment or of enabling any other person to avoid payment under the Act/ Up to or Rs.5000/Schemes, knowingly makes or One year. causes to be made any false Or with both. statement of representation. Contravention or Default in payment of Contribution payable under Sec.6, Nonpayment of Inspection Charges payable in A/C.No.2 & Non Payment of Administrative 14(1) Whoever Up to 3 years (a) But not less Rs.10000/than one year for non remittance of 14(1A) An Employer 63 Charges payable in A/C.No.2 Employees’ Share of contribution deducted; (b) But not less than 6 months (in any other case) Up to one year but shall not be less than 6 months (Proviso common to Sec.14(1A) and 14(1B) provides that the Court may or any adequate & Special reasons to be recorded in the judgement, impose a sentence of imprisonment for a lesser term). Up to or One year Rs.5000/- 14(1B) An Employer Contravention or Default in payment of EDLI Contribution payable in A/C.No.21, EDLI Adm. Charges payable in A/C.No.22 and Inspection Charges payable in A/C.No.22 And also fine extended to Rs.5000/- 14(2) Any Person Contravention or Default in Complying with any of the provisions of the three Schemes. with fine which may Extend to Rs.4000/Or with both. 14(2A) Whoever Contravention or Default in complying with any provisions And also of the Act or any condition Up to 6 months extend subject to which exemption was (but not less Rs.5000/granted under Sec.17 (if no than one month) other penalty is else-where provided under the Act) Having been convicted by a court of an offence punishable under the Act / Schemes, commits the same offence under the Act / Schemes. Convicted of an offence in default in the payment of EPF/EPS/EDLI Contributions or non transfer of previous P.F Accumulations either on account of coverage or an account of cancellation of exemption and ordered to pay the contributions or transfer the accumulations within stipulated period and failure to pay or transfer the amount as directed by the Court. Extend to 5 And fine years but shall Rs.25000/not be less that 2 years fine to of 14(AA) Whoever 14C An Employer Imprisonment as provided under Sec.14 of the Act, as relevant to the offence committed. And also fine extended to one hundred rupees for every-day, after expiry on which the Court Order has not been complied with. 64 WITHDRAWAL OF PROSECUTION - PROCEDURE It should be ensured that once the prosecution is sanctioned by the competent authority, complaint is filed in the appropriate court by the Enforcement Officer within a period of seven days of its sanction. Prosecutions once sanctioned should not be held back merely because the establishment has paid the amount in arrears, before the prosecution complaint is actually filed in the Law Court. While it is not our intention to prosecute every defaulting employer indiscriminately, it is absolutely necessary for us to ensure that no defaulting employer commits a default and yet is allowed to get away with impunity. The prosecution once filed in the law court should not be withdrawn under any circumstances whatsoever except with the prior and specific permission of the Central Provident Fund Commissioner. Section 257 of the Code of Criminal Procedure deals with drawal of prosecution complaints. It reads as follows : “If a complainant at any time, before a final order is passed in any case under this chapter satisfies the magistrate that there are sufficient grounds for permitting him to withdraw his compliant against the accused or if there be more than one accused, against all or any of them, the magistrate may permit him to withdraw the same, and shall there upon acquit the accused against whom the complaint is so withdrawn.” Although the power of withdrawal of prosecution vest with the complainant still it lis felt that as a measure of having uniformity in acting upon the provision of Section 257 of the Code of Criminal Procedure certain guidelines should be followed by the complainant before actual withdrawal is given effect to. Whenever any request from a defaulting employer for withdrawal of prosecution is received by the Regional P.F. Commissioner, he should before referring the same to the Central P.F. Commissioner for orders in the matter, ensure fulfilment of the following conditions; a. the accused is a first offender and has not been convicted for a similar offence earlier, nor any other prosecution under the EPF & MP Act, 1952 is pending against him b. the accused has set right all the contraventions against which the compliant was filed. c. his current performance, in the matter of payment of all dues including interest due under Section 7Q of the Act, if any, is up to date. This is essential as it would be futile to withdraw one compliant and file another, close on the heels of withdrawal. d. the accused person has paid to the fund the damages upto date levied under Section 14 B of the EPF & MP Act, 1952 and also, reimbursed the legal and other expenses incurred by the office in connection with the prosecution. 65 e. the accused gives an undertaking to Regional P.F. Commissioner, to make full and prompt complaints under the various provisions of the EPF & MP Act, 1952. As the employer seeking withdrawal of prosecution cases is required to pay the damages before his request is considered, it is necessary for the Regional P.F. Commissioners to levy, without delay, the quantum of damages payable by the employer after observing all the necessary formalities and the employer should be called upon to pay the damages before his request is forwarded to the Central P.F. Commissioner for consideration. Moreover, the above instructions should be given effect to invariably in all cases and where any defaulting employer has not complied with any one or more of these requirements, his request for withdrawal of the prosecutions may straight away be rejected without any reference to the Central P.F. Commissioner to avoid protracted correspondence and wastage of time. Requests of employers who are habitual defaulters should not be entertained and they should be proceeded against in accordance with the law. The above instructions should be given effect to, uniformly in all cases. Furthermore, if a habitual or heavy defaulter is given lenient punishment by the court, immediate appeal should be filed. In case of any doubt, the case should be referred to Central P.F. Commissioner for instruction. The Regional P.F.Commissioner in charge of the region is required to recommend the withdrawal of prosecution in respect of cases arising from the SubRegional Offices under his jurisdiction duly furnishing the completer particulars of the case. 10 LEVY OF PENAL DAMAGES – AN INTRODUCTION The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 has been amended by Act 37 of 1953 providing for recovery of damages on the belated payment of dues under the Act/Schemes. The power to recover damages vested with the appropriate government till 25.4.1957. The power to levy damages was delegated to the State Government from 26.4.1957. As there was considerable delay in levy of damages, the Act has been amended by amendment Act 40 of 1973 vesting the power to levy damages to the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government. The Central Government has authorised the Regional Provident Fund Commissioners to levy damages vide notification S.O. 548(E) dated 17th October 1973 as amended by S.O.No.2793 dated 18.6.1983 with effect from 1.11.1973. The Regional Provident Fund Commissioners in the region as well as in the Sub-Regional Offices are empowered to levy and recover damages. With effect from 4.5.2002 the APFCs have also been empowered to levy and recover damages. The organisation was taking a stand that the damages as imposed under section 14B includes the penalty and the loss of interest sustained by the organisation by the belated payment of dues. The Apex Court has also held the same view in the case of Organo Chemical Industries 66 v/s Union of India and others. By the amendment Act 33 of 1988, for the words “from the employers such damages not exceeding the amount of arrears as it may think fit to impose”, the words “from the employer by way of penalty such damages, not exceeding the amount of arrears as may be specified in the Scheme” were substituted to make it clear that the damages is by way of penalty only. Simultaneously section 7Q was inserted in the Act making employer liable to pay interest on belated payment of any dues under the Act. All the covered establishments are required to pay the dues within 15 days from the close of the month. Five days grace period is also allowed. The dues shall include, any amount of contribution or amount to be transferred to the Fund on account of coverage under Section, 15(2) or amount to be transferred to the Fund under Section 17(5), after the cancellation of exemption or payment of any charges payable under any other provisions of the Act/Schemes or any of the conditions specified under Section 17 of the Act. If the amount is not deposited within this stipulated time, penal damages not exceeding the amount of arrears can be imposed under Section 14-B of the Act on the establishment. But before levying and recovering damages, the employer shall be given reasonable opportunities of being heard. The function of Regional Office/SRO/SAO with regard to Section 14-B are: (a) (b) (c) (d) (e) (f) (g) A centralised ‘Damages Cell’ is to be constituted. Defaults are to be detected through CCTS Software. Issue of notices to the employers. Obtain postal acknowledgement for the notices. Hearing of representations of defaulters. Issue of speaking orders. Collection of the damages levied through revenue recovery action. Functions of Accounts Branch: (a) For effective operation of the Section 14-B the Accounts Branch shall watch for the receipt of monthly returns and challans. After auditing Form 12A etc. and completing the entries in DCB register note down the delays made in remittances. The remittances made up to 20th of the following month are not to be taken as defaults. (b) A statement of delayed remittances should be prepared in Appendix A/B after verifying the particulars of remittances with Schedule of Receipts. The damages statement in Annexure-A and one copy of Annexure ‘B’ should be sent by 15th of the following month to the ‘Damages Cell’ duly approved by AAO/AO/AC. An entry for having sent the Damages statement is to be made in the DCB register for future reference. At present CCTS Software provides the list of defaulters, amount in default, amount of damages and dues under 7Q of the Act, and the same is forwarded to the defaulting employer. The employer can remit the amount of damages and the simple interest on the basis of CCTS reports. The personal hearing need to be provided to the employer and necessary procedure is required to be followed. 67 Functions of Damages Cell: (a) On receipt of damages statement prepare a show cause notice in format Appendix-C. The notice should be accompanied by a statement of dues and payments. (b) Issue notice to the employer. Before issue of notice make necessary entries in the “Register for watching levy and recovery of damages” (vide special proforma No.20). (c) Watch for any replies, representations from the employers and add the same to the file and submit the same to the Asst. P.F. Commissioner /Regional PF Commissioner one day before the date of hearing. (d) Once an order is passed by Asst. P.F. Commissioner / RPFC, the damages cell should prepare the proceedings in prescribed format, get it approved by Asst. P.F. Commissioner /RPFC. After this the fair copy should be neatly typed and sent to the employer by registered post. Printed or cyclostyled forms of speaking orders should not be used for this purpose. (e) The amount of damages as ordered by Asst. P.F. Commissioner /RPFC is to be entered in the Register for watching the levy and recovery of damages. (f) If the remittances are not received within 15 days of the issue of the order the damages cell shall initiate action for recovery. (g) When instalment facility is granted, the damages cell should receive and keep the Bank guarantee and watch for remittances on due dates of the instalments. The process of levy and realisation of damages is a quasi-judicial function. As a result of the adjudication by the Regional Commissioner, civil consequences are vested on the employer and it is therefore necessary that while conducting such adjudication, the quasi judicial authority have to act in conformity with the principles of natural justice. The employer should be given reasonable opportunity of being heard and his submission should be taken into consideration before deciding the case finally. The orders passed by the Asst. P.F. Commissioner /Regional P.F. Commissioner should be a speaking order which should specifically state the reasons for the imposition of the damages. Damages imposed under Section 14-B is a penalty. It serves as a deterrent, so that an employer may not commit further defaults. To sustain the loss caused to the Organisation, simultaneous action need to be taken to charge the interest under Section 7Q of the Act in all belated remittances. Levy and realisation of damages should be made in time. As soon as the default is detected immediate action should be taken, to initiate the proceeding under Section 14-B. Even though the law of limitation does not apply, damages should be levied without much delay. . As soon as the default is detected, the Accounts Section should prepare the statement of delayed remittances and pass it on to the Damages Cell. The Damages 68 Cell may take action on the Penal Damages Statement generated through CCTS Software and the amount realised should be accounted for properly. As already mentioned earlier, the process of levy of damages is a quasijudicial function. The employer should be given an opportunity of being heard. On receipt of the statement of the delayed remittances, the Damages Cell will issue a show-cause notice to the employer. The soft notice through CCTS serves this purpose. The Asst. Commissioner /Regional Commissioner should fix certain dates every month for conducting personal hearings under Section 14-B. The show-cause notice indicating the date of personal hearing should be issued by Registered Post and the acknowledgement obtained and kept on record. This will ensure that the employer has been duly informed of the date of hearing and he can not take the plea that he was not aware of the dates. All the replies and representations received from the employer should be kept on record and the file put up to the Asst. Commissioner / Regional Commissioner with a brief note on the date before the date of hearing. On the date of hearing, Asst. Commissioner / Regional PF Commissioner should record the proceedings in his own hand and pass an appropriate speaking order applying his mind to the facts and circumstances of the case. In case the employer fails to attend the personal hearing on the specified date, damages may be levied taking into account the written representation, if any, received from the employer. The speaking order should specifically meet all points raised by the employer in his written and oral evidence, so that the orders once passed are self-speaking and complete in all respects. The order should be neatly typed and sent to the employer by registered post. A copy of speaking order should be sent to the accounts branch also. The section will enter the details in the DCB Register and the remittance watched. In case, the damages are not paid within 15 days action should be initiated to invoke the provisions of Section-8F of the Act. According to Section 14-B of the Act read with the provisions of the relevant scheme the Regional Provident Fund Commissioner may recovered from the employer by way of penalty such damages, not exceeding the amount of arrears, as specified in the Scheme. The rates of damages given in the Schemes are reproduced hereunder. E.P.F. Scheme ……..Para 32-A E.P.S.-1995 ……..Para 5 E.D.L.I. Scheme ……..Para 8-A. Period of default Rates of damages (percentage of arrears per annum) Seventeen than Twenty Two Twenty Seven Thirty Seven (a) Less than two months (b)Two months and above but less four months (c) Four months and above but less than six months (d) Six months and above The Central Board of Trustees may reduce or waive the damages levied under Section 14-B of the Act in relation to an establishment which is a sick industrial company and in respect of which a Scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 69 subject to such terms and conditions specified in the relevant Scheme. In other cases, depending upon merits reduction of Damages upto 50% may be allowed. The order passed under Section 14B can not be revised or rescinded. However, any clerical or arithmetical mistake can be rectified either suo motto or on a representation from the employer provided that no such rectification should be made without giving the employer a further opportunity of hearing where such rectification will have the effect of enhancing the liability of the employer. An exparte order may be re-opened if it is subsequently brought to the notice of the Regional Commissioner by the employer that he did not receive the notice or that he was prevented by sufficient cause from sending representation in writing/appearing before the authority on the first date. In such cases, the Regional Commissioner may issue revised speaking order indicating the reasons for the review etc. cancelling the earlier order. Damages should not be waived by the Regional Commissioner as he is not empowered to waive the same. The employer may, however, be allowed to pay the damages in instalments if he satisfies the requisite conditions of instalment facility. Levy of Penal Damages in respect of Establishments covered retrospectively: In respect of the establishments covered belatedly the following guidelines have been issued by the Head Office vide Lr. No. C.II/Misc./Inst./04/15921 dated 15.6.2004 with regard to levy of damages. 1. 2. 3. Levy of damages on : workers’ share for prediscovery period Establishment which paid : PF dues within the time prescribed in the coverage notice. Establishments which paid : PF dues beyond the date fixed in the coverage notice. 4. Establishments which were : having their own private PF system before coverage and who deposited the PF in banks or finance establishments. No damages shall be levied if the workers’ share for the pre-discovery period has been waived. No damages shall be levied, however to compensate the interest loss to the EPFO, only simple interest @ 12% p.a. shall be levied. No damages shall be levied till the date of payment fixed in the coverage notice. Only simple interest @ 12% upto the date mentioned in the coverage letter and damages at appropriate rates for the period of delay beyond the date fixed in the coverage letter be levied. Only difference of interest amount between 12% simple interest p.a. and the actual interest earned by the private PF shall be levied if the latter is less than 12% p.a. Beyond the date fixed in the coverage notice, damages shall be levied at the appropriate rates. 70 However, the past cases already decided may not be reopened. To avoid confusion and inconvenience in the matter of remittance of PF dues where the establishments are covered belatedly, the coverage notices shall henceforth contained instructions that ‘payments of PF contributions and allied dues shall be made within 15 days from the date of receipt of the coverage notice’. PENAL DAMAGES MAY NOT BE LEVIED IN THE FOLLOWING CASES: 1. Damages may not be levied on an employer who sends a Bank Draft or cheque on or before 20th of the month even though the actual realisation of money into the account of the Fund takes place after the due date, including days of grace. 2. Where arrears arise due to mistake in totalling contributions etc. damages may not be levied for the reason that it can not be said to be a case of default. 3. Damages are not to be levied where an employer did not make deduction from the wages of an employee on account of an accidental mistake or a clerical error or where an employee giving a false declaration regarding his previous membership provided the employer was permitted in writing to make deduction from the subsequent month’s wages. 4. Only damages accrued upto the date of liquidation of a company can be realised from the liquidator. No damages can be levied subsequent to the date of liquidation. 5. Part payment made by the establishment is to be treated as default and damages are leviable on the balance amount due. 6. If the delay is solely due to and attributable to railway/General/Bank strike, no penal damages should be levied. This will, however, be subject to verification. Need for timely Action: The observation made by a High Court on the belated action in levying the damages is reproduced for guidance: “the officers entrusted with the task of administering social welfare legislations should be aware of this and they should be conscious that they are administering a law which has been enacted for the welfare of the employees. The Government who have enacted the law owes a duty to set up proper machinery to administer it. If it needed 17 years to issue notice which only required turning the pages of a register with a view to seeing the date of payment, it is difficult to understand what sort of administration of this social welfare legislation is being done by the authorities concerned. This case is a glaring example of the way of the social welfare legislations are being dealt with and administered. The whole of the legislative purposes may be frustrated by administrative inefficiency, inaction or negligence. If any loss is caused to the employees by their inaction, negligence or remissness responsibility may be fixed and the amount recovered from the persons so responsible. Action taken after long 17 years for levy of damages of Rs.53,000 for a default committed for a period of 10 years can neither be exemplary nor act as a deterrent for other employers.Where no period of limitation is prescribed by the law for 71 exercise of any power it must be exercised within a reasonable time. Any unreasonable delay in exercise of power may affect its validity. What is reasonable time will depend upon the facts of each case.” Though Apex Court set aside the impugned judgement of the High Court and salvaged the situation to certain extent, that it has not given any blanket permission to Regional Provident Fund Commissioner to levy the damages taking their own time. The Apex Court observed “There can be no dispute that when a power is conferred by the statute without mentioning the period within which it could be invoked, the same has to be done within a reasonable period, as all powers must be exercised reasonably and exercise of the same within a reasonable period would be facet of reasonableness”. Keeping in view of the above observations, Regional Commissioners should take action to levy damages promptly. Further, interest under section 7Q is chargeable for belated remittances of damages. A period of 15 days should be allowed to an employer for remittance of damages from the letter of issue of the levy order. Launching of prosecution for non-payment of Damages levied: The question as to whether an employer could be prosecuted for nonpayment of damages was examined long back and it was decided by the Legal Advisor to the Government of India, Ministry of Labour than once the date or period within which the employer is required to pay the damages levied is incorporated specifically in the speaking order, legal action can be taken against the employer by resorting to the prosecution under Section 14(2A) of the Act. It was also decided that the protection of Article 20(2) of the Constitution of India will not apply as it would not amount to double jeopardy. The employer has to deposit the damages at the rate as specified under three Schemes immediately on issue of a proceedings issued by the Regional Provident Fund Commissioner in terms of proviso to Section 14B of the Act. Thus, the penal damages levied becomes an amount payable by the employer under the provisions of the Act and as such the non-payment of damages could be construed as an offence falling under Section 14(2A) of the Act. In view of this, speaking order should specifically mention the date by which the damages levied shall be remitted, and in the event of the employer failed to do so within the stipulated time, the employer is liable for prosecution, besides, recovery of interest under Section 7Q of the Act. Database Creation: With a view to ensure that Penal Damages under Section 14 B and interest under Section 7Q are realised in respect of all belated deposits, the Headquarters office has given directions to all the field offices to create a data base in the prescribed formats (Data base I & II) to the extent of 100% of all establishments. For this purpose, the remittance particular with the date of deposit are to be collected in respect of each establishment with reference to DCB Register and Enforcement files, from the date of Coverage of the establishment. Simultaneously, wherever the Penal Damages and interest are not realised action shou7ld be initiated to recover the dues on priority basis. 72 The Regional P.F. Commissioners in charge of the Regions have been given the task of completing the task of creation of database I & II as their key functional areas. RECKONING THE PERIOD OF DELAY: To be reckoned from 16th of the month following to the month for which the dues relates to the date of remittance. Where arrear wages are paid – To be deposited within 15 days of disbursement. Transfer of past accumulation dues – Within 10 days from the issue of related letter. Retrospective application of the Act – From the normal due date, from the date of coverage and not from the date of issue of Code Number. GRANT OF INSTALMENT FACILITIES FOR PAYMENT OF PF DUES IN SUITABLE NUMBER OF INSTALMENTS, DELEGATION OF ENHANCED POWERS TO THE RPFCS The CBT, EPF at its 163rd meeting held on 19-08-2003 has approved delegation of enhanced powers of the RPFCs in the matter of granting instalment facility for liquidation of outstanding statutory dues as detailed below:S.NO. 1. 2. GRADE OF THE OFFICER Officer in chare of SROs headed by RPFC-II RPFC-I in charge of the regions ARREAR LIMIT Rs.5 lakhs Rs.10 lakhs However these officers shall be required to ensure that the dues are realized during the current financial year itself. Cases where the amount exceeds Rs.10 lakhs in arrears and where the amount is not realisable within the current financial year, fit cases shall be referred by the Regional P.F. Commissioner-I of the region to the Central Office with his/her specific recommendations. Sanction of the instalment facility shall be subject to the norms and conditions already communicated early. 73 The number of instalments shall be regulated depending on the merit of each case and not mechanically. Similarly, while recommending cases for instalment facility to Central Office, care shall be taken to ensure that all the conditions communicated on the subject are adhered to strictly. [vide Headquarters letter No.E.II/Inst./03/DL/50863 dated 15.10.2003] ******* GUIDELINES FOR GRANT OF INSTALMENT FACILITY TO LIQUIDATE THE ARREARS 1. Maximum instalments shall be 36 (monthly instalments). However, the number of instalments admissible in each case will be decided on individual merits. 2. Except in the case of sick units, the defaulters shall be required to liquidate the employees’ share, before applying for instalments. 3. The scheme shall operate from the subsequent month of grant of the facility. 4. A revolving bank guarantee equal to one instalment shall be furnished alongwith the proposal. 5. The proposal shall be submitted to the regional/sub-regional/sub-accounts office controlling compliance of the establishment. Depending on the delegated powers the case shall be processed by the appropriate office. 6. Where the case is to be decided by the Head Office, the proposal complete in all respects shall be forwarded by the Regional Provident Fund Commissioner-I alongwith his observations and specific recommendations. 7. RPFC-I shall recommend the instalment only where it exceeds the delegated powers or where the period required stretches beyond the calendar year. 8. Only if the RPFC is satisfied about the viability of the scheme, he shall send his recommendation. 9. The number of instalments recommended shall be reasonable and relatable to the quantum of default. 10. The establishment shall be required to remit the instalment amount before 15th of the subsequent month. 11. The establishment shall ensure remittance of the current dues alongwith the instalment dues before 15th of the month. 12. There shall be an undertaking regarding payment of damages and interest dues as and when levied. 74 13. The instalment scheme shall be deemed to have been cancelled in case of any default in payment either of instalment amount or current dues. 14. Consequent on the cancellation of the instalment facility all coercive steps shall be initiated against the establishment/employer for realizing the outstanding dues without further notice. 15. Even where the default amount is within the powers of the RPFCs a review shall be made by the RPFC-I of the region periodically. [vide Headquarters letter No.C.II/Misc/Inst./03/DL/65517 dated 02.12.2003] 16. The field offices shall forward proposals for grant of instalments to liquidate only the assessed dues so that in case of default the recovery proceedings can be initiated immediately. (H.O. Lr. No. Comp.05/Recovery/Cir/Co-ord/Adm. Inst./21840 dated 2.6.2005) ASSESSMENT OF DUES UNDER SECTION 7A AND 14B OF THE ACT When the Compliance 2001 program was introduced during 2001 detailed instructions were issued to all the field formations to scrupulously follow certain norms for accountability and transparency in quantification of dues under the Act. They were also required to maintain the basic books of accounts and furnish the information to the Recovery Officer as per the existing instructions. The Circle Officer was made the centre point of compliance in all matters regarding to arrear management including recovery up to the end of the financial year. Specific work norms were fixed for the Assessing Officers as well. However, it is a matter of record that many regions do not adhere to these instructions strictly with the result the arrears mount up which are not brought to the books of accounts. Directions were also issued making it imperative on the part of the supervisory officers like RPFC-II and RPFC-I to scrutinize the assessment orders, at least eight orders of each Assessing Officer every month. Out of the eight orders, four were to be selected by the supervisory officer whereas four were to be submitted by the Assessing Officer as per his choice. This should be communicated to the Head Office for every month before 10th of the subsequent month. Except from a very few regions, such information is not received in the Head Office, which has been viewed seriously by the Central Provident Fund Commissioner. [vide H.O. Letter No.RRC/28(3)2003/7A-14B/68533 dated 9.12.2003] 75 NOTIFICATION OF EMPLOYEES’ PROVIDENT FUND ORGANISATION UNDER SECTION 138 OF INCOME TAX ACT, 1961 FOR DISCLOSURE OF INFORMATION OF ASSESSEES Section 138 of Income Tax Act, 1961 provides for disclosure of information of assessees. Section 138(1) provides that the Central Board of Direct Taxes or any other income-tax authority specified by it by a general special order in this behalf may furnish or cause to be furnished to such officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary to do in the public interest, specify by notification in Official Gazette. Government of India vide notification No.9/2003 dated 7.1.2003 has specified Central Provident Fund Commissioner or any other officer, not below the rank of Regional P.F. Commissioner for the purpose of Section 138 of Income Tax Act, 1961 duly authorized by him. Authority: [CPFC’s Letter No.Co-ord/24(5)2000/201 dated 12.6.2003 read with Ministry of Labour letter No.35025/2/2001-SS.II dated 27.1.2003. 76 11 APPLICATION OF SECTION 7Q Provisions in the Act: Section 7Q creates liability on the employer to pay simple interest at twelve percent per annum or at such higher rate, as may be specified in the Scheme on any amount due from him under the Act from the date on which the amount has become due till the date of its actual payment. The higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank. As no provision has so far been made in the Scheme for higher rate of interest, the defaulting employer is liable to pay simple interest at twelve percent per annum. Implications of Section 7Q of the Act: Section 7Q was inserted by the Amendment Act 33 of 1988 and it is given effect only since 1.7.1997. While amending the Act (by the Amendment Act 33 of 1988) for creation of Employees’ Provident Fund Organisation’s own recovery machinery on the lines of recovery machinery of the Income Tax department by adopting and applying the provisions of Second and Third Schedules to Income-tax Act, 1961 and Income-tax (Certificate Proceeding) Rules, 1962, some other provisions of the Income-tax Act, 1961 relating to recovery were also borrowed and incorporated with such modification as necessary to suit the requirements of the Employees’ Provident Fund Organisation. Section 7Q of the Act is adopted from Section 220 of the Income-tax Act, 1961. There is a reference to Section 220 of the Act in the Rule 5 of the Second Schedule to Income-tax Act, 1961. This section provides for payment of simple interest at the rate of one-and-a-half percent for every month or part of a month, comprised in the period commencing from the immediately following the end of period mentioned in sub-section (1) of 220 of the Income-tax Act, 1961 i.e. thirty days from the date of service of demand notice. Particularly when there is specific provisions in the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 for payment of interest on belated payment of due under the Act., i.e., Section 7Q of the Act, section 220 of Income-tax Act, 1961 cannot be invoked and the interest cannot be charged under this section in addition to charging of interest under Section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The interest also cannot be charged at rates mentioned therein, ignoring the provisions of section 7Q of the Act. Interest can be charged only at the rate specified in section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 or the rate as may be specified in the Scheme. Section 14B of the Act was also amended on the lines of section 221 of the Income-tax Act, 1961. For the words “may recover from the employer such damages not exceeding the amount of arrears, as it may think fit to impose” in section 14B of the Act, the following words were substituted. 77 “may recover from the employer by way of penalty such damages not exceeding the amount of arrears, as may be specified in the Scheme”. By adding the words “by way of penalty” in Section 14B, it is made clear that the damages imposed is by way of penalty and it does not cover the loss of interest to the fund. Further Income-tax Act, 1961 also provided for penalty in addition to simple interest to be charged on the dues. In view of the above, employer is liable to pay simple interest at the rate of twelve percent per annum on the belated payment of contributions, administrative charges, inspection charges, previous accumulations due for transfer on coverage of establishment or cancellation of exemption from the date they become due for payment till the actual date of payment/transfer, in addition to the damages payable under section 14B of the Act. The exempted establishment also should pay the simple interest at twelve percent on the belated payment of contribution to the Board of Trustees of the exempted fund in addition to the damages payable under section 14B of the Act. The interest should be paid to exempted fund. Section 7Q of the Act creates liability on the employer to pay simple interest on any amount due from him under the Act and the damages levied under Section 14B of the Act is the amount due under the Act. Further rule 5 of the Second Schedule to Income-tax Act, 1961 provides for the payment of interest on belated payment of penalty also. In view of the above, simple interest at the rate of twelve per cent per annum should be recovered from the employer from the date it becomes due ( i.e. fifteen days from the date of receipt of levy order, as ordered in the levy order itself) till the date of actual payment. Action to be taken by the Regional Office/Sub-Regional Office : As the section 7Q of the Act came into force with effect from 1.7.1997 the employer is liable to pay simple interest at twelve per cent per annum on the belated payment of contribution, administrative charges, inspection charges, damages and past accumulations due from 1.7.1997. Demand should be raised for such amounts straightening after calculating the same. There is no necessity to hear the employer the before raising the demand, as it is not a penalty. Entry in the Interest Suspense Account Register: The interest realised under Section 7Q should be entered under a separate column in the interest suspense account register as credit to Interest Suspense Account. Action should be taken to provide a separate column in the Challan to show amount of interest under section 7Q of the Act. Till then the amount should be indicated against “Misc. Remittances” with remarks “Interest under Section 7Q”. 78 12 EPFO - RECOVERY MACHINERY RECOVERY – AN INTRODUCTION – ACTION UNDER SECTION 8B -8F – PROCEDURE – ITCP RULES By the Amendment Act 33 of 1988, Section 8B to 8G have been inserted, to create the Employees’ Provident Funds own recovery machinery on the lines of the recovery machinery of the Income-tax Department by adopting and applying the Second and Third Schedules of Income-tax Act, 1961 and Income-tax (Certificate Proceeding) Rules, 1962. Though the Act was amended in the year 1988, these provisions were given effect from 1.7.90. Government in the first instance notified one Assistant Provident Fund Commissioner by name for each Region except Maharashtra Region where two Assistant Provident Fund Commissioners were provided, to exercise the powers of the Recovery Officer under the provisions of the Act. The process of recovery delayed due to large number of cases pending and also of concentration of work with one Assistant Provident Fund Commissioner. Subsequently, Government notified all the Regional Provident fund Commissioners and Assistant Provident Fund Commissioners as recovery officers in their respective regions so as to decentralize and speed up the recovery work and also to make each assessing officer responsible for the recovery of arrear dues assessed by them. As the each Regional Provident Fund Commissioner/Assistant Provident Fund Commissioner is the assessing officer and also the recovery officers, it will be easier for each one of them to concentrate on recovery of arrears due from the defaulting establishments falling in their jurisdiction and to bring down the arrears. The main functions of the Recovery Officer are as under: (1) To initiate recovery proceedings against the defaulters. (2) To ensure compliance with the requirements for recovery proceedings. (3) Enforce the recovery of arrears by attachment and sale of movable and immovable property of the defaulter; (4) Enforce the recovery by attachment of business of the defaulter; (5) To appoint Receiver for running the business attached, of the defaulter; (6) Enforce the recovery by arrest and detention of the defaulter; (7) Investigate the claim preferred to or any objection made to attachment and sale of property and pass orders; (8) To ensure safe custody of the property attached; (9) To confirm the sale of the property; (10) To ensure the delivery of the property to the purchaser; (11) To ensure the amount realized are deposited on the same day of its realization in the EPF Accounts with the State Bank of India. 79 The duties and responsibilities of an Enforcement Officer in recovery proceedings are as under: (1) (2) (3) (4) (5) To cause service of summons/warrants/demand notices upon the defaulting employers to avoid delay. To collect the information about the movable/immovable property of the defaulting employer and the establishment. Attachment of the movable/immovable properties. To pursue the recovery of dues by sale or auction of the property attached. To attend the periodical meetings with the Recovery Officer and the Regional Provident Fund Commissioner to review the recovery position. To maintain the various Registers required for the purpose of monitoring the recovery. To maintain liaison with the Courts for speedy and expeditious recovery. To carry out such other functions as may be assigned to him by the Recovery Officer. (6) (7) (8) RECOVERY CERTIFICATE: Recovery Certificate means an authority given by the authorised officer to the Recovery Officer to recover the amount from the defaulter invoking the provisions of Section 8B to 8G. As such the authorised officer has to issue Recovery Certificate to the Recovery Officer furnishing the amount of due and the details of the defaulter. It is also the duty of the authorised officer to inform the recovery officer the assets and properties of the defaulter. Whenever the defaulter pays the amount or installment is granted or the amount due is waived the fact should be informed to the Recovery Officer then and there. The assessing officer on the close of every financial year before 5th of April the total defaulting amount to be intimated to the Recovery Officer through Recovery Certificate. On receipt of the Recovery Certificate by the Recovery Officer in his office enter in a register called Demand Collection Register the details of the Recovery Certificate. By which the Recovery Officer can ascertain his work load and the quantum of amount to be recovered from the defaulter for that financial year. The Recovery Officer has to issue notice of demand in Form No.1 to all the defaulters giving 15 days time to remit the amount. On expiry of the 15 days, the Recovery Officer has to proceed for the recovery of the amount due wherever not remitted within that 15 days by invoking the powers of (i) attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer; (first the property of the establishment may be attached if it is not sufficient or if it is not available then the personal property of the employer shall be attached). Arrest of the employer and detention in prison. Appointing the receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer. (ii) (iii) 80 ATTACHMENT: The attachment means after serving the copy of the warrant to the defaulter, the Enforcement Officer, if he desires to attach the property he should choose movable property and its approximate value to be attached, then he has to make a punchanama (Mahajar) furnishing the entire events right from the stepping into the establishment to till the proceedings is over. In the mahajar he should mention the time and date of his arrival and leaving and the persons present over there, details of the properties attached and the value of the properties attached and where the attached property is kept and also he should obtain signature of the witnesses and signature of the employer or his representatives. Finally, the Enforcement Officer should sign the mahajar and the copy of the same should be handed over to the employer and one copy should to pasted in the notice board of the Recovery Officer. The attachment by the seizure should be made after the sunrise and before the sunset and not otherwise. ATTACHMENT OF MOVABLE PROPERTIES: Issue of notice: If the defaulter fails to pay the dues within the date specified in the assessment under Section 7A or levy order under Section 14B, action should first be initiated under Section 8F of the Act to recover the dues. If the dues could not be recovered, either fully or partially, by taking action under Section 8F or if it is not feasible to initiate action under Section 8F, action should be initiated under Section 8B of the Act to recover the dues. The concerned Assessing Officer, i.e. Regional P.F. Commissioner or Asst. P.F. Commissioner himself should draw up statement of dues (i.e. the Recovery Certificate) specifying the period, amount, etc., in his capacity as Recovery Officer and issue the demand notice in the Form EPFCP-I requiring the defaulting employer or the establishment, as the case may be, to pay the arrears specified in the Recovery Certificate within 15 days receipt of notice, by registered post with acknowledgement due. Alternatively, the area Enforcement Officer may be directed to serve the demand notice and obtain the acknowledgement of receipt of notice from the defaulter. The notice should be issued only in the prescribed form. The non issue of notice as required above will render entire proceeding taken by the Recovery Officer, illegal and void. The issue of Recovery Certificate should be noted in the Register of Recovery Cases. As further action will have to be taken based on the date of receipt of notice by the defaulter, the receipt of acknowledgement card should be watched and the date of receipt of notice by the defaulter should be entered in the Register of Recovery Cases. The Acknowledgement Card should be preserved properly in the relevant recovery file of the establishment. The Acknowledgement Card may be printed by the office, if necessary, after getting approval of the Postal Department, with Red Border on all the four sides of the Card for easy identification. After the service of notice, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him and if created, without specific permission of the Recovery Officer, it shall be void. Nor shall any Civil Court issue any process against such property in execution of a decree for the payment of money. 81 Issue of warrant: When the movable property is to be attached, the Recovery Officer should direct the area Enforcement Officer to serve a copy of the warrant in Form EPFCP-2 on the defaulter and take further action as directed therein. Enforcement Officer should return the warrant on or before the date specified therein with an endorsement certifying the date on which and manner in which, it has been executed. This requirement of service of the copy of the warrant of attachment on the defaulter, is to afford an opportunity to the defaulter to pay the amount. For due compliance of this requirement service should be personal service and not by affixation. The whole aim should be to recover the money and not otherwise. If the defaulter, after the service of warrant, fails to pay the amount of arrear dues forthwith, the Enforcement Officer should proceed to attach the movable property of the defaulter and intimate the details of the property attached to the Recovery Officer. If he could not execute the warrant, he should give reasons for its non-execution. While attaching the property, it should be ensured that the property exempt from attachment under Section 60 of code of Civil Procedure 1908 is not attachable. The Recovery Officer’s decision as to what property is so entitled to exemption shall be conclusive. Where the movable property other than the agricultural produce, is in the possession of defaulter, Enforcement Officer should attach the property by actual seizure. He should keep the property in his own custody and he should take adequate care and steps to keep the property safely, till the Recovery Officer directs him to sell the property. When the property seized is subject to speedy and natural decay or when the expense of keeping it in the custody is likely to exceed its value, he may sell it at once. Warrant of Sale: On receipt of report of Enforcement Officer regarding the attachment of property, Recovery Officer should issue the warrant of sale in Form EPFCP.12, in triplicate and direct the Enforcement Officer to act as per the instructions therein. The date of issue of warrant of sale should be entered in the Register of Recovery cases and the report of the Enforcement Officer should be watched. After serving the copy of the warrant of sale on the defaulting employer, Enforcement Officer should send a report indicating the date on which and manner in which it was served and also the valued of the each movable property seized to enable the Recovery Officer to fix the reserve price and order for sale of movable property. Proclamation of sale: On receipt of the report of the Enforcement Officer, the date of receipt of report of the Enforcement Officer should be entered in the Register of Recovery cases. Thereafter, the proclamation of sale of the property in the form EPFCP-13 should be issued by the Recovery Officer in the languages to district of the intended sale. He should also fix the reserve price for each article and indicate in the proclamation of sale. The reserve price should be determined after an objective 82 consideration of all the relevant facts. It should not be any figure having no relation whatsoever to the minimum price which the property intended to be sold is expected to fetch at the auction sale. The copy of the proclamation of sale should be affixed in a conspicuous part of the office of the Recovery Officer and Enforcement Officer. He should normally direct the area Enforcement Officer to conduct the sale by public auction in one or more lot as the Enforcement Officer considers necessary. If the Recovery Officer considers that it is more advantageous to appoint a person other than the area Enforcement Officer to sell the property, he may appoint any other Enforcement Officer of the Regional Office/Sub-Regional Office, whom he considers more suitable for the job. He may also appoint any other fit person other than the Enforcement Officer from the approved, auctioneers to sell the property and fix the remuneration to be allowed to him for rendering such services. The remuneration payable to such person should be treated as cost of the sale and should be recovered from the defaulter along with other costs. While appointing an auctioneer, adequate care should be taken in selecting the auctioneer. The Recovery Officer may summon any relevant person and examine him in respect of any matters relevant to proclamation and required him to produce any document or power relating thereto for the purpose of ascertaining the matters to be specified in the proclamation of sale. The Enforcement Officer should arrange for the proclamation of sale by beating of drum or other customary mode: (1) (a) (b) in the case of property attached by actual seizure in the village in which the property seized or if the property was seized in a town or city, then in the locality in which it was seized. At such other place as the Recovery Officer may direct. (2) in case of property attached otherwise than by actual seizure, in such places, as Recovery Officer may direct. Sale after fifteen days: No sale of property should take place until the expiry of atleast fifteen days calculated from the date on which the copy of the proclamation of sale affixed in the office of the Recovery Officer, i.e., Regional Office or Sub/Regional Office, as the case may be. Where the property is subject to speedy and natural decay or when the expense of keeping it in custody is likely to exceed its value, sale may take place before fifteen days. If the defaulter gives his consent, in writing, for selling the property before fifteen days, sale may take place before fifteen days. Prohibition of sale on holidays: No sale should take place on a Sunday or other general holidays recognized by the State Government on any days which has been notified by the State Government to be a local holiday for the area in which the sale is to take place. 83 Prohibition against bidding or purchase by officer of the Employees’ Provident Fund Organisation: No officer/staff of the Employees’ Provident Fund Organisation or any person having duty to perform in connection with any sale, should either directly or indirectly, bid for, acquire or attempt top acquire any interest in the property sold. Investigation by Recovery Officer: If any claim is preferred to or any objection is made to the sale of any property in execution of certificate on the ground that such property is not liable for such sale, the Recovery Officer should proceed to investigate the claim or objection. ATTACHEMENT OF IMMOVABLE PROPERTY: After the issue of notice in Form EPFCP.1, if the defaulter fails to pay the amount of arrears due, within the date specified therein, the Enforcement officer should send a report immediately to the Recovery Officer, furnishing the details of immovable property that may be attached. On receipt of report of the Enforcement Officer, the Recovery Officer should issue the order of attachment, after the expiry of notice period of 15 days in Form EPFCP-16 and he should direct the area Enforcement Officer to serve a copy of the order of attachment on the defaulter. The attachment of immovable property may be resorted only when sufficient movable property of the defaulter are not available for attachment or when the amount of arrears due is huge and it is not advisable to attach movable property. However, the Recovery Officer is under no obligation to recover the arrears first by proceeding against movable or by arrest before attaching the immovable property of the defaulter. If he so desires, he may attach the immovable property without resorting to attachment of movable property. The Enforcement Officer should return the order of attachment on or before the date specified therein with an endorsement certifying the date on which and the manner in which, it has been executed. The order of attachment should also be proclaimed at some place on or adjacent to the property attached by beat of drum or other customary mode and a copy of the order should be affixed on a conspicuous part of the property attached. This is necessary to make the public aware of the order of attachment. Further a copy of the order of attachment should be affixed on the notice board of the Recovery Office (i.e., Regional Office/Sub-Regional Office). The Enforcement Officer should also send the details of the property attached. Attachment relate back from the date of service of notice: The attachment of immovable property shall relate back to or take effect from the date on which notice to pay the arrears issued in Form EPFCP.1, served upon the defaulter. Investigation by Recovery Officer: If any claim is preferred to or any objection is made to the attachment or sale of any immovable property, on that ground that such property is not liable for attachment or sale, the Recovery Officer should, proceed to investigate the claim 84 or objection. No such investigation should , however, be made, where he considers that the claim or objection was designedly by or unnecessarily delayed. The claimant or objector must adduce evidence to show that at the date of service of notice issued in Form EPFCP.1 to pay the amount of arrears due, on the defaulter, he had some interest in or was possessed of the immovable property in question. On investigation, if the Recovery Officer has found that attached property, at the date of service e of notice in Form EPFCP.1, was not in possession of the defaulter or if some person in trust for him or in the occupancy or a tenant or other person paying rent to him or that though the property was in possession of the defaulter, it was in his possession not in his own account or as his own property but on account of or in trust for some other person or partly on his own account and partly on account of some other person, the Recovery Officer should make an order releasing the property, wholly or to such an extent he think fit for attachment or sale. If he has found that the property at the above said date was in the possession of the defaulter, as his own property or was in the possession of some other person in trust for him or in the occupancy of a tenant or other person paying rent to him, he should disallow the claim. The party against whom the order is made may institute a Civil suit, to establish his rights to the property. The orders of Recovery Officer shall be conclusive, subject to result of such suit. The investigation by the Recovery Officer is not an empty formality. The process is quasi-judicial involving a reasoned decision after hearing both sides. It is beyond the competence of the Recovery Officer to decide the question of title. His power is limited to decide as to who was in possession of the property. Proclamation of sale: The proclamation of sale should be issued in the Form EPFCP.13. It should be in the language of the district of the intended sale. Recovery Officer should normally direct the area Enforcement Officer to sell the property attached or portion thereof to cover the amount of arrears due and other expenses relating to recovery. If Recovery Officer considers that it will be more advantageous to appoint a person other than area Enforcement Officer to sell the property he may appoint any other Enforcement Officer of the Regional Office/Sub-Regional Office, whom he consider as more suitable for the job. He may also appoint any other fit person (other than the Enforcement Officer) from the approved auctioneers list to sell the property and to fix the remuneration to be allowed to him for rendering such services. The remuneration payable to such person should be treated as cost of sale and should be recovered from the defaulter along with other costs. While appointing an auctioneer, adequate care should be taken in selecting the auction agency. The Recovery Officer may summon any relevant person and examine him in respect of any matters relevant to proclamation of sale and require him to produce any document or power relating thereto for the purpose of ascertaining the matters to be specified in the proclamation of sale. The notice for settling the sale proclamation should be issued in Form EPFCP-17. 85 Contents of Proclamation: The proclamation of sale of immovable property should be drawn up after notice to the defaulter in Form EPFCP.17 and it should state the time and place of sale and also should specify, as fairly and accurately as possible (a) (b) (c) (d) (e) the property to be sold; the revenue, if any, assessed upon the property or any part thereof; the amount for the recovery of which the sale is ordered; the reserve price, if any, below which the property may not be sold; Any other thing which the Recovery Officer considers material for the purchases to know, in order to judge the nature and value of the property. The reserve price should be determined after an objective consideration of all relevant facts. It should not be any figure having no relation whatsoever to the minimum price which the property intended to be sold is expected to fetch at the auction sale. If the sale proclamation simply mentions the name of the factory or establishment, but gives no details as to the nature of the building, machinery, etc., the sale on the basis of such deficient proclamation will be false and it is likely to be quashed by the Court on the ground that it would result in substantial injury to all concerned. The full details of the property should therefore be given in the sale proclamation. It should also be ensured that there is no material misdescription in the sale proclamation. Sale proclamation should not mention two different dates. The date mentioned should not be meaning-less, vague, ambiguous or unintelligible to a man of ordinary prudence. Mode of making proclamation: The proclamation for the sale of immovable property should be made at some place on or near such property by beat of drum or other customary mode and a copy of the proclamation should be affixed on a conspicuous part of the property and also on a conspicuous part of the office of the Recovery Officer, i.e., Regional Office/Sub-Regional Office, and also of the office of the Enforcement Officer. If the Recovery Officer considers that such proclamation should also be published in the local newspaper, he may do so. The cost of such publication should bed treated as cost of sale. Where the substantial amount is involved, it is desirable to go for publication in the local newspaper,. Where the property is divided into lots for the purpose of being sold separately, it is not necessary to make a separate proclamation of each lot, unless proper notice of sale cannot, in the opinion of Recovery Officer, otherwise be given. Time of sale: No sale of immovable property should, without consent, in writing of the defaulter, take place until after the expiration of atleast thirty days calculated from the date on which a copy of proclamation of sale has been affixed on the property or in the office of the Recovery Officer, whichever is later. However, if the defaulter gives his consent in writing for the sale before the expiry of the above period, sale may take place. 86 Sale to be by auction: The sale of immovable property should be by public auction to the highest bidder, subject to confirmation of sale by the Recovery Officer. Sale by public auction is mandatory and the sale held in any other manner is not valid. However, no sale shall be made, if the amount of bid by the highest bidder is less than the reserve price, if any, fixed. Adjournment or stoppage of sale: The Recovery Officer may adjourn or stop the sale as per Para 28(i) of the EPF Recovery Manual. Bid of co-sharer to have preference: Where the property sold is a share of undivided immovable property and two or more persons, of whom one is a co-sharer, respectively bid the same sum for such property or for any lot, the bid shall be deemed to be bid of the co-sharer. Postponement of sale to enable the defaulter to raise amount due under the recovery certificate: The whole aim of the recovery action is to recover the amount of arrears and not otherwise. In view of this, if the defaulter proves to the satisfaction of the Recovery Officer that there is reason to believe that the amount of the recovery certificate may be raised by the mortgage or lease or private sale of such property or some part thereof or of any other immovable property of the defaulter and he applies for the postponement of sale of the property ordered for sale, the Recovery Officer may postpone the sale on such terms, and for such period, as he thinks proper, to enable the defaulter to raise the amount. In such case, the Recovery Officer should grant a certificate, in Form EPFCP.21, to the defaulter, authorizing him within a period to be mentioned therein, to make the proposed mortgage, lease or sale, subject to the condition that all money payable under such mortgage, lease or sale should be paid to Recovery Officer only and not to the defaulter. Investigation by the Recovery Officer: If any claim is preferred to or any objection is made to the sale of any immovable property, on the ground that such property is not liable for sale, the Recovery Officer should proceed to investigate the claim or objection. Authority to bid: All persons bidding at the sale should be required to declare as to whether they are bidding on their own behalf or on behalf of their principals. In the latter case, they should be asked to deposit their authority letter of their principals. If they fail to deposit the authority letter, their bids should be rejected. Prohibition against bidding or purchase by officer of the Employees’ Provident Fund Organisation: No officer or staff of the Employees’ Provident Fund Organisation or any person having duty to perform in connection with any sale should either directly or indirectly bid for, acquire or attempt to acquire any interest in the property sold. Where, however, the sale has been postponed for want of a bid of an 87 amount not less than reserve price fixed by the Recovery Officer, an “authorised officer”, as defined in section 2(aa) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, if so authorised by the Chairman of the Central Board of Trustees, may bid for the property on behalf of the Central Board of Trustees at any subsequent sale. APPOINTMENT OF RECEIVER: The Recovery Officer may attach the business of the defaulter and appoint a person as receiver to manage the business. This mode of attachment will have to be opted only in rarest of rare situations, where the adoption of other modes of recovery is not found feasible, as it is not the function of the Employees’ Provident Fund Organisation to manage the business and apart from that it has no expertise in this field. It should be ensured that by choosing this mode of recovery, the organisation will not land in trouble. It should be ensured before taking recourse to this action that— i) ii) iii) iv) v) vi) there is no recession in the particular industry; there is demand for the product of the establishment; there is no labour problem; there is good management team capable of running the establishment efficiently; the accumulated liability of the establishment is not beyond the manageable limit; and there is ample scope for enough profits to recover the arrears in a reasonable period. Attachment of business should be made by issuing order in Form EPFCP-22. A copy of the order of attachment should be served on the defaulter and another copy should be affixed on a conspicuous part of the premises in which the business is carried on and another copy on the notice board of the Recovery Officer (Regional Office/Sub-Regional Office). While appointing a person as receiver, adequate care should be taken. The person chosen for the job should be of a man of very high integrity. He should be well experienced and knowledgeable in the particular field. He should be capable of managing the labour force and his managerial team. He should have good rapport with the financial institutions, which provide funds to the establishment. The order of appointment of receiver should be made in the Form EPFCP.24 which may be so varied as circumstance of each case may require. Appointment of receiver for immovable property: When immovable property is attached, the recovery officer, instead of directing the sale of property, may appoint a person as receiver to manage such property. 88 Powers of the receiver: The receiver shall, subject to the control of recovery officer, have such powers, as to brining in and defending suits and for the realization management, protection and preservation of the property and the collection of rents and profits thereof, the application and disposal of such rents and profits and the execution of the documents, as owner himself has or such of those powers as the Recovery Officer thinks fit. Remuneration of the receiver: The Recovery Officer may fix the amount to be paid as remuneration for the receiver, with the approval of the Central Provident Fund Commissioner. Duties of the receiver: Every receiver so appointed should – a) furnish such security (if any) as the Recovery Officer thinks fit, duly to account for what he shall receive in respect of the property; b) submit his accounts at such periods and in such form as the Recovery Officer directs c) pay the amount due from his as the Recovery Officer directs; and d) be responsible for any loss occasioned to the property by his willful default or gross negligence. The Receiver should— (1) maintain--(i) (ii) (iii) (iv) true and regular accounts of receivership; cash book in which all receipts and payments should be entered; ledger accounts; and a counterfoil receipt book with leaves numbered for issuing receipt for payments made to the receiver. (2) open a account in the name of receiver ship in the bank as directed by the Recovery Officer. (3) deposit all receipts immediately after the receipt thereof, less the amount required for meeting day to day expenses. (4) make payments by cheques as far as possible. (5) submit his accounts once in every three months to the Recovery Officer within fifteen days of each period of three months (the first of such accounts commencing from the date of his appointment and ending with the expiry of three months should be submitted within fifteen days of expiry of said period) Enforcement of receiver duties: If a receiver fails to submit his accounts at such periods and in such form as the Recovery Officer directs, the Recover Officer may direct his property to be attached until such time as such accounts are submitted to him. 89 The Recovery Officer may at any time make an enquiry as to the amount, if any, due from the receiver, as shown by his accounts or otherwise, or an enquiry as to any loss to the property occasioned by his willful default or gross negligence and may order the amount found due, if not already paid by the receiver, or the amount of the loss so occasioned, to be paid by the receiver within the period to be fixed by the Recovery Officer. If the receiver fails to pay any amount which he has been ordered to pay within the period specified, the Recovery Officer may direct such amount to be recovered from the security (if any) furnished by the receiver or by attachment and sale of his property or, if his property has already been attached by the sale and sale of his property or, if his property has already been attached by the sale of such property, and may direct the sale proceeds to be applied in making good any amount found due from the receiver or any such loss occasioned by him and the balance (if any) of the sale proceeds should be paid to the receiver. If a receiver fails to submit his accounts at such periods and in such form as directed by the Recovery Officer without reasonable cause or improperly retains any cash in his hands, the Recovery Officer may disallow the whole or any portion of the remuneration due to him for the period of the accounts with reference to which the default is committed and may also charge interest at a rate not exceeding twelve percent per annum on the moneys improperly retained by him for the period of such retention without prejudice to any other proceedings which might be taken against the receiver. Adjustment of profits, rents, etc., towards the discharge of arrears: The profits or rents and profits of the business or other property should after defraying the expenses of the management be adjusted towards the discharge of arrears of dues and the balances, if any, should be paid to the defaulter. Withdrawal of management: The attachment of management may be withdrawn at any time at the discretion of the Recovery Officer or if the arrears are discharged by receipt of such profits and rents or otherwise paid. Arrest and Detention of the Defaulter: The arrest and detention of the defaulter should be resorted in an extreme situation. The order for arrest and detention of the defaulter in civil prison should not be issued unless the Recovery Officer, for reasons recorded in writing, is satisfied – (1) that the defaulter, with the object or effect of obstructing the execution of Recovery Certificate, has after drawing up of the Recovery Certificate by the Recovery Officer, dishonestly transferred, concealed or removed any part of his property or (2) that the defaulter has or has had since the drawing up of the Recovery Certificate by the Recovery Officer, the means to pay the arrears or some 90 substantial part thereof and refuses or neglects or has refused or neglected to pay the same. The warrant of arrest may, however, be issued even otherwise, if the Recovery Officer is satisfied by affidavit or otherwise that the with object or effect of delaying the execution of the Recovery Certificate the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Recovery Officer. The Recovery Officer should not order for the arrest and detention of woman or any person who in his opinion is a minor or of unsound mind. The gathering of information relating to concealment, removal or transfer of property, with the help of workers or their Union or otherwise is essential before resorting to arrest and detention of defaulter. Thereafter, a notice in Form EPFCP-25 should be issued by Recovery Officer and served upon the defaulter by Registered Post with Acknowledgement Due or through the Enforcement Officer, calling upon him to appear before the Recovery Officer on the date specified in the notice and to show cause why he should not be committed to the civil prison. When the defaulter appears before the Recovery Officer in obedience to the show cause notice issued to him, the Recovery Officer should give the defaulter an opportunity to show cause why he should not be committed to civil prison. If the defaulter has not appeared before the Recovery Officer on the day specified in the above notice served on him, he may issue the warrant for the arrest of defaulter in Form EPFCP-26 and direct the area Enforcement Officer to act as directed therein. If the defaulter for the time being found in the jurisdiction of other Recovery Officer, i.e., in other region (The jurisdiction of Regional Provident Fund Commissioners and Assistant Provident Fund Commissioners in Regional Office/ Sub-Regional Office is for the whole of the region, as they are notified as Recovery Officer for the area covering the whole region), the warrant of arrest issued by the Recovery Officer of one region may also be executed by the Recovery Officer of such other region. For the purpose of making the arrest of defaulter, as ordered by the Recovery Officer, the Enforcement Officer should not enter the dwelling house after the sun-set and before sun-rise. He should not break open the outer door of the dwelling house. If, however, such a dwelling house or a portion thereon is on occupancy of the defaulter and he or other occupants of the house refuses or in any way prevents access thereto, he may break upon the outer door of the dwelling house. If he has gained entry to any dwelling house in a normal way, he may break open the door of any room or apartment, if he has reason to believe that the defaulter is likely to be found there. No room which is in the actual occupancy of woman, who according to the customs of the country does not appear in public, should be entered into unless 91 the Enforcement Officer has given notice to her that she is at liberty to withdraw and has given her reasonable time and facility for withdrawing. When the defaulter is brought by the Enforcement Officer and appear before the Recovery Officer, he should give the defaulter an opportunity of showing cause, why should not he be committed to civil prison. Though the rule 75 of Second Schedule to Income-tax Act, 1961 provides for detention of defaulter in the custody of any officer, as the Recovery Officer may think fit, pending conclusion of the enquiry the other alternative to release him on his furnishing security to the satisfaction of the Recovery Officer for his appearance, when required, is better than the earlier one, the Recovery Officer may adopt this procedure. Once a defaulter has appeared before the Recovery Officer in response to the notice issued to him in Form EPFCP-25 he is not to be arrested unless the inquiry contemplated by rule 74 of the Second Schedule to Income-tax Act, 1961 is over or the conditions mentioned in Rule 73(1) or 73(3) are fulfilled. Upon on the conclusion of enquiry, the Recovery Officer may make an order for the detention of the defaulter in the Civil Prison, in Form EPFCP-27 and should in that event cause him to be arrested, if he is not already under arrest. He may give an opportunity to the defaulter to pay the arrears before making order of detention and leave him in the custody of officer arresting him or any other officer for a specified period not exceeding fifteen days or release him on his furnishing security to the satisfaction of the Recovery Officer for his appearance at the expiration of the specified period, if the arrears are not paid. When the Recovery Officer does not make an order of detention, he should, if the defaulter is under arrest, direct his release. An order of arrest and detention of the defaulter cannot be made without following the procedure which is implicit in Rules 73 to 81 of Second Schedule to Income-tax Act, 1961. Immediately after arrest of an employer the same shall be communicated to the relatives, the best friend or any person closely associated with the employer. Detention and Release from Prison: Every person detained in the civil prison in execution of a certificate may be so detained:(a) where the certificate is for a demand of an amount exceeding two hundred and fifty rupees—for a period of six months; and (b) in any other case—for a period of six weeks: Provided that he should be released from such detention— i) on the amount mentioned in the warrant for his detention being paid to the officer-in-charge of the civil prison, or ii) on the request of the Recovery Officer on any ground other than the grounds mentioned in rules 78 and 79 of Second Schedule to Income-tax Act, 1961. 92 Where the Recovery Officer is satisfied that the defaulter who has been arrested has disclosed his whole of property and has placed it at his (Recovery Officer) disposal and that he has not committed any act of bad faith, he may order release of the defaulter. If he has ground for believing the disclosure made by the defaulter earlier to have been untrue, he may order for his re-arrest. The period of detention in the civil prison should not in aggregate exceed the period mentioned above. The Recovery Officer may release the defaulter on the following grounds: (i) defaulter suffering from serious illness (ii) he is not in a fit state of health to be detained in the civil prison. (iii) existence of any infectious or contagious disease or serious illness. A defaulter released on the above grounds may be rearrested if the above grounds cease to exist, but the period of detention in the civil prison should not, in aggregate, exceed the period mentioned above. The Order of release should be issued in Form EPFCP-28. A defaulter released from detention under this rule should not, merely by reason of his release, be discharged from his liability for the arrears; but he should not be liable to be re-arrested under the certificate in execution of which he was detained in the civil prison. APPEAL Though there is provisions for appeal in Rule 86 of the Second Schedule to Income Tax Act, 1961, for filing appeal against any original order of the Recovery Officer, not being an order, which is conclusive, no authority has so far been specified for hearing such appeal. As such, the appeal provision will be inoperative till the Central Government notify the Appellate Authority to make them operative. Time Limit and Form of Appeal: After the Government notifies the Appellate Authority, the appeal must be presented to the specified Appellate Authority, within 30 days from the date of order appealed against or within such period as may be specified by the Government in respect of orders passed by the Recovery Officer before the appointment of Appellate Authority. Pending decision of any appeal, the execution of Recovery Certificate may be stayed, if the Appellate Authority, so desires, but not otherwise. The appeal should be made in Form EPFCP.30 which should be verified in the manner indicated therein and should be accompanied by a copy of the order appealed against. The above prescribed form of appeal, the grounds of appeal and the form of verification appended thereto should be signed by the defaulting employer or one of the persons referred to in Form 5A under EPFS, 1952 or any person affected by the orders of the Recovery Officer. 93 Procedure in appeal: The specified Appellate Authority should fix a day and place for the hearing of the appeal and should give a notice of the same to the appellant and the Recovery Officer against whose order the appeal is preferred. The appellant either in person or by an authorized representative and the Recovery Officer either in person or by an representative should have the right to be heard at the time of appeal. The appellate authority, if sufficient cause is shown, at any stage of the appeal, grant time to the parties or any of them and may for reasons to be recorded in writing, adjourn from time to time, the hearing of the appeal. The appellate authority, before disposing of any appeal, make such further enquiry as it thinks fit or may direct the Recovery Officer to make further inquiry and report the result of the same to the Appellate Authority. The Appellate authority at the time of hearing appeal allows the appellant to go into any ground of appeal not specified in the grounds of appeal, if the appellate authority is satisfied that the omission of that ground from the form of appeal was not willful or unreasonable. The order of the appellate authority should be in writing and should state the points for determination of the decision therein and the reason for the decision. The appellate authority should communicate the order to the appellant, defaulter (if he is not the appellant) and Recovery Officer. The appeal should be disposed as expeditiously as possible and endeavor should be make to dispose of the appeal within six months from the date on which it is presented. Assistance by Police: Whenever assistance of Police is required by the Recovery Officer/Enforcement Officer, in connection with the attachment and sale of property, arrest of defaulter, etc., he may apply to the officer in charge of nearest Police Station for providing such assistance by inviting reference to Section 8G of the EPF & MP Act, 1952 read with Rule 19 of the Second Schedule to Income Tax Act, 1961. Scale of Fees for process, charges for other proceedings and poundage fees etc. The fees for (i) service and execution; (ii) copying; (iii) inspection; (iv) poundage etc., should be charged as prescribed in Rule 56 to 59 of Income Tax (certificate proceeding) Rules, 1962. Register to be maintained: The Registers specified should be maintained and verified every month by the Recovery Officer. Note: 94 As per the provisions of Section 8G of the Act, the provisions of the Second and Third Schedule to the Income Tax Act, 1961 and The Income Tax (certificate proceeding) Rules, 1962, as in force from time to time shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount mentioned in Section 8 of the Act instead of the Income Tax Act. Further any reference in the said provisions of the rules to the “assessee” shall be construed as a reference to the “employer” under the Act. “Officer” referred hereunder shall mean “Recovery Officer” as defined under Section 2(kb) of the Act. “Defaulter” means the establishment who has failed to pay the dues, damages, interest payable under the Act and the three schemes framed there under. 13 PENAL PROVISIONS TO EXEMPTED ESTABLISHMENTS APPLICATION The provisions of Section 6, 7A, 8 and 14B apply to the employer of the exempted establishment. Further the exemption is granted to an establishment/class of employees/employee, subject to certain conditions specified in the notification granting the exemption. An employer who contravenes or makes default in complying with the provisions of the Act or conditions governing grant of exemption or any other provisions of the Act, attracts the penal provisions of the Act and thus punishable under section 14 of the Act. APPLICATION OF PENAL PROVISIONS – BOARD OF TRUSTEES The employer of the exempted establishment should establish a Board of Trustees for the administration of the Provident Fund, as per paragraph 79C of the Employees’ Provident Funds Scheme, 1952 and perform the duties as specified in sub-section (d) of Section 17(1A) of the Act. Any contravention or default by the Board of Trustees is deemed to have committed an offence under sub-section 2(A) of Section 14 of the Act shall be punishable with the penalties provided in that sub-section. The penal provisions are also applicable to the establishments exempted from Employees’ Pension Scheme,1995 and/or Employees’ Deposit Linked Insurance Scheme,1976. 95 SCRUTINY AND FOLLOWUP ACTION ON RETURNS DUE FROM ESTABLISHMENTS EXEMPTED FROM EPF SCHEME 1952 CHECK POINTS FOR SCRUTINY OF ANNEXURE “A”: a. Whether Annexure “A” has been received within 25th of the close of each month, if not action taken. b. Whether inspection charges have correctly been calculated and deposited by the employer within fifteen days of each month. If not, whether any action taken to levy damages has been taken. c. If the employer is habitual defaulter in the payment of inspection charges or in the submission of Annexure “A”. d. Whether there is any abnormal decline in the number of employees and number of subscribers as shown in Annexure “A” as compared with previous Returns. e. Whether the information showing the contractor’s workers has also been shown or not. f. In case of deficiencies in the Rules, whether the same have been amended by the Company, if not Action Taken. g. Whether the Provident Fund Rules of the Company have been scrutinised and approved by the Income Tax Authorities and the Regional Provident Fund Commissioner, if not action taken. h. Whether it is a case of relaxation, if so, the date of issue of relaxation order and the action taken to grant final exemption. i. Whether information showing the number of employees, number of subscribers, amount of contribution, refund of advances, grant of loan/advances, payment towards Life Insurance premia, date of transfer of contributions to the Board of Trustees, investment transfer of accumulations, election etc., has been verified by the area Enforcement Officer, if so, whether any action on the deficiencies pointed out by the Enforcement Officer has been taken. j. Whether Board of Trustees has been properly constituted and there is equal representation to the employer and the workers side, as per Paragraph 79C of the Scheme. k. Whether the Board of Trustees is common to more than six units, if so, action taken to bifurcate them so that each group of six units or less is required to have a separate Board of Trustees. l. Whether the rate of interest and rate of contribution is at par or more favourable to the employee than those provided under the statutory Scheme, if not, action taken. 96 m. Whether the forfeiture amount is being utilised for the welfare of the members according to rules as per pattern duly approved by the Regional Provident Fund Commissioner. n. If the pre-coverage Provident Fund accumulations had been invested in shares/debentures floated by private corporate bodies/companies, whether all such shares/debentures have been promptly registered according to Law and dividends in accordance with Central Government instructions from time to time. o. Whether in the matter of advances, the Scheme of the exempted establishment is less/more favourable than the Employees’ Provident Funds Scheme, 1952. p. Whether the employer has automatically made application to his employees any amendment to the statutory scheme which is more beneficial to the employees than the existing rules of the establishments. q. Whether the amount of Provident Fund contributions has been transferred by the employer to the Board of Trustees within the prescribed period, if not, action taken. r. Whether the amount due for investment in different categories is correctly assessed and the amount actually invested tallies, if not whether there is abnormal deviation. s. Whether the Provident Fund accumulations have been invested in securities as per pattern of investment approved by the Government within the prescribed period. t. Whether the amount lying uninvested at the end of each month is within the permissible limit and justified. u. Whether a copy of the Balance Sheet together with audit report for each year has been received in the Regional Office, if so, whether there is any adverse comments of the Auditors with require further action. v. Whether Board of Trustees is meeting atleast once in every three months, if so, whether copies of minute of the meeting are being received in the Regional Office. w. Whether the position showing the inspection of each exempted establishment and the deficiencies have been noted in the register maintained in the Office. x. Whether the pension contribution is transferred to the Regional Provident Fund Commissioner by deposit in Account NO.10 before the due date. The quantum of contribution and the date of remittance should be verified. y. Whether the condition governing exemption as stipulated in Para 27AA of the EPF Scheme are followed properly. 97 14 DRILL FOR CONDUCT OF INSPECTION OF UNEXEMPTED ESTABLISHMENTS The Enforcement Officers are expected to attend office and report to their Assistant Provident Fund Commissioner (in case of Inspectorates at the Inspectorate) except where directed otherwise by the Assistant Provident Fund Commissioner, In-charge, of the Circle or Regional Provident Fund Commissioner (Enf.) or Regional Provident Fund Commissioner – Gr. I. The Enforcement Officers will be deployed by the Assistant P.F.Commissioner to whom they are assigned to attend to any work assigned to them. They will attend court cases as directed by the Assistant P.F.Commissioner Incharge of Enforcement to whom they are attached. The Enforcement Officers shall be deployed during this year which is to be observed as Compliance 2001 Programme year to inspect inoperative establishments only and to secure compliance from them in the first instance. After completion of the inspection of inoperative establishments, inspection of other defaulting establishment may be conducted with the specific written direction from Assistant Provident Fund Commissioner, in-charge of the circle. No routine inspection is allowed for the present. No Enforcement Officer should be allowed to visit any establishment without clear and specific written direction of Assistant Provident Fund Commissioner, in-charge of the circle. Publicity may be made to the effect that no Enforcement Officer should be allowed access to any establishment without specific written authority/direction from Assistant Provident Fund Commissioner or Regional Provident Fund Commissioner. Reports indicating remarks such on “record were not produced” “establishment asked to produce records in office” “ responsible official not found” “ establishment found closed” etc. indicate poor efforts and lack of initiative on the part of Enforcement Officers and should be avoided. Enforcement Officers must inspect the record/take the statements of employees present in the establishment, in exercise of the powers vested in him under Section 13(2)(a) to (d) of the Act. Enforcement Officers are expected to take the extracts of the relevant books, registers and documents maintained in the establishment. For taking these copies, extracts etc. presence of responsible person is not required. Any person who is keeping these records can be treated as an employee or representative and in his presence extracts or copies of the record can be made. The presence of employer is not necessary for this purpose. 98 The Inspector should examine the person present in the establishment and must record his statements on relevant matters. It is the responsibility of the Enforcement Officer to lay his hands on the required documents and examine the person whom he believes to be in-charge of these documents. In case it is felt that an offence has been committed relevant books, registers or other documents or portion thereof as may be considered relevant in respect of these offences may be seized. Enforcement Officer must record his observation with dated signature in the Inspection Book of the establishment and bring a photocopy/carbon copy thereof for submission to Assistant Provident Fund Commissioner in-charge of the circle alongwith his report. Enforcement Officers may ensure collection of details regarding the change of ownership, details of responsible persons, Bank-accounts- Sundry creditorsdebtors/properties etc. to be utilised for realisation of the dues if the dues are not remitted within the period specified in the speaking order. The filing of prosecution must be selective. Prosecution need not be filed in routine cases as launching prosecution which goes on for years has not been an effective means either to secure compliance or to deter the establishments from committing defaults. The purpose of prosecution must be to ensure punishment which may be exemplary in nature. Accordingly prosecution for routine may be avoided until and unless all other methods of brining the defaulter to mainstream of compliance have failed. 15 DRILL FOR CONDUCT OF INSPECTION OF EXEMPTED ESTABLISHMENTS BOARD OF TRUSTEES – SPECIAL INSPECTION ON INVESTMENT: Inspections will hereafter be carried out only by an APFC level Officer in whose jurisdiction the establishment is located. In respect of Regional Office, Mumbai, Calcutta, Chennai and Bangalore inspection have to be carried out by an APFC level Officer exclusively assigned by RPFC-I. The monthly returns received from the exempted establishments should be scrutinized only at the level of APFC or above. The functioning of the Trust can be monitored from these monthly returns itself and only in those cases where the establishment do not respond or do not give a satisfactory reply on the deficiencies communicated by the APFC there should be a need for an inspection. The particulars furnished by the establishment in the monthly return should be either entered in a register manually or the information may be fed in respect of each establishment in the Computer. Normally, those exempted establishments which are found to function well in the matter of enrolment, proper investment of investible surplus after meeting the obligatory outgoings, declaration of same or better rate of interest than the statutory interest rate, prompt sanctioning of withdrawals, settlement/transfer of PF accumulations etc. 99 during the last two financial years as disclosed in the monthly Annexure-A as well as the report of the squad during the exempted months need not be inspected during this financial year. In case the monthly returns are not received from an establishment a letter should be sent by the APFC reminding the establishment in polite language to submit the return. If the first letter does not elicit any reply or submission of returns within fifteen days a more tersely worded letter has to be sent to the establishment. If the second letter also do not generate any response an EO should be sent to the establishment with a specific written direction to ascertain the reasons for nonsubmission of the returns. The EO is not expected to do any inspection. Depending upon the report of the EO, the APFC, In-charge of Enforcement should inspect the establishment. This procedure is intended to detect default promptly and to take necessary legal action immediately so that the arrears do not mount. 16 TERMS & CONDITIONS OF EXEMPTION (UNDER PARA 27AA) All exemptions already granted or to be granted hereafter under section 17 of the Act or under paragraph 27A of the Scheme shall be subject to the revised Terms and conditions as given in the Appendix below. APPENDIX – A The employer shall establish a Board of Trustees under his Chairmanship for the management of the Provident Fund according to such directions as may be given by the Central Government or the Central Provident Fund Commissioner, as the case may be, from time to time. The Provident Fund shall vest in the Board of Trustees who will be responsible for and accountable to the Employees’ Provident Fund Organisation, inter alia, for proper accounts of the receipts into and payment from the Provident Fund and the balance in their custody. For this purpose, the “employer” shall mean – i. ii. In relation to an establishment, which is a factory, the owner or occupier of the factory; and In relation to any other establishment, the person who, or the authority, that has the ultimate control over the affairs of the establishment. 1. 2. The Board of Trustees shall meet at least once in every three months and shall function in accordance with the guidelines that may be issued from time to time by the Central Government/Central Provident Fund Commissioner (CPFC) or an officer authorised by him. All employees, as defined in section 2(f) of the Act, who have been eligible to become members of the Provident Fund, had the establishment not been granted exemption, shall be enrolled as members. 3. 100 4. Where an employee who is already a member of Employees’ Provident Fund or a provident fund of any other exempted establishment is employed in his establishment, the employer shall immediately enrol him as a member of the fund. The employer should also arrange to have the accumulations in the provident fund account of such employee with his previous employer transferred and credited into his account. The employer shall transfer to the Board of Trustees the contributions payable to the Provident Fund by himself and employees at the rate prescribed under the Act from time to time by the 15th of each month following the month for which the contributions are payable. The employer shall be liable to pay simple interest in terms of the provisions of Section 7Q of the Act for any delay in payment of any dues towards the Board of Trustees. The employer shall bear all the expenses of the Administration of the Provident Fund and also make good any other loss that may be caused to the Provident Fund due to theft, burglary, defalcation, misappropriation or any other reason. Any deficiency in the interest declared by the Board of Trustees is to be made good by the employer to bring it upto the statutory limit. The employer shall display on the notice board of the establishment, a copy of the rules of the funds as approved by the appropriate authority and as when amended thereto along with the translation in the language of the majority of the employees. The rate of contributions payable, the conditions and quantum of advances and other advances laid down under the Provident Fund rules of the establishment and the interest credited to the account of each member, calculated on the monthly running balance of the member and declared by the Board of Trustees shall not be lower than those declared by the Central Government under the various provisions prescribed in the Act and Scheme framed there under. An amendment to the Scheme, which is more beneficial to the employees than the existing rules of the establishment, shall be made applicable to them automatically pending formal amendment of the Rules of the Trust. No amendment in the rules shall be made by the employer without the prior approval of the Regional Provident Fund Commissioner (referred to as RPFC hereafter). The RPFC shall before giving his approval give a reasonable opportunity to the employees to explain their point of view. All claims for withdrawals, advances and transfers should be settled expeditiously, within the maximum time frame prescribed by the Employees’ Provident Fund Organisation. The Board of Trustees shall maintain detailed accounts to show the contributions credited withdrawal and interest in respect of each employee. The maintenance of such records should preferably be done electronically. The establishments should periodically transmit the details of members’ accounts electronically as and when directed by the CPFC/RPFC. 5. 6. 7. 8. 9. 10. 11. 12. 13. 101 14. The Board of Trustees shall issue an annual statement of accounts or passbooks to every employee within six months of the close of financial/accounting year free of cost once in the year. Additional print outs can be made available as and when the members want, subject to nominal charges. In case of pass book, the same shall remain in custody of employee to be updated periodically by the trustees when presented to them. The employer shall make necessary provisions to enable all the members to be able to see their account balance from the computer terminals as and when required by them. The Board of trustees and the employer shall file such returns monthly/annually as may be prescribed by the Employees’ Provident Fund Organisation within the specified time limit, failing which it will be deemed as a default and the Board of Trustees and employer will jointly and separately be liable for suitable penal action by the Employees’ Provident Fund Organisation. The Board of trustees shall invest the monies of the provident fund as per the directions of the Government from time to time. Failure to make investments as per directions of the Government shall make the Board of Trustees separately and jointly liable to surcharge as may be imposed by the CPFC or his representative. (a) The securities shall be obtained in the name of the Trust. The securities so obtained should be in Dematerialised (DEMAT) form and in case the required facility is not available in the areas where the trust operates, the board of trustees shall inform the RPFC concerned about the same. (b) The Board of trustees shall maintain a script wise register and ensure timely realisation of interest. (c) The DEMAT Account should be opened through depository participants approved by Reserve Bank of India and Central Government in accordance with the instructions issued by the Central Government in this regard. The cost of maintaining DEMAT account should be treated as incidental cost of investment by the Trust. Also all types of cost of investments like brokerage for purchase of securities etc. shall be treated as incidental cost of investment by the Trust. 15. 16. 17. 18. (d) 19. All such investments made, like purchase of securities and bonds, should be lodged in the safe custody of depository participants, approved by Reserve Bank of India and Central Government, who shall be the custodian of the same. On closure of establishment or liquidation or cancellation of exemption from EPF Scheme, 1952, such custodian shall transfer the investment obtained in the name of the Trust and standing in its credit to the RPFC concerned directly on receipt of request from the RPFC concerned to that effect. The exempted establishment shall intimate to the RPFC concerned the details of depository participants (approved by Reserve Bank of India and Central 20. 102 Government), with whom and in whose safe custody, the investments made in the name of trust, viz., investments made in securities, bonds, etc. have been lodged. However, the Board of Trustees may raise such sum or sums of money as may be required for meeting obligatory expenses such as settlement of claims, grant of advances as per rules and transfer of member’s P.F. accumulations in the event of his/her leaving service of the employer and any other receipts by sale of the securities or other investments standing in the name of the Fund subject to the prior approval of the RPFC. 21. Any commission, incentive, bonus, or other pecuniary rewards given by any financial or other institutions for the investments made by the Trust should be credited to its account. The employer and the members of the Board of Trustees, at the time of grant of exemption, shall furnish a written undertaking to the RPFC in such format as may be prescribed from time to time, inter alia, agreeing to abide by the conditions which are specified and this shall be legally binding on the employer and the Board of Trustees, including their successors and assignees, or such conditions as may be specified later for continuation of exemption. The employer and the Board of Trustees shall also give an undertaking to transfer the funds promptly within the time limit prescribed by the concerned RPFC in the event of cancellation of exemption. This shall be legally binding on them and will make them liable for prosecution in the event of any delay in the transfer of funds. (a) The account of the Provident Fund maintained by the Board of Trustees shall be subject to Audit by a qualified independent chartered accountant annually. Where considered necessary, the CPFC or the RPFC in-charge of the Region shall have the right to have the accounts reaudited by any other qualified auditor and the expenses so incurred shall be borne by the employer. (b) A copy of the Auditor’s report along with the audited balance sheet should be submitted to the RPFC concerned by the Auditors directly within six months after the closing of the financial year from 1st April to 31st March. The format of the balance sheet and the information to be furnished in the report shall be as prescribed by the Employees’ Provident Fund Organisation and made available with the RPFC Office in electronic format as well as a signed hard copy. (c) The same auditors should not be appointed for two consecutive years and not more than two years in a block of six years. 25. A company reporting loss for three consecutive financial years or erosion in their capital base shall have their exemption withdrawn from the first day of the next/succeeding financial year. The employer in relation to the exempted establishment shall provide for such facilities for inspection and pay such inspection charges as the Central Government may from time to time direct under Clause (a) of sub-section (3) of Section 17 of the Act within 15 days from the close of every month. 22. 23. 24. 26. 103 27. In the event of any violation of the conditions for grant of exemption, by the employer or the Board of Trustees, the exemption granted may be cancelled after issuing a show cause notice in this regard to the concerned persons. In the event of any loss to the trust as a result of any fraud, defalcation, wrong investment decisions etc. the employer shall be liable to make good the loss. In case of any change of legal status of the establishment, which has been granted exemption, as a result of merger, demerger, acquisition, sale, amalgamation, formation of a subsidiary, whether wholly owned or not, etc., the exemption granted shall stand revoked and the establishment should promptly report the matter to the RPFC concerned for grant of fresh exemption. In case, there are more than one unit/establishment participating in the common Provident Fund Trust which has been granted exemption, all the trustees shall be jointly and separately liable/responsible for any default committed by any of the trustees/employer of any of the participating units and the RPFC shall take suitable legal action against all the trustees of the common Provident Fund Trust. The Central Government may lay down any further conditions for continuation of exemption of the establishments”. 28. 29. 30. 31. 17 HOLDING OF SECURITIES IN DEMAT FORM OPENING OF DE-MAT ACCOUNT BY EXEMPTED PF TRUSTS: De-mat – Dematerialisation is a process by which the investors gets physical certificate converted into electronic balance maintained in his account with the depository participant. Depository is an Organisation where securities are held in electronic form through the medium depository participants. DP(Depository participants) is a representative of the depository in the system maintained clients securities accounts. Advantages of De-mat. 1. 2. 3. 4. 5. 6. No requirement of filling up the transfer deed and lodging for transfer. Immediate transfer on registration of securities as against 3-4 months. Shorter settlement cycle ensure prompt liquidity (transaction plus 5 days). Eliminates bad deliveries. Eliminates cost of wastage of time. Reduction in brokerage. 104 7. Special concession on stamp duty. 8. Minimum handling of paper. 9. Avoiding cost of courier. 10. Avoidance loss in transaction/mutilation resulting in expenditure. 11. Receives interest direct to depository account as direct credit. 12. Avoid loss towards interest on interest. 13. Safety in holding. 14. Depository is like a bank. 15. Depository can legally transfer ownership to an institution account. 16. DP will intimate the status of holdings. 17. One can dematerialized debt instructions, mutual fund units, Government securities in his De-mat account. It can be held in a single De-mat account. 18. DP(Depository participant) will assist for selling dematerialized securities and also purchase dematerialized securities. Transactions in Government Securities: The Reserve Bank of India has advised that RBI regulated entities will have to hold and deal in debt instructions in the De-mat form. As a result, in due course, entities like PF holding securities in the physical form may be faced with problem of liquidity on account of counter parties un willing to transact in the physical mode. The Reserve Bank of India, therefore, suggested to issue suitable instructions to PF trusts exempted under EPF & MP Act, 1952 to start the process of dematerializing the existing holding in their own interest. To mitigate the difficulties in making the investments in physical form of securities as pointed out by Reserve Bank of India, Board of Trustees of establishments exempt under relevant provisions of EPF & MP Act, 1952 be allowed to keep the securities in DEMAT accounts with Scheduled Bank under the credit control of the Reserve Bank of India. Further it may be noted that RBI does not control all the brokers/private firms who are entitled to operate as depository participants of NSDL/CSDL. NSDL and CSDL do not open the DEMAT accounts directly, rather they operate through depository participants such as Scheduled Commercial Banks, private companies and brokers. For safe custody of funds exempted provident fund trusts should not be allowed to open DEMAT accounts with brokers/other private fund trusts should not be allowed to open DEMAT accounts with brokers/other private companies acting as depository participants. Accordingly such exempted trusts may open DEMAT account only with Scheduled Commercial Bank. To encourage securities in DEMAT form, now Reserve Bank of India has stopped to issue Government Stock certificates in physical form. The State Bank of India, the portfolio manager for the EPFO has also desired that whenever securities are to be transferred either to exempted trust or EPFO requisition to transfer securities in DEMAT form should be forwarded alongwith particulars of CSGL account and all scheduled bank with whom CSGL account has been opened. Consequent to cancellation of exemption, particulars of CSGL Account and of scheduled bank wherein the Employees’ Provident Fund Organisation has opened CSGL account would be furnished alongwith the cancellation order itself. 105 Henceforth, the securities are to be transferred only in Demat form to the CSGL Account of the Employees’ Provident Fund Organisation. While transferring the securities the details in respect of securities transferred, date of transfer, date up to which interests have been credited to the Trust Accounts and next due date of interest on securities so transferred, may be intimated to the respective Regional Provident Fund Commissioner immediately. It is therefore reiterated that the securities held by exempted Provident Fund Trust are to be immediately converted to Demat form. Wherever necessary, CSGL accounts for the purpose may be opened with scheduled banks under the control of Reserve Bank of India. DEMATERIALIZED MODE: The Reserve Bank of India has started encouraging holding of Government Securities in the dematerialized mode in the following ways: All entities having a Subsidiary General Ledger (SGL) account with RBI are allowed to open Constituent Subsidiary General Ledger (CSGL) accounts on behalf of their clients. Although being non-banks, depositories (NSDL/CDSL) and organizations such as SHCIL have been provided an additional SGL account to open CSGL accounts on behalf of their clients. The cost of postage incurred by the depositories on remitting interest and redemption proceeds is being reimbursed by RBI so as to encourage dematerialized holding and retail participation in Gilts. Guidelines have been issued to the banks prescribing the safeguards to be adopted for maintenance of CSGL accounts. To import transparency in Government Securities traded by clients (though CSGL accounts), a special feature has been incorporated in the Negotiated Dealing System (NDS) for reporting and settlement of such trades. Provisions has also been made in the NDS for giving quotes on behalf of clients i.e CSGL account holder. In the light of some fraudulent transactions, in the guise of Government Securities transactions in physical format by a few co-operative banks with the help of some broker entities, the Reserve Bank of has now proposed the following measures to accelerate the trading in dematerialized form: All entities regulated by RBI (including financial institutions (FIs), primary dealers (PBs), cooperative banks, RRBs, local area banks (LABs), non banking financial companies (NBFCs) should necessarily hold their investments in Government securities portfolio in either SGL (with RBI) or CSGL (with a schedule commercial bank/ State Cooperative Bank/PD/FI/sponsor bank (in case of RRBs) 106 and SHCIL or in a dematerialized account with depositories (NSDL/CDSL). Only one CSGL or dematerialized account can be opened by any such entity. In case the CSGL accounts are opened with a scheduled commercial bank or state cooperative bank, the account holder has to open a designated funds account (for all CSGL related transaction) with the bank. In case a CSGL account is opened with any of the non-banking institutions indicated above, the particulars of the designated funds account (with a bank) should be intimated to that institution. The entities maintaining the CSGL / designated funds accounts will be required to ensure availability to clear funds in the designated funds accounts for purchases and of sufficient securities in the CSGL account for sales before putting through the transactions. No further transactions by a regulated entity should be undertaken in physical form with any broker with immediate effect. SUBSIDIARY GENERAL LEDGER (SGL) ACCOUNT: The Reserve Bank of India has extended the facility of holding Government securities in Subsidiary Ledger Form to all exempted Provident Funds. The Public Debt Offices of Reserve Bank of India has permitted the exempted trust to hold a minimum balance of Rs.10,000/- to open an SGL Account. This facility was allowed in the year 1987. 2. In order to ensure efficient payment and settlement system in respect of transactions in Government Securities, Reserve Bank of India, in consultation with Government of India has introduced the Delivery Versus Payment (DVP) System with effect from 17th July 1995. Under this system, it is obligatory for the SGL Account holders to effect simultaneous fund transfer through their current account with Reserve Bank of India along with the transfer of securities held in the SGL accounts. As such those SGL account holders not having current account with the Reserve Bank of India are not eligible to maintain their SGL accounts with the Reserve Bank of India. Provident Fund Trusts and approved brokers, etc., are not eligible to open current account with the Reserve Bank of India. Accordingly Provident Fund Trusts, etc. have been advised to transfer their existing SGL holdings to SGL Account No.II of a Commercial Bank of their choice or convert their holdings into stock certificates. Commercial Banks have allowed to open additional SGL Account with Reserve Bank of India for transaction in Government Securities on behalf of their clients. Stock Certificates are transferable by just completing the transfer deed and by tendering the same at the Public Debt Office of the Reserve Bank of India for registration. In other words, the holdings in the form of stock certificate do no inhibit the holders from selling, transferring or gifting the same to others. The Stock Certificate holders also enjoy the benefit of receiving half-yearly interest warrants in respect of their holdings to their respective registered addresses without lodging of the original securities with Reserve Bank of India for claiming interest. The level of service available in respect of stock certificates will be the same as in the case of holdings in SGL Account. 107 3. The exempted establishments may maintain an SGL Account with a Commercial bank and obtain periodical certificate of holding with shall be verified by the Assistant Provident Fund Commissioner / Enforcement Officer. Alternatively, the securities may be kept in the form of Stock Certificates. CONSTITUENT SGL ACCOUNT: Subsidiary General Ledger (SGL) account is an account maintained by banks and other select financial institutions with the Reserve Bank of India (RBI). The Public Debt Office (PDO) maintains SGL Accounts of banks, which have a record of their holds of Government of India and State Government Securities. The Public Accounts Department (PAD) of the RBI maintains SGL accounts of banks, which have a record of their holdings of Treasury Bills. 2. Banks are allowed to maintain two SGL accounts from Government Securities (G-Secs) with PDO and two accounts for Treasury Bills (T-Bills) with the PAD. The first account in each case is for the bank’s holdings of G-Secs and T-Bills on its own account. The second account in each case is for G-Secs and T-Bills, which the bank holds on behalf of its constituents and is termed the Constituent SGL account. The bank in turn maintains sub-accounts, which have a record of the holdings of G-Secs and T-Bills by each of its constituents. TRANSFER OF SECURITIES BETWEEN CONSTITUENT ACCOUNTS: The transfer of securities through the SGL accounts is done by means of a SGL Transfer Form. The seller of a security instruct this bank to execute a SGL Transfer Form in favour of the buyer of the security’s bank, which gives details of the transactions. This SGL Transfer Form is lodged by the buyer’s bank with the RBI. On receipt of the SGL Transfer Form the RBI debit the seller’s bank’s SGL account and credit’s the buyer’s bank’s SGL account with the face value of the security transacted. Simultaneously the RBI debits the buyer’s bank’s current account and credit’s the seller’s bank’s account with the proceeds of the transaction. This settlement system is known as Delivery-versus-Payment (DVP) and it eliminates settlement risk. 2. All transactions will be carried on receipt of the client instructions. The Settlement paper work, and RBI liaison is done by the concerned banks. 3. The settlement will not take place in the following cases: SGL Transfer Form improperly executed. Seller has insufficient balance in SGL Account Buyer has insufficient balance in Current Account. Since the bank’s current account with the RBI gets debited in case of purchase by the bank or by the bank’s constituent, the constituent must have clear funds in its Current / Savings account with the bank to enable the transaction to be put though. 108 4. The constituent will receive a Debit / Credit advice for both the SGL as well as the Current / Savings account if a transaction is put through on its behalf. COUPON / REDEMPTION PROCEEDS: The RBI credits the Coupon and Redemption proceeds for G-Sec/T-Bill to the bank’s Current Account with the RBI. The constituent will receive a credit advice for the amount credited to its Current / Savings account immediately on receipt of the funds from RBI. 2. The present long prevalent scrip-based system has traditionally involved paper work involving stock certificates in paper form and transfer deeds. The process beginning from purchase of securities, getting the securities duly endorsed in the buyer’s name and depositing in safe custody is complex and time consuming. 3. RBI’s Subsidiary General Ledger (SGL) account system essentially aims at eliminating the cumbersome paper work involved in the scrip-based system and also assures risk-free and ‘paperless’ trading. 4. Advantages of holding securities in a Constituent SGL account rather than as Physical stock certificates: When any trust buys securities via the constituent SGL account, the Securities are transferred to the name of the trust immediately on confirmation of a valid delivery-versus-payment transaction. If scripts are purchased in physical form the trust will have to wait for over one moth for scripts to be transferred in their name, while the trust has already paid the seller the full consideration. Thus the trust will have to take settlement risk on the seller of the security, who may be a broker or NBFC . The SGL account system has been designed by RBI to eliminate risk of default, which the investor may face while transacting in government securities. When the trust’s bid is successful at a RBI auction, RBI may directly credit the securities allotted into the SGL account. Any refund amount will be directly be credited into the trust’s bank account. Thus the trust will be spared the bother of collecting refund and securities from the Reserve Bank. There is no requirement of filling transfer deeds and lodging the transfer documents with the RBI, thus saving paper work and time for the trust. To operate an SGL account the trust would have to instruct the bank regarding the execution of a transaction. All the settlement paper work is done between the concerned banks. The client will receive a memo after every transaction. The bank also allows non-Mumbai trusts to maintain their bank accounts in their city but purchase securities in Mumbai. This enable a non-Mumbai trust to take advantage of the deeper security market in Mumbai. Additionally, as Treasury bills are only transacted in Mumbai the nonMumbai trust will also be able to invest in the same. 109 Since all transactions are by book entry, consolidation, transfer or splitting of a security between various trusts can be effected easily and quickly. There is no scope of any risk of loss, theft or fraud with regard to stock certificate. If securities are maintained in a Constituent SGL account it is not necessary to have a safe custody account for Government Securities and Treasury Bills, thereby saving the safe custody charges. The Bank provides the statement of holdings on a monthly basis. This will aid in audit and valuation of the trust’s holding. The bank will collect interest on SGL holdings on behalf of the constituent and will credit the constituent’s bank account at no extra cost. As the recent budget has removed tax reduction at source on government securities, the full amount of interest as paid by RBI will be credited to the client’s account. As per the investment guidelines, any interest earned has to be reinvested in similar category of securities. The Bank can also offer quotes for sale of securities to its client for their investments. NATIONAL SECURITIES DEPOSITORY LTD The NSDL (National Securities Depository Ltd) provides opening of Demat Account in NSDL system. The Employees’ Provident Fund Organisation has also opened demat account in the NSDL system and has dematerialized and significant part of its non-SLR holdings. All the PF Trusts should be advised to hold their Securities in demat form. For more details on DP and Demat, Please consult the Website http/ www.nsdl.co.in 18 EPF SYSTEM OF ACCOUNTS INTRODUCTION: The Employees’ Provident Fund Organisation of India is one of the oldest institution in the world today and over the years it has played a major role in providing protection to Indian workers upon reaching old age, and in the event of invalidity and death. The protection thus provided is essential to permit workers to aspire to a decent standard of living upon retirement or invalidity and to assist family members in the event of death of the breadwinner. Over the years the Employees’ Provident Fund Organisation has made major efforts to expand the scope and level of coverage provided, this is clearly illustrated by the fact that at its inception it applied to factories and establishments falling within six specified industries, while at present it covers 180 types of industries and classes of establishments. Moreover, in order to ensure a comprehensive level of protection, in addition to provisions for a 110 lump sum benefit and withdrawals, it now also offers a pension benefit. To meet the growing number of subscribers and pensioners and the resultant volume of transactions a sound and transparent accounting system is to be followed. A Retrospect: The Employees’ Provident Funds & Miscellaneous Provisions Act and the schemes viz. Employees’ Provident Fund Scheme, 1952, Employees’ Pension Scheme, 1995 and Employees’ Deposit Linked Insurance Scheme, 1976 framed there under provides various benefits in the nature of Social Security to the working class and their families. The EPF Organisation, in its 50 years of existence, is marching ahead in extending and enlarging the various Social Security benefits. To begin with, a compulsory contributory Provident Fund Scheme was introduced to the employees in the year 1952 to which both the employees and the employers would contribute. A Provident Fund has been set up for this purpose and administered by the CBT-EPF. Thus, the system of accounts and the maintenance of accounts was initially applicable to the administration of the EPF Scheme, 1952. The rate of contribution payable by the employees and employers was also steadily increased from 6.25% to the present level of 12%. The accounts of the EPF subscribers were maintained and the advances/withdrawals were allowed apart from issuing the Annual Provident Fund Statement of accounts to the subscribers through their employers. The employers were depositing the EPF dues alongwith the administrative charges into the State Bank of India. The benefits were released through a separate account known as the EPF refund account and thus three different accounts were maintained till the year 1971. On introduction of Employees Family Pension Scheme, 1971, a contribution account exclusively for crediting the contribution towards family Pension Fund at the rate of 1.16% of the pay diverted from Employees and Employers share of Provident Fund account was opened. On introduction of EDLI Scheme, 1976, the Employers (alone) were asked to deposit the EDLI contribution alongwith the administrative charges. In the year 1995, the Employees Family Pension Scheme has been converted into a Pension Scheme by introducing the Employees Pension Scheme, 1995. Thus the EPF Organisation is vested with the administering the Employees Provident Fund, Pension Fund and Insurance Fund alongwith the Administration funds. The rate of administration charges has also been increased from 3.% of total contribution to 1.10% of pay. To begin with the EPF money collected by the State Bank of India were transferred to the investment account and the money required to meet the obligatory out goings was made by making a requisition for transfer from the investment account with the approval of Headquarters Office, New Delhi. The EPF Organisation is administering the schemes through its Field Offices located in the Regional Offices/Sub-Regional Offices. The main operational area was practically categorised as Enforcement (Compliance) Wing and the Accounts Wing. The Enforcement (Compliance) wing is responsible for application of the Act and in securing compliance from the establishment and also to invoke the Penal provisions against the defaulters. In the Accounts Wing the individual Ledger accounts of the EPF members are being maintained and the services to the members were extended through this individual ledger account. Initially, the employers were 111 asked to furnish the wages and contribution of the individual members every month and postings were made in the ledger card manually and at the end of the financial year the closing balance was conveyed to the members through the establishment. On an experimental basis, the maintenance of ledger accounts of the members were divided into 4 categories and the financial year was staggered for each category so as to ensure the issue of statement of accounts to the members without falling into arrears. Due to certain inherent defect in the system, this procedure was reversed and the financial year (April to March) was made uniform for all the establishments. With a view to simplify the system of EPF accounts, the employers were asked to furnish only the abstract of total wages and total contribution details of the establishment for each month alongwith receipted challans. As a result the posting of contribution into individual members on monthly basis was discontinued. Instead, the annual contribution for each financial year was posted into the ledger account. The accounts statements were thus prepared and issued to the members. To facilitate, this the Annual return in Form 3A and 6A were also introduced showing the month-wise contribution of individual members through Form 3A alongwith its summary in Form 6A. Due to the application of computers, the contribution of the members were captured from the Annual Returns in Form 3A/6A and prepared the computerised annual statement of Accounts every year. In order to ensure audit check on the recovery of contribution etc., instead of capturing the contributions the system of capturing the wages by computer was introduced thereby the computer calculated the quantum of PF Contribution and Pension contribution on the given wages in respect of each individual member. The maintenance of ledger card had undergone series of changes. Initially to facilitate monthly posting of contribution, a single ledger card was kept for 4 financial years. The size of the card was then reduced and provided for 6 financial years. After the introduction of computers a ledger card was designed to cover 8 financial years. With a view to avoid fraudulent payment etc. the ledger cards were supplied in a bound volume containing 20/50/100 folios. But, the bound volume of the subscribers ledger posed some serious practical difficulty in disposal of claims. At present one individual loose ledger card in respect of each member is prescribed which will be kept from his date of entry to date of exit and this will serve as a master for recording only the details of withdrawals, transfers etc. Except for this, the subscribers ledger card will not bear any annual contributions on year to year basis. While releasing the final settlement of the Provident fund account this ledger card will be completed by extracting the closing balance for the preceding year and the ledger card for the current year is completed on manual basis. As an improvement to this system and to suit the settlement of accounts through computer, the members master ledger card are being used only to record final payments and withdrawals. No separate individual subscribers ledger account is maintained under the Employees Pension Fund, as the benefits are not related to the amount of contribution paid to the fund. Similarly the position in respect of EDLI fund also. 112 The payment of interest to the EPF balance was allowed upto 1.4.93 at the declared rate on the amount stood as Opening Balance as on 1st April. The method of crediting the interest to the subscribers account had been changed whereby the interest was credited on monthly balance method. A series of changes have also been witnessed in the operation of bank accounts. Now all the bank accounts are treated as receipt and payment account. Most of the activities in the Banking operations/cash branch in the EPFO has been transferred to the computer. As a result, the preparation of Daily cash book, subsidiary Cash books for each accounts groups and the main cash book on both receipts as well as payments are through computer. By doing so, the receipt details collected through the computerised cash book facilitates quantifying penal damages and interest under section 7Q on all belated deposits. Similarly the monthly abstract statement in Form 12-A is also being fed to the computer so as to determine the dues payable by the employer. This facilitates generation of DCB register through computer which replaced the manual preparation of DCB Registers. Similarly the withdrawals are also captured by computer as and when payment is made which will be directly reflected in the Annual statement of accounts. Thus the system of compilation of annual statement of accounts was simplified, avoiding manual feeding of certain vital data relating to payments. The Portfolio management of the investment of EPFO monies which was handled by the Reserve Bank of India has now been entrusted to the State Bank of India. The EPF Organisation entered into an agreement with the State Bank of India and the service charges payable to the State Bank of India will be adjusted within the interest payable by the State Bank of India to EPF Organisation on account of belated transfer of funds. The investment of EPF money is subject to adherence to the pattern of investment prescribed by the Central Government from time to time. The organisation is preparing its balance sheet alongwith the audit report and presenting to the Government and Parliament as per the mandate given in the EPF scheme, 1952. To facilitate this all the field offices in the region are also required to compile the monthly classified summary of receipt and payment and forward to the Headquarters for consolidation. A regional balance sheet is also prepared and consolidated in the Head quarters every year. The organisation is also maintaining certain Proforma accounts on Interest Suspense account, Unclaimed Deposit Account, DRF and SRF. The procedure for transfer of PF balance to the Unclaimed Deposit Account has been duly closing ledger account and maintaining the UCD register was dispensed with and instead only the Form 24 of each establishment reflects the contribution of the members divided into 3 parts viz. contributing member, noncontributing member (for a period of 3 years) and members whose accounts are settled in the current year.. The accounts of the non contributing members are continued with upto date interest which facilitate settlement without any delay. With a view to ensure expeditious payment of benefits, the payments are also being made through ECS. The monthly pension to the members and Family Pension are being released through the banks designated for this purpose in each region 113 which includes Nationalised Banks and Scheduled banks such as HDFC, UTI and ICICI. Necessary agreement have been entered into with the disbursing agencies i.e. Banks and Post Offices and the accounting procedure has been evolved for reconciliation of payment. The administration/inspection charges realised by the regions are utilised to meet its administration expenditure subject to the budget allocation and Delegation of Administrative and Financial powers. Proposed Action Plan: Under the Reinventing EPF India, the EPF Organisation is preparing in for Business Process Reengineering (BPR) for total computerisation of the entire operation of the accounting in EPFO. It is also under consideration whether to switch over to double entry accounting in handling various accounting aspects of EPF System of Accounts. The Manual of Accounting Procedure, Part II-A, Chapter-I provides for the details on the system of accounts prescribed under the EPF. 19 SALIENT FEATURES OF THE NEW BANKING ARRANGEMENTS ENTERED WITH SBI DEFINITIONS In this agreement, the following Terms shall be interpreted as indicated: a. “Commissioner” means the Central Provident Fund Commissioner or other representative authorised by the Central P.F. Commissioner. b. “The Trustees” means the Central Board of Trustees acting through the Central Provident Fund Commissioner and Financial Advisor & Chief Accounts Officer. c. “The Agreement” means the agreement entered into between the Trustees and the SBI as recorded in the Agreement form signed by the Trustees through their representatives and the SBI, including all attachments and annexes thereto and all documents incorporated by reference therein. d. “Link Branch” of SBI means the branch designated by SBI where the accounts of the Regional/Sub Regional Offices and Sub Account Offices of the Trustees are held for collection of Provident Fund Dues etc., within the territorial jurisdiction of the concerned office of the Trustees. e. “Local Base Branches” of SBI shall mean all branches of SBI situated within the municipal limits of the Link Branch. f. “Outstation Base Branches” of SBI shall mean all other branches of SBI situated outside Municipal limits of Link Branch but within the territorial jurisdiction of concerned office of the Trustees. 114 g. “The Services” mean all of the services which the SBI is required to perform for the Trustees under the Agreement. STANDARDS: The Service under this Agreement shall confirm to the specifications mentioned in the Agreement. Use of Agreement Documents and Information i. The SBI shall not, without the Trustees’ prior written consent, disclose the Agreement, or any provision thereof, or any specification, or information furnished by or on behalf of the Trustees in connection therewith, to any person other than a person employed by the SBI in performance of the Agreement except as may be and to the extent required under any law, statute or by any statutory regulation or other authority exercising power under any law/rules/regulations. Disclosure to any such employed person shall be made in confidence and shall extend only as far as may be necessary for purposes of such performance. The SBI shall not, without the Trustees’ prior written consent, make use of any document or information except for purposes of performing the Agreement. ii. SCOPE OF THE AGREEMENT 5.1 The trustees shall maintain and operate the Savings Bank Accounts as a twotier arrangement i.e. one at the level of Regional, Sub Regional and Sub Accounts Office and other at the Headquarters. 5.2 In the Headquarters of the Regional, Sub Regional and Sub Accounts offices there shall be a branch designated as the Link branch. The said Link Branch shall maintain the accounts and also receive the dues directly from the employers within the territorial jurisdiction of each of the concerned office of the Trustees. There shall be a number of branches of the SBI and its Associate Banks within the territorial jurisdiction of each of the concerned office of the Trustees for the purpose of collecting the dues as specified in the Act and Schemes framed there under (hereinafter referred to as Base Branches). The base branches shall, after collecting the dues paid by the employers, transmit the same to the Link Branch in which accounts of the Trustees are being maintained, on the date of receipt itself. The receiving branch what so ever will have no responsibility and liability in regard to correctness of the deposits made by the employers’ vis-à-vis their liability under the respective Act. 5.3.1 The Link Branch, apart from accepting Monies and other dues on behalf of the Trustees in the manner applicable to all base branches, will maintain the following Savings Bank accounts of the Head Office, Regional Office, Sub Regional, Sub Accounts Office, as the case may be. 115 Acc. No. 1 2 10 21 22 Name of the Account Employees’ Provident Fund Contribution account Employees’ Provident Fund Regional Administration account Employees’ Pension Fund Contribution account Employees’ Deposit Linked Insurance Fund Contribution account Employees’ Deposit Linked Insurance Fund Regional administration account. 5.3.2. Description of accounts maintained by the Head Office of Trustees. Name of the Account Employees’ Provident Fund Central Administration account Employees’ Provident Fund Head Office (Local Administration) account Employees’ Provident Fund Investment account Employees’ Provident Fund Staff Provident Fund Account Employees’ Provident Fund Pension cum gratuity account Employees’ Pension Fund Investment account Employees’ Deposit Linked Insurance Fund Central Administration account Employees’ Deposit Linked Insurance Fund Investment Account Acc. No. 4 4A 5 8 9 11 24 25 5.4 The remittances received from various base branches as well as the remittances deposited directly in the link branch shall be credited to the respective accounts as per schedule detailed in clause 5.5. The credit/debit advice pertaining to the above mentioned accounts shall be sent to the Head Office/Regional Office/Sub Regional Office/Sub Accounts Office concerned on daily basis. The link branch shall furnish the reconciled Bank Statements & supporting challans and other documents to the concerned office of the Trustees in the manner and periodicity as set out in the Annexure I of this agreement. 5.5 Monies received by various branches shall be credited within the manner and period specified below: I. The deposits received by way of cash by the Link branches across the counter shall be credited to the account of CBT EPF on the same day. II. The deposits received by way of Demand Draft and Cheques by the Link branches shall be credited to the accounts of CBT EPF within one day from the date of realisation(date of realisation will be counted when the clearing return discipline time is over). III. The deposits received by way of Demand Draft and Cheques by the local base branches shall be credited to the accounts of CBT EPF in Link Branch within four days from the date of realisation by the base branches. IV. The deposits received by way of Demand Draft and Cheques by the outstation base branches shall be credited to the accounts of CBT EPF in Link branch within seven days from the date of realisation by the base branches. 116 5.6 The cheques received by the link branch as well as the base branches shall be presented for clearing on the date of receipt or on the next working day itself. 5.7 All branches receiving PF Dues by Cheques/Demand Draft shall accept only local Cheques/Demand Drafts. 5.8 Any delay in crediting the amounts indicated in Para 5.5., over and above the period prescribed shall attract payment of interest, which shall be equivalent to 2% above the Savings Bank Interest rate as applicable from time to time on the Savings Bank Deposits of SBI. 5.9 On the services so rendered as narrated above, SBI shall be entitled to the remuneration/fee as detailed in the paragraphs given herein after. 5.10 The Service charges @ Rs.2.50 per Rs.1000/- on the total monies received on behalf of the Trustees by the base branches and remitted to the link branch (excluding the direct deposit with link branch) is payable to the link branch of the State Bank of India by the respective Regional Office/Sub Regional Office every month. 5.11 The remittance charges @ Rs.1.50 per Rs.1,000/- on the monies received on behalf of Trustees by the link branch directly is payable to the link branch of the State Bank of India by the respective Regional Office/Sub Regional Office every month. 5.12 Out of pocket expenses incurred on postages, telegrams, courier, cost of MICR cheques etc. shall be reimbursed to SBI by the Trustees on actual basis. If there are any other expenses incurred by SBI, the same will be considered for reimbursement on mutual agreement. 5.13 Levy of charges shall by only on remittances from base branches to link branches and on provident fund dues collected by the link branches. Other inter departmental remittances shall be excluded from the levy of charges. 5.14 Charges shall be debited to CBT EPF account No.2 in respect of Regional/Sub Regional/ Sub Accounts offices and to Account No.4/4A in respect of Head Office of the Trustees only after adjusting the interest on delayed credits to the account of CBT EPF on month to month basis. The details of bank charges so debited shall be sent to respective offices of Trustees every month; Provided that any dispute on calculation and debiting of service charges net of interest on delayed credits shall be settled within one month and that the Officer-incharge of the respective field offices of the Trustees and concerned Manager of link branch of SBI shall act as the nodal officer for the purpose. Provided further that any dispute relating to charges if any debited by SBI net of interest on belated credits, should be resolved by the nodal officers within three months from the date of such debits failing which Trustees shall be entitled to penal interest of 4% above prevailing savings bank interest rate of SBI. 117 5.15 The monies received at base branches (other than the situation when the link branch acts as base branch) should be transferred through electronic mode wherever possible and where such arrangement has been set up in consultation with Trustees’ officers. However, in other cases old system of transfer of funds through DD may continue till such facilities are available at these branches. 5.16 the monies and other remittances received in the Link branch, net of payments authorised by designated officers of the Trustees shall be transferred to the respective investment accounts by the SBI immediately on receipt of instructions from the respective field offices of the Trustees. 5.17 The link branches shall provide the Regional, sub Regional Offices, Sub Accounts Offices the particulars of balance available in the accounts maintained by them on daily basis and that the link branches shall provide the facility of remote long in (wherever available) to the respective field offices so as to facilitate efficient transfer of funds. The transfer from the link branch to the respective investment accounts and vice versa shall be through electronic mode only (wherever available). 5.18 Settlement with regard to payment of service charges & claim of interest for delayed credit, clearance of missing credits, un reconciled amount, or amount in transit pertaining to past period shall be in accordance with the mechanism agreed in February 1998. NODAL OFFICER: SBI has informed that a Nodal Officer of AGM rank in each of their 14 circles all over the country shall be notified for coordinating all issues concerning EPFO. The name, designation etc. of the Nodal Officers shall be intimated as and when received by Headquarters. All offices are requested to take up the outstanding issues with the Nodal Officers and get them resolved. [H.O.Letter No.BKG7(1)2001/NBA/Part/2003/68639 dated 11.12.2003] 20 PROCEDURE FOR INVESTMENT OF PROVIDENT FUND MONIES The employer of an establishment exempted from the operation of Employees' Provident Fund Scheme, 1952 either in respect of the establishment as a whole for which, exemption granted under Section 17(1)(a) or 17(1)(b) of the Act or in respect of an employee/Class of employees for whom exemption granted under Paragraph 27 or 27-A of Employees' Provident Fund Scheme, 1952, respectively, shall transfer the monthly Provident Fund contributions (both shares, after diverting 118 the Pension contributions from the employer's share of Provident Fund) including the refund of withdrawals to the respective Board of Trustees within fifteen days of the close of the month (with five days grace period), through a cheque drawn in favour of the Trust. The Area Enforcement Officer should ensure the actual crediting of the monthly dues remitted by the employer duly verifying the Pass Book of the Exempted Fund and the Bank Statement showing the realization of Cheque before due dates. All belated remittances, as explained in the Chapter on Penal Damages, will attract levy of damages by the Regional Provident Fund Commissioner concerned. In addition to the contributions and refund of withdrawals remitted by the employer, the Board of Trustees may realize the interest due on various securities/deposits, etc., kept on its investment holdings and also on redemption proceeds (i.e., repayment on account of matured securities). Similarly, the transfer of Provident Fund accumulations received from the statutory or other exempted establishments will also constitute the current accretions for a month. Out of monthly current accretions, the Board of Trustees should discharge, in the first instance, the payment of dues towards outgoing members of their final settlement, transfer of account, payment of refundable and non-refundable withdrawals. These are known as obligatory outgoings. After meeting the obligatory outgoings, the money available (investible fund) should be invested as per the pattern of investment notified by the Ministry of Labour, Government of India, under Section 17(3)(a) of the Act. The pattern of investment prescribed by the Central Government from time to time, is enclosed below: The pattern of investment prescribed by the Central Government is applicable both for the funds generated through unexempted establishments and also of exempted funds. As regards unexempted establishments the pattern is notified under the provisions of Paragraph 52 of the Employees' Provident Fund Scheme, 1952 and the pattern for exempted Provident Fund is notified separately under Sec.17(3)(a) of the Act. 119 PATTERN OF INVESTMENT NOTIFICATION : GOVT. OF INDIA, MINISTRY OF LABOUR, New Delhi, NO. G-27031/3/99/-SS.II dated 9th July, 2003 Sl.No.. (i) Category Percentage of amount to be invested (ii) (iii) (iv) (v) Central Government securities as defined in Section 2 of the Public Debt Act, 1944(18 OF 1944); and/or units of such Mutual Funds which have been set up as Twenty five per cent dedicated Funds for investment in Government securities and which have been approved by the Securities and Exchange Board of India. (a) Government securities as defined in Section 2 of the Public Debt Act, 1944 (18 of the 1944) created and issued by any State Government ; and/or units of such Mutual Funds which have been set up as dedicated Funds for investment in Government securities and which have been Fifteen per cent approved by the Securities and Exchange Board of India. and/or (b) Any other negotiable securities the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government except those covered under (iii)(a) below. (a) Bonds/Securities of "Public Financial Institutions as specified under Section 4(1) of the Companies Act; "Public Sector Companies" as defined in Thirty per cent Section 2(36-A) of the Income Tax Act, 1961 including Public Sector; and/or (b) Short duration (less than a year) Term Deposit Receipt (TDR) issued by Public Sector Banks To be invested in any of the above three categories as Thirty per cent decided by the Trustees The Trusts, subject to their assessment of the risk-return prospects, may invest upto 1/3rd of (iv) above, in private sector bonds/securities which have an investment grade rating from at least two credit rating agencies. 2. Any money received on the maturity of earlier investments reduced by obligatory outgoing shall be invested in accordance with the investment pattern prescribed in this Notification. 3. In case of any instruments mentioned above being rated and their rating falling below investment grade and the same rating has been confirmed by two credit rating agencies then the option of exit can be exercised. 4. The investment pattern as envisaged in the above paragraphs may be achieved by the end of a financial year, and shall come into force with immediate effect. 120 PATTERN OF INVESTMENT UNDER SEC.17(3)(A) OF THE ACT NOTIFICATION : GOVT. OF INDIA, MINISTRY OF LABOUR, New Delhi, NO. G-27031/3/99/-SS.II dated 9th July, 2003 S.No. (i) Category Central Government securities as defined in Section 2 of the Public Debt Act, 1944 (18 of 1944); and / or units of such Mutual Funds which have been set up as dedicated Funds for investment in Government Securities and which have been approved by the Securities and Exchange Board of India (a) Government securities as defined in Section 2 of the Public Debt Act, 1944 (18 of the 1944) created and issued by any State Government ;and/or units of such Mutual funds which have been set up as dedicated Funds for investment in Government Securities and which have been approved by the Securities and Exchange Board of India; and/or (b) Any other negotiable securities the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government except those covered under (iii)(a) below. (a) Bonds/Securities of "Public Financial Institutions as specified under Section 4(I) of the Companies Act; "Public Sector Companies" as defined in Section 2(36-A) of the Income Tax Act, 1961 including Public Sector Banks; and or (b) Short duration (less than a year) Term Deposit Receipts (TDR) issued by public sector bank. To be invested in any of the above three categories as decided by their Trustees % of amount to be invested 25 % (ii) 15 % (iii) 30 % (iv) (v) 30 % The Trustees, subject to their assessment of the risk-return prospects, may invest upto 1/3rd of (iv) above, in private sector bonds/securities which have an investment grade rating from at least two credit rating agencies. 2. Any money received on the maturity of earlier investments reduced by obligatory outgoing shall be invested in accordance with the investment pattern prescribed in this Notification. 3. In case of any instruments mentioned above being rated and their rating falling below the investment grade and the same rating has been confirmed by two credit rating agencies then the option of exist can be exercised. 4. The Investment pattern as envisaged in the above paragraphs may be achieved by the end of a financial year and shall come into force with immediate effect. 121 Item (iv) of the pattern provides investment of 20% of the investible funds in any of the three categories, viz., Central Government securities, State Government Securities and Public Financial Institution/Public Sector Companies/IDFC/Public Sector Banks/IDFC/Certificate of Deposits issued by the Public Sector Banks. The option for investment of 20% in any of the said categories is left to the concerned Board of Trustees. With effect from 1.4.1998, the Board of Trustees may invest the extent of ten per cent out of the amount allocated for item (iv) (which is to be invested at the discretion of the Board of Trustees in any three categories specified above) in private sector bonds/securities which have an investment grade rating from at least two credit rating agencies. While doing so, the Board of Trustees should assess the riskreturn prospective of the bonds/securities of the private sector companies. The bonds/securities issued by the private sector companies should be examined after assessing their risk return prospects(Default risk) with reference to their investment grade rating, as under : ASSESSMENT OF RISK-RETURN PROSPECTS Credit rating refers to the rating (or assessment and gradation) of creditorship securities or debt instruments, particularly with regard to the probability of timely discharge of payment of interest and repayment of principal obligations Credit ratings are usually expressed in alphabetical or alphanumeric symbols enabling the investor to choose between debt instruments on the basis of their underlying credit quality. For example, standard and poor, corporate and municipal debt rating definitions are as follows: High Investment Grades : "AAA" (Triple A) "AA" (Double A) Investment Grades : "A" "BBB" (Triple B) Speculative Grades : "BB" (Double B) "CCC"(Triple C) "CC" (Double C) Default Grade : "D" The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Credit rating aims toI. provide superior information to the investors at a low cost; II. provide superior information to the investors at a low cost; III. provide a sound basis for proper risk-return structure ; IV. subject borrowers to a healthy discipline ; and V. assist in the framing of public policy guidelines on institutional investment. Thus, the credit rating financial services represent an exercise in faith building for the development of a healthy financial system. 122 21 SETTLEMENT OF PF CLAIMS CLAIM FORMS S.No. 1. 2. FORM No. Form 19 Form 20 PURPOSE Application for claiming the PF accumulations dues on leaving service/retirement. Application for claiming the PF accumulations of the deceased PF member by Nominee / Legal Heir / Minor / Lunatic . SCHEME PROVISIONS Para 69 of EPFS,52 Para 70 of EPFS,52 ATTESTATION OF CLAIMS BY THE EMPLOYER: (Para 72(5)) 1.In case of claim which is to be settled immediately under Para 69(1) (a) to (dd) & Para 70 , the employer has to get the claim application from the member / nominee duly filled in, attest it and forward the application within 5 days of its receipt to the Commissioner. 2. In case the member has to prefer the claim after the waiting period of 2 months, the employer has to get the claim application from the member when he/she leaves the service, attest it and handover to the member for submission to the Regional P.F.Commissioner after the completion of waiting period of 2 months. 3.The employer has to attest the claim forms of the members forwarded to him by the Commissioner for attestation and return the same to the Commissioner within 5 days of its receipt. 4. The Employer has to ensure submission of Form -10 & Form 3A for the broken currency period (for the previous financial year(s) also, if not submitted already) along with Claim forms in Form – 19 / Form – 20. 5. The defaulting establishment should ensure the payment of dues and submission of returns upto the date of leaving service/death of the member and forward the challans and returns alongwith the claim without fail. Immediate settlement Under Para 69 (1) (a): On Retirement from Service after attaining the age of 55 years: 123 1.Provided that a member, who has not attained the age of 55 years at the time of termination of his service, shall also be entitled to withdraw the full amount standing to his credit in the Fund if he attains the age of 55 years before the payment is authorised. 2.The Employer may forward the claims of such members 3 months in advance before the date of retirement on attaining age of 55 years in order to enable the Commissioner to make arrangement for payment of PF accumulation to the members on the date of Retirement. On Retirement on account of total and permanent incapacity due to bodily or mental infirmity 1.The Employer has to designate the Doctor for the purpose of issue of Medical certificate, where such designated Doctor is not there, the Medical certificate from the Registered Medical Practitioner will also be accepted. Under Para 69 (1) (b): 2. If the establishment is covered under ESIC, a Certificate from ESIC is accepted. 3. The Certificate issued by the Medical Board which exists by mutual agreement between the employer & employees of the establishment. 4. In doubtful cases the claim will be settled after 2 months waiting period. Under Para 69(1)(c): Migration from India for permanent settlement abroad, or for taking abroad. employment 1.The Attested copies of the Passport, Air ticket & Immigration Visa must be forwarded alongwith the claim form. 2.In case of a member taking up employment at abroad, the offer of appointment letter received by the member is to be forwarded. 3.The payment to such member who already left the country will be credited to his bank account maintained at any Scheduled / Exchange bank in India. Termination of service in the case of Mass or Individual retrenchment. 1. The employer should state whether or not the Retrenchment compensation has been paid to the member/members. Under Para 69(1)(d) Termination of Service on V.R.S. framed by the Employer and the Employees under a mutual Under Para 69(1) (dd) agreement 1.A copy of VRS Scheme has to be forwarded by the employer and it will be accepted if the operative period of the Scheme is not expired. 124 SETTLEMENT ONLY AFTER THE WAITING PERIOD OF TWO MONTHS Under Para 69(1)(e)(i) Transfer of a non retrenched employee from a closed establishment To uncovered establishment. Transfer of an employee from a covered establishment to an uncovered establishment under the same employer. Member discharged and is given retrenchment compensation under the Industrial Disputes Act, 1947 Under Para 69(1)(e)(ii) Under Para 69(1)(e)(iii) Under Para 69(2) Other cases viz. Resignation, Left Service, etc. Note: For female members leaving service for the purpose of getting married; waiting period is not applicable. SETTLEMENT UNDER PARA 70: (Settlement of deceased members P.F account – Application to be made:- Form No.20). Para 70 (i): If a nomination exists, payment will be made to the nominee in accordance with Form 2 (R). (Nomination and Declaration Form). Para 70(ii): If no nomination subsists, payment will be made to the members of his family (as defined under Para-2(g) of EPF Scheme 1952) other than those indicated below in equal share. (a) Major sons, (b) Sons of a deceased son who have attained majority, (c) Married daughters whose husbands are alive. (d) Married daughters of a deceased son whose husbands are alive. Para 70(iii): In any cases where 70(i), 70(ii) do not apply, the whole amount will be paid to the person legally entitled to it. For the purpose of this paragraph, a member’s posthumous child, if born alive, shall be treated in the same way as a surviving child, born before the member’s death. If posthumous child is to be born to the deceased member, the amount will be retained and the balance will be distributed. If subsequently no child is born or the child is still born, the amount retained will be distributed among the eligible family members. PARA 70(A): If a person entitled to receive a share in the Provident Fund accumulations of a deceased is charged with committing the murder of the member or with abetting the crime, the share payable to such person shall be retained till the case is finalised. If, subsequently he/she is exonerated the share will be paid to 125 him/her. If such a person is found guilty and convicted, the share will be paid equally to other person(s) entitled to receive the accumulations. Para 72 (1 & 2): In case there is no nominee and also there is no person entitled to receive the amount, if the amount to the credit of the Fund does not exceed Rs.10,000/- the Commissioner may pay such amount to the claimant after enquiry and after satisfying the title of the claimant. Para 72 (3): Where the payment is to be made to a minor, it is payable to: a) b) c). d). The Guardian appointed under Guardian and Wards Act 1890. Failing (a) above, the Guardian appointed by the member as per Para 61 (4A), Failing (a), (b)above, to the natural guardian of the minor. Failing (a), (b), (c) above, to the person, considered to be the proper person by the Commissioner when the amount not exceeding Rs.20,000/- or the person considered to be the proper person, by the Chairman, C.B.T. where the amount exceeds Rs.20,000/-. Para 72(3A): Where the payment is to be made to a lunatic person, it is payable to: a) The Manager appointed for the minor’s estate under Indian Lunacy Act, 1912. Failing (a) above, The natural guardian of the lunatic. Failing (a),(b) above, To the person considered by the Commissioner as proper person, amount being not exceeding Rs.20,000/- or to person considered by Chairman C.B.T. as proper person amount being exceeding Rs.20,000/-. b) c) CHECKLIST FOR CLAIMS IN FORM 19 (Form to be used by a major member of the EPF Scheme) 1) Whether all the columns in the Form 19 are correctly and completely filled in (as per the details furnished to this office), in ink, without any overwriting. 2) Whether the reason and date of leaving service have been correctly filled in, with reference to Form 10 already given, in the appropriate columns in the Form 19. 3) Whether the member has furnished his full postal address, with the postal pin code number, for communication and for payment of amount, if preferred by postal money order.(Money Order is issued only where the amount payable is below Rs.2000/-) 4) If the payment is preferred by account payee cheque, through Bank, please check to: Whether the member has got a Savings Bank account in any of the branches of a Nationalised/Scheduled/Co-operative Bank/Post Office. 126 Whether the account so opened is only an individual account and not a joint account. Whether the name, branch and address of the Bank have been clearly furnished in the Form 19. Any correction should be attested by the Employer.(Attach the first page of Savings Bank passbook showing the name and account number of the member) Whether the member has completed the advanced stamped receipt (furnished in the Form 19 itself) and appended his signature on one rupee revenue stamp affixed in the relevant portion. 5) If the reason for leaving service is “Left”, “Resigned”, etc., ensure that 2 months period has been completed from the date of leaving service to the date of preference of the claim. However this will not be applicable if the member has completed 55 years of age or being a female member resigned for her marriage. 6) In case the member is an illiterate, whether thumb impression of the member is affixed at the relevant portion. 7) Whether Form 5 and Form 10 particulars are reproduced in the claim Form. 8) a) Whether Form 3A, if any, for the broken period of currency is enclosed. b) Whether Form 3A for the previous currency period is sent, if not,received already c) Whether Form 3A is completed and signed and reasons for ‘Nil’ contribution is given. d) Whether the period of non-contributory service is indicated where the wages are not drawn for a full month. 9) Whether the remittances are made upto date and returns submitted. If for any reasons, any remittance is outstanding in respect of the claimant, the amount due on his/her account needs to be indicated. 10) Whether the specimen signatures of the authorised officials of the establishment are already submitted to the Regional Provident Fund Commissioner. If not, it shall be done and be updated whenever there is change in the officials. 11) Whether the claim has been attested by the authorised officials of the establishment, duly affixing his official seal and date. CHECKLIST FOR CLAIM IN FORM-20 (Form to be used by a nominee/ a legal heir in case of death of a member) Note : The Points given below are in addition to common points such as attestation, Form 3A, mode of Payment, completion of form etc., as given in the checklist for claims in Form 19. 1) In case of death of the member, whether death certificate in original is enclosed. 2) Whether complete details of the deceased member/the claimant are furnished in the appropriate columns of the Form 20. 3) Whether the claim has been preferred by the nomine(s) as per the nomination Form 2 as Executed by the deceased member. 4) In case the member has not executed any valid nomination during his life time, ensure that the claim is preferred by eligible member(s) of the family or 127 5) 6) 7) 8) eligible legal heir of the member, as the case may be. (In such case, a list of members of the family duly certified by the employer or the Revenue official or an affidavit by the family members sworn before a Notary Public should be enclosed). In case, the parents of the deceased member are included in the list of family members, whether or not the parents were dependent on the member is to be specified. In case of the claims preferred by any person other than natural guardian on behalf of the minor member/nominees/legal heirs, ensure that the required Guardianship certificate etc. are enclosed. Whether the age and marital status of the family members/Legal heirs are furnished as on the date of death of the member and NOT on the date of the claim. Separate application should be preferred by each eligible claimant. In the case of minor, guardian is to prefer the claim. CHECKLIST FOR CLAIMS IN FORM-13(Revised) 1. To check whether all columns in the claims are properly filled. 2. Whether the particulars are written clearly without any overwriting or cutting. Correction, if any, is attested 3. Whether the previous employment particulars such as name, address and code number and the account number of the member are correctly furnished 4. In case the PF transfer is due from the PF Trust of an exempted establishment, the application is to be sent direct by the employer to the PF Trust of the exempted establishment with a copy to the RPFC concerned for details of the Pension Scheme membership. 5. This form should be submitted by the member to the present employer for onward transmission to the RPFC by whom the transfer is to be effected. CHECKLIST FOR CLAIMS IN FORM-31 1. To check whether all columns in the claims are properly filled. 2. Whether the particulars are written clearly without any overwriting or cutting. Correction, if any, is attested. 3. For the non-refundable withdrawal under Para 68B it should be ensured that declaration in the prescribed form is furnished. In all cases the employer should ensure the genuineness of the case before forwarding the application. It should be noted that if the advance granted is misused, the amount of advance will be recovered together with penal interest. 4. For the withdrawal for repayment of loans under 68 BB, it should be ensured that the member earlier obtained a loan from a State Government, Cooperative Society, Housing Board, a Municipal Corporation, or a body similar to Delhi Development Authority solely for the housing purpose. 5. For closure/lock-out it should be ensured that no compensation is paid to the member and the advance is eligible for the reasons other than strike only. 6. For Illness of member/family member whether the certificate has been furnished by the employer as regards to the leave granted and the nonavailability of ESI benefits 128 7. Whether the medical certificate in proper form obtained from the factory doctor/designated medical officer / the Registered Medical Practitioner/Hospital is enclosed. Before forwarding it to the RPFC, the genuineness of the certificate should be ensured. 8. It should be noted that one month hospitalisation is compulsory in case of the illness of family members. 9. In case of treatment of heart ailment/mental derangement a certificate by a specialist doctor is necessary 10. For marriage purpose certificate regarding advance required to meet the expenses in connection with the marriage needs to be furnished in the claim form. 11. In the case of education a certificate from the educational institution regarding the course of study and the anticipated expenditure needs to be submitted 12. Before forwarding the applications for the reasons noted under item No10 the genuineness of the case shall be ensured by the employer. 13. In case of advance for the natural calamity (flood/earthquake/riot) whether the certificate from an appropriate authority to the effect that the movable or immovable property has been damaged as a result of the natural calamity and it should be ensured that the State Government has declared that the calamity has affected the general public in the area. It is also to be ensured that the application for advance is made within a period of 4 months from the date of declaration by the State Government. 14. In the case, affected by cut in electricity it should be certified that the fall in wages amounting to 25% or more than 25% of the wages in respect of the member is due to power cut. A certificate from the State Government is also necessary to the effect that the cut in the supply of electricity was enforced in that area where the factory is situated. 15. Purchase of equipment for physically handicapped member: whether the certificate from a competent medical practitioner furnishing the details like name of the person, nature of the handicap, nature of the equipment required and its approximate cost is submitted. 16. Payment of withdrawal within one year before the retirement. The employer should ensure that the member has attained the age of 54 years or within one year before his actual retirement on superannuation, which is later and then the application is submitted. He should also ensure that the said particulars tally with the age particulars furnished in Form – 9 or Form – 2. 22 EPS-1995 – BENEFITS – DOS & DONT’S IN PROCESSING THE CLAIMS – SCRUTINY OF FORM 10C AND 10D DETAILS OF BENEFITS TO MEMBERS OF EMPLOYEES’ PENSION SCHEME 1995 & THEIR FAMILY MEMBERS Pension is defined as the Pension payable under the Employees’ Pension Scheme, 1995 and includes the Family Pension admissible and payable under the ceased Employees’ Family Pension Scheme, 1971. 129 Pension depends upon 4 factors: 1. Pensionable Salary 2. Pensionable Service 3. Age (Date of Birth). 4. Pension Factor Pension is classified broadly into 2 categories:a) Pension to the members; b) Pension to the family. TYPES OF BENEFITS: BENEFITS TO MEMBERS BENEFITS TO FAMILY MEMBERS WITHDRAWAL BENEFIT WIDOW PENSION SCHEME CERTIFICATE CHILDREN PENSION PENSION 1.SUPERANNUATION PENSION 2.RETIRMENT PENSION 3.SHORT SERVICE PENSION 4.DISABLED PENSION NOMINEE PENSION ORPHAN PENSION DISABLED CHILDREN PENSION COMMUTATION OF PENSION RETURN OF CAPITAL TO NOMINEE OPTION FOR RETURN OF CAPITAL DEPENDENT PARENT PENSION AGE (DATE OF BIRTH) AGE IS AN IMPORTANT FACTOR WHICH PLAYS A VITAL ROLE IN DECIDING THE FOLLOWING 1. ENROLMENT AND RETENTION OF MEMBERSHIP. 2. ELIGIBILITY FOR PENSION 3. NATURE OF PENSION 4. THE QUANTUM OF PENSION PAYABLE TO A MEMBER 5. PERIOD OF PAYMENT OF PENSION IN THE CASE OF CHILDREN / ORPHAN. 130 The age should be determined with reference to the date of birth. Wherever the date of birth is not given, it shall be determined in the following manner: 1. where the year of birth is given but not the exact date, 1st July shall be treated as the date of birth. 2. where the year and month are given, the 16th of the month shall be treated as the date of birth; and 3. where only the age is indicated the member shall be assumed to have completed that age on that date of the medical certificate accompanying Form 2, and where no medical certificate is attached to From 2, on the date of filing Form 2. On attaining the age of 58 years the member can normally draw the pension. On attaining the age of 58 years the member is not required to pay the pension contribution. Further the age as on 16.11.1995 is also relevant to determine the monthly members pension, to the members of EFPS, 1971. The completed age of the member alone should be taken into account for all purposes and as such the question of rounding off of age does not arise. A member is entitled to draw reduced pension after attaining the age of 50 years. A member is entitled to disabled pension before attaining the age of 50 years. The payment of pension for past service is determined as on 16.11.1995 and for that purpose the Existing members are divided into three groups. 1. those who have not attained the age of 48 years as on 16.11.1995 2. those who have attained the age of 48 years but less than 53 years as on 16.11.1995 and 3. those who have attained the age of 53 years or more as on 16.11.1995. In the case of children, on attaining 18 years of age they become major. Till then, the guardian is to be appointed to receive the benefit. The children are entitled to pension upto the age of 25 years. SALARY The term “SALARY” means the pay / wages on which contributions is due. “Pay” for the purpose of contributions means “Basic wages dearness allowance, retaining allowance and cash value of food concession, admissible, if any” [para 2(xiii)] 131 a) Salary for Calculation of MMP for Past Service: The Salary drawn as on 16.11.1995 or date of exit whichever is earlier was divided into two groups . i) Salary upto Rs.2500/- per month. ii) Salary more than Rs.2500/- per month. b)Salary for Calculation of MMP for Pensionable Service: Average monthly pay drawn during the contributory period of service of 12 months preceding the date of exit from the membership of the Employees’ Pension Scheme, 1995. c)Salary for Calculation of Widow Pension (Table C) Salary at the date of death of the member,. d)Salary for Calculation of Withdrawal Benefit (Table A & Table B): Salary at the date of exit. e)Salary for Calculation of Return of Contributions (Table D) Salary at the date of exit. Statutory ceiling of Salary (Pay/Wages) Statutory ceiling of pay on which contributions are to be made is as follows; Wage Ceiling 1000/1600/2500/3500/5000/6500/From To 31.12.1962 28.02.1983 (01.03.1971) 01.03.1983 31.08.1985 01.09.1985 31.10.1990 01.11.1990 30.09.1994 01.10.1994 31.05.2001 01.06.2001 onwards IMPORTANT FACTORS TO DECIDE THE ELIGIBILITY AND QUANTUM OF PENSION a).Upto 15.11.1995 1. SERVICE b).On or after 16.11.1995 a) as on 15.11.1995 2. SALARY 132 b). On or after 16.11.1995 (Pensionable Salary) 3. AGE Date of Birth of the member Age as on 16.11.1995 Age as on date of exit after 16.11.1995 Date of birth of the family members SERVICE The term service is classified into the following four categories 1. 2. 3. 4. Past Service Actual Service Eligible Service Pensionable Service The total period of each service referred to above is calculated for the following purposes 1. To decide the eligibility of the member for Pensionery Benefits under the Employees’ Pension Scheme, 1995. 2. To decide the Quantum of Pensionery Benefits payable to the member under the Employees’ Pension Scheme, 1995. 3. Minimum quantum prescribed for- factor pension Pension with 24 years of past service Pension with service less than24 years DEFINITION:[PARA 2] PAST SERVICE: ‘Past Service’ means the period of service rendered by an existing member from the date of joining Employees’ Family Pension Fund till the date of exit (i.e. death or leaving service) or attainment of age of 60 years or 15th November 1995 whichever is earlier. [para 2 (xii)] BREAK IN SERVICE: The period of Break in Service is the period of Past Service for which no contributions to EFPS, 1971 were payable due to non eligibility for wages. (first proviso to para 6 of EFPS, 1971). 133 ACTUAL SERVICE: ‘Actual Service’ means the aggregate of periods of service rendered from 16 November 1995 or from the date of joining any establishment, whichever is later, to the date of exit from the employment of the establishment covered under the Act or the date of attaining the age of 58 years, whichever is earlier. [para 2(ii)] th PENSIONABLE SERVICE: ‘Pensionable Service’ means the service rendered by the member for which contributions have been received or are receivable.[para 2(xv)] CONTRIBUTORY SERVICE: ‘Contributory Service’ means the period of Actual service rendered by a member for which the contributions to the fund have been received or are receivable. [para 2(iv)] NON CONTRIBUTORY SERVICE: ‘Non Contributory Service’ is the period of Actual service rendered by a member for which no contribution to the ‘Employees Pension Fund’ has been received or are receivable; due to non eligibility for wages. [para 2(x)] BENEFITS OF PENSION SCHEME – IN NUTSHELL • • • • A member is eligible for Pension after 10 years of service. The Pension is payable on attaining the age of 58 years, whether he is in service or superannuated. Early Pension at reduced rate can be availed on leaving the employment, after attaining the age of 50 years. Where an employee is totally disabled and leaving service on account of disablement, Disablement Pension is allowed. No age and service stipulation to claim the pension. Every year, the pension quantum may increase. Wherever the Pension claims are received three months before the date of superannuation, the Regional Provident Fund Commissioner will deliver the Pension Payment Order on the day of superannuation. Apart from Pension Benefit, a member can commute upto one-third of his pension and in lieu of this, he will receive a lumpsum amount equivalent to 100 times of the commuted value of pension. A Pensioner may nominate a person to receive a lumpsum amount after his death, as Return of Capital. Family Pension is payable in case of death of a member: after leaving the employment. while in employment. after drawing the pension Family Pension is payable even where the death occurs before 10 years of service. Thus, the minimum eligible service of 10 years is not applicable. • • • • • • 134 • • • • • • • • • • • • • • • On death of a pensioner. the Pension is automatically payable to the spouse (widow / widower). When a member dies as Bachelor or Spinster or where there is no spouse or children below 25 years, the Family Pension is payable to Nominee till his/her death. When there is no valid nomination, the Family Pension is payable to dependent father followed by dependent mother. In addition to Family Pension to Widow / Widower, Children below 25 years are also eligible for Pension simultaneously. It is payable to the married daughters also, below the age of 25 years. On death or re-marriage of widow / widower, Children will be given enhanced pension treating such children as Orphan. On behalf of the minor children the pension is payable to guardian. Any child in a family with total and permanent disablement will receive Children Pension till death. The monthly pension is payable through Indian Overseas Bank, State Bank of India, Indian Bank, HDFC Bank and Post Offices in Tamil Nadu and Pondicherry States on the first day of every month through the Savings Bank account of the pensioner. The pension can be drawn anywhere in India. The employees with less than 10 years of service on the day of superannuation may avail the benefit of withdrawal from Pension Fund. Where an employee has not served for 10 years on the date of leaving service, he may obtain a Scheme Certificate so as to continue his membership during un-employment period and the same can be used to count the previous service as and when he joins another establishment covered under the Act. The employees who have not contributed to the Employees’ Family Pension Scheme, 1971 can also join the Employees’ Pension Scheme before attaining the age of 58 years, at their option, after paying the contribution and interest upto-to-date. The contribution to Pension Fund can be made beyond the ceiling limit of Rs.6,500/- on the joint request of the employee and the employer so as to get more benefit. The Pension quantum is determined separately for the period of service from 1.3.1971 to 15.11.1995 as fixed amount. This is known as “Past Service” benefit. The Pension for the service rendered after 15.11.1995 is calculated through formula namely, Pensionable Salary x Pensionable Service 70 An employee on his superannuation is entitled for Pension (through the above formula) upto 60% of the pensionable salary. (Pensionable Salary would mean, the salary drawn by the employee for a period of 12 months prior to the date of superannuation). • 135 POINTS TO BE NOTED WHILE AUDITING Work sheet for Pension • Date of Birth: As per Form 9 or Form 3 (PS) . EPF members – Form 2 received before 16.11.95. EPS members – Form 2 received on or after 16.11.95 Date of Birth given in Form 10D if it is less than one year to the Form 9. age in • Date of Cessation of Membership: Date of leaving service. Date of Superannuation. Death in service – Death away from service. Date of Entitlement of Pension: date of Superannuation. Date furnished Column 8A of Form 10D, Date of application may be treated as date of option or date first receipt of the claim in EPF Office. Rounded off Past service after regularisation if any. Wages on the date of exit in respect of Death cases otherwise only minimum pension of 450 alone. Wages as on 15.11.95 Maximum Rs.3,500/- upto 30.9.94 and Rs.5,000/thereafter. Formula Pension upto 16.11.2000 Minimum Rs.335/- para 12(5) (a) Upto 16.11.2005 Minimum Rs.335/Minimum Rs.438/- para 12(4)(a) After 16.11.2005 Minimum Rs.335/Minimum Rs.438/Minimum Rs.635/- para 12(3)(a) Every month Maximum Pension MMP Rs.820/- Jan. 2002. WMP Rs.205/- for Rs.6500/ To be calculated and given to Auditors for checking. Percentage of Commutation opted. Form ROC option 1: One or more persons were nominated in Col. No.11. In such case 1st nominee have to be taken into account. ROC option 2: Wife should not be nominated in Col.No.11. Bank account No.: Xerox copy of Ist page of pass book of account opened in designated bank. CMP Cases: Date of Birth of children and Bank account of eligible children. Parental pension Death while in service or 10 years membership arrears from 6.3.99. OTHER POINTS TO BE NOTED • • • • • • • • • • • • 1. Where about of the member not known. Date of filing FIR note the date of disappearance. 2. After the death of the member pensioner adopted child – Children Monthly Pension not eligible. 136 3. Post retiral spouse and children is also eligible for pension. 4. Child or children legally adopted by the member eligible for pension. 5. Permanent total disable children eligible for Pension for life time in addition to regular eligible children. 6. Left service before 1.4.93 more than 10 years. EPF and FPF settled after 1.4.93. Eligible for pension. 7. Multiple memberships – An employee served in more than one establishment. 8. Bachelor died at the time of death he is orphan – No valid nomination - No Pension is payable to Brother/sister. 9. NEPAL (i) SONALI SBI (ii) RAKSHAL through SRO, Gorakhpur (UP) (iii) BADANI 10. Payment of Pension through NRI account. 11. Two or more wives – Seniority Date of marriage – Children according to Date of Birth. POINTS TO BE NOTED FOR WITHDRAWAL BENEFIT For Past Service – upto Date of Cessation 15.11.95; Actual Service from 16.11.95 or Date of Joining; If fluctuation in wages in Form 3A or Form 7(PS) breaks should not be assessed notionally in the absence of break statement; If no contribution is received for entire month, it has to be treated as break; For Table D, Actual Service minus NCP days- rounded off; For Table B, Date of Exit minus Date of Joining or 16.11.95 without deducting NCP days; Breaks in Past service have to be regularised; However if continuous break is more than one year upto 1.4.88 it cannot be regularised under any pretext. This should be strictly followed to avoid any erroneous/over payment. In respect of defaulting establishments, the withdrawal can be allowed if the factor in Table D is not altered (Proportion of wages at exit) even after excluding the defaulted period from the total year of service. The Scheme Certificate can be issued wherever the due benefit is not payable, with due remarks on the period of default given in the Scheme Certificate. (The question of extending the withdrawal with reference to the actual period of service for which contribution received is receiving the attention of the Headquarters Office). NCP days not to be regularised; If there is abnormal fluctuation in wages, 12 months average can be taken into account, with prior permission of APFC. If there are NCP days during last month wages, the salary drawn during last 12 months divided by actual number of days worked during the last span of 12 months shall be multiplied by 30 to work out the average monthly pay; Actual Service upto the date of exit or on attaining 58 years of age whichever is earlier; For Past and Actual service, full pay last drawn have to be rounded off to next Rs.10/-; Seasonally employed actual service during the year shall be treated as full year – Not attended, when employment is offered taken as NCP; 137 EPF and EPS can be settled separately. No question of simultaneous payment: A member can draw his PF account and continue in the Pension membership; POINTS TO BE NOTED FOR ISSUE OF SCHEME CERTIFICATE As and when Scheme Certificate is received along with Form 5, it should be recorded in Form 9/Form 3 (PS) and transmitted to Pension Section / EDP for recording the data in the system. Actual salary and service are not to be rounded off. Rounding off should take place on Superannuation/Pension payable; The breaks in Past service have to be regularised as per proviso to 9(2) OF EPS, 1995; However if continuous break is more than a year upto 1.4.88, it cannot be regularised under any pretext. This should be strictly followed to avoid any erroneous/over payment; Bank account details and Advanced Stamped Receipt not necessary; If total service is more than 10 years after deducting breaks, service falls short of 10 years, withdrawal benefit should not be settled. Only Scheme Certificate or Pension is payable if otherwise entitled; Family details if not furnished in Form 2 this need not be insisted – for issue of Scheme Certificate. Date of Birth as per Form 9 or Form 3 (PS) only taken into account – Form 2 received before 16.11.95 for FPF member – Form 2 received after 16.11.95 in respect of new members under EPS 1995 – If the date of birth given in Form 10C tallies age in Form 9. (less than one year on both ways) the actual Date of Birth given by the member may be admitted; In respect of defaulting establishments, if the yearly returns, such as Form 3A or Form 7 (PS) not submitted, the fact on the period of default should be recorded on the Scheme Certificate, before issue; Pension to be payable in future will not take place in Scheme Certificate; Wherever Scheme Certificate is already issued, the member has preferred the claim in Form 10D duly surrendering the Scheme Certificate, the claim is to be verified with reference to Scheme Certificate and after ensuring its issue and also verifying the authority attested the claim, the Form 10D and its enclosures should be verified for its correctness. Thereafter Form 10D along with IDS & Scheme Certificate should be sent to Pension Section; Once Scheme Certificate is issued, and transfer of provision Account of the member is received, a fresh Scheme Certificate to be issued cancelling the original received from the member; Scheme Certificate holder dies, his family is entitled for Family Pension, subject to eligibility. When pension is applied for, Original Scheme Certificate to be surrendered. CHECK LIST FOR CLAIMS IN FORM –10C (Form to be used by a member of Employees Pension Scheme 1995 for claiming Withdrawal Benefit/Scheme Certificate) 1) To check whether all columns in the claims are properly filled. 138 2) Whether the particulars are written clearly without any overwriting or cutting. Correction, if any, is attested. 3) Whether the member has appended his signature on One Rupee Revenue Stamp affixed in the relevant portion. (To be given where withdrawal benefit is admissible and opted for payment by cheque). 4) Whether the details of wages and period of non-contributory service were already informed through Form 3A. 5) If the member is not eligible for pension and has rendered 10 or more years of eligible service, he/she is not entitled for option but Scheme Certificate only will be issued. 6) Wherever the member is having less than 10 years’ eligible service, he/she may be advised to opt for Scheme Certificate instead of Withdrawal Benefit. 7) Option to be specifically stated either for Scheme Certificate or Withdrawal Benefit. 8) In case of opting for “Scheme Certificate”, it is not necessary to furnish the Savings Bank Account and enclosing of attested photos. 9) These points are in addition to common points furnished under “Checklist for claim in Form-19”. CHECKLIST FOR CLAIMS IN FORM-10D (Form to be used for claiming Superannuation Pension, Retirement Pension, Shortservice Pension, Disablement Pension, Widow Pension, Children Pension and Orphan Pension). 1) To check whether the application in Form-10D has been preferred in duplicate in case pension is to be drawn in other SRO/SAO or other Region. 2) Whether all columns are properly filled in without any overwriting. 3) Whether the application in form-10D has been attested by the employer or his authorised official with his official seal and date. 4) Whether the date of birth of the member has been furnished as per records already submitted to the RPFC. 5) In case of death of the member (For Widow, Children or Orphan Pension) ensure that the death certificate is submitted in original and family members’ certificate is furnished. 6) The descriptive roll/finger impressions/Specimen signatures of the claimant are obtained in the prescribed forms (in duplicate) and attested by the employer. 7) Whether 3 copies of Passport Size photograph of the member with spouse (taken together/or claimant) are submitted and the employer has attested with seal on the back side of the Passport size photos duly furnishing the name and Account number of the member below the age of 25 years irrespective of their marital status. 8) Whether the birth certificate of the children of the member, is submitted in original, with one Xerox copy duly attested by the employer. 9) Whether the Personal marks of Identification, if any, on the hand /face or body of the claimant is furnished. 10) The monthly Pension can be disbursed to the Pensioner through the designated Banks such as State Bank of India and other Nationalised Banks or HDFC (or ICICI) or Post Offices. Please check whether the member has 139 opened a Savings Bank Account in any Bank branch and he has furnished Savings Bank Account Number and complete postal address of the Bank in the relevant column of the Form-10D. 11) Whether the claimant has exercised any option for Return of Capital, in the relevant column of Form-10D. If so, please specify the Para such as 13(1), 13(2) or 13(3). In case of opting for Para 13(2), the nomination should be made in favour of person other than the spouse. Similarly it should be ensured that the member furnished his option for Commutation under Para 12A. 12) While furnishing family details, the relationship with the member may be furnished correctly in Form-10D. 13) Whether the particulars of wages etc. at Page 7 of the claim form is duly checked and correctly filled up by the employer. 14) Separate Savings Bank Account for the minor children may also be opened in the same branch at which the Savings Bank Account opened to the widow/widower. EXAMPLE : PENSION CALCULATION 1. From the following particulars calculate the Short Service Pension payable to Mr. ‘X’. 1) Date of Birth …………………………………02.07.1943 2) Past Service………………………………….. 5 Years 3) Pensionable Salary……………………………Rs.5,000/4) Wages as on 15.11.95………………………... Rs.3,500/5) Date of Exit…………………………………... 11.10.2000 6) Date of Application…………………………... 09.01.2001 SOLUTION SHORT SERVICE PENSION = Para 12 (1) (c) The member has rendered eligible service of 10 years or more but less than 20 years. (a) Pension as per formula – Para 12 (2) Pensionable Service Date of Exit == 11.10.2000 16.11.1995 ------------25.10. 4 ------------- 140 (i.e.) rounded off to 5 years. 5000 X 5 ---------------70 == 142.85 But minimum pension payable as per Para 12 (4) (a) Rs.438/- (b) Past Service Benefit under FPFS ‘71 Past Service 5 years Salary Rs.3,500/- (i.e.) more than Rs.2,500/Pension as per Table Factor as per Table ‘B’ = Rs.85 02.07.43 58 --------------01.07.2001 16.11.1995 --------------15. 7. 5 --------------- Less than 6 years Factor 1.689 85 X 1.689 Rounded off to = = 143.56 144/- (c ) Total pension payable (a ) + (b) = 438 + 144 = 582/But minimum pension payable as per Para 12 (4) (b) is Rs.600/Proportionate Service Reduction : 600 X 10 = 250/----24 as per 12 (4) (b) minimum payable is Rs.325/Age reduction @ the age of 57 years Rs.325 X 97 % = 315.25 Rounded off to Rs.315/- p.m. w.e.f. 9.1.2001 141 CALCULATION OF PENSION (Para: 12 – EPS 1995) --------------------------------------------------------------------------------------------------Past Service Pension Aggregate Pension Formula Pension Minimum Formula Pension Aggregate Minimum Pension Service below 24 Years ----- ? --------------------------------------------------------------------------------------------------Pension for Past Service + Pension as per Formula for Pensionable Service (Sub. to Minimum (with reference to age group, as on 15-11-1995) 53 & above 48 - 53 Below 48 - Rs.335 - Rs.438 - Rs.635 Aggregate Pension --------------------------------------------------------------------------------------------------If it is below Rs.500/600/800 Raise to Minimum applicable. If service is below 24 years Reduce proportionately, subject to minimum of Rs.265/325/450 EMPLOYEES’ PENSION SCHEME, 1995 – PARA 12 COMPUTING MONTHLY MEMBER PENSION A. i. ON ATTAINING 58 YEARS (UPTO NOVEMBER 2005) On attaining the age of Superannuation (i.e. 58 years), irrespective of No. of years of eligible service wherever the aggregate of Past Service benefit and Formula Pension works out to Rs.600/- or above, the amount thus calculated is payable as Monthly Member Pension. Wherever the aggregate of Past Service benefit and Formula Pension works out to an amount below Rs.600/-, raise the Pension to the minimum of ii. 142 Rs.600/- and while doing so, wherever the Eligible Service is below 24 years, reduce the Pension quantum proportionately. (For this purpose, the Past Service and Pensionable Service will be construed as Eligible Service). B. i. EARLY PENSION (UPTO NOVEMBER 2005) Wherever the Pension is payable between 50-57 years of age (Early Pensioners – before 58 years) irrespective of their age as at 16.11.1995, a minimum aggregate Pension of Rs.600/- only will be given. The aggregate minimum Pension would mean, the sum of total of Past Service benefit and Formula Pension. Thus in Early Pension cases – (a) Calculate Past Service benefit – and (b) Calculate Formula Pension (Subject to minimum of Rs.438/- upto Nov 2005). If aggregate of (a) and (b) above is equal or more than Rs.600/- that will be further reduced by 3% for each year of age that falls short of 58 years. If aggregate of (a) and (b) works out to an amount below Rs.600/-, raise the Pension to Rs.600/-. Then reduce proportionately, where the eligible service (for this purpose, the Past Service + Pensionable Service) is below 24 years. However, this will be subject to minimum Pension of Rs.325/-. Thereafter reduce 3% with reference to age that falls short of 58 years. ii. iii. 23 PENSION DISBURSEMENT – RECONCILIATION – DISBURSING AGENCIES – LIFE CERTIFICATE PENSION RECONCILIATION The Link branch of the designated Bank is the nodal point to ensure proper and prompt disbursement of pensions under the Employees’ Pension Scheme, 1995 co-ordinating the activities of Regional Office / Sub-Regional Office and the paying branches, in the matter of receipt and disposal of Pension Payment Orders, monthly disbursement, maintenance of SB account and reconciliation with the payment received from Employees’ Provident Fund Organisation and the amount reimbursed to the paying branches etc. Whenever the PPO is forwarded by the RO / SRO of the EPF Organisation to the Link Branch, the Link Branch designated Officer should verify the signatures of the Authorised Officer affixed on the PPO with the specimen signatures available with Link Branch from time to time, and then ensure to send the PPO to the Paying Branch concerned under their jurisdiction within 3 days for disbursement of pension after proper identification and in the manner prescribed. The Paying Branch should verify the PPO and keep in a separate file for its preservation and maintenance being the basic document for release of pension. 143 A monthly statement of Pension Payment will be prepared by the RO/SRO of EPFO in triplicate, paying Branch wise, and will be forwarded to the Link Branch by 20th of every month together with a summary sheet of all the Paying Branches in duplicate, and a cheque for the amount of deposit for disbursement of Pension on month to month basis. The amount required for the payment of pension during the next month will be remitted by RO / SROs after adjusting the balance amount, with due examination, if any, at the close of the month. As explained above, the Regional Office / Sub-Regional Office of the Employees’ Provident Fund Organisation will release cheque on 20th of each month towards the pension due for disbursement in the ensuing month. This advance payment by Regional Office/ Sub-Regional Office will cover all the pensions due for the current month i.e. pensions which are current till previous month and also all cases for which pension payment orders released in the current month. Wherever arrear pension is due, the same will be included. In addition, the dues to the pensioners towards Return of Capital and commuted value of Pension, relief, etc., as and when payable, will also be included. The Monthly Statement of Pension Payments received from RO/SRO should be checked by the Link Branch. Any discrepancy noticed should be taken up with RO/SRO for due rectifications. The said statements (in triplicate) will be sent to the concerned paying branch on 23rd each month. The Paying Branch on receipt of the said statements and after verifying the Pension Payment orders included therein, shall disburse the Pension duly crediting the amount on the last day of the month or on any specified date in the following month but not later than 7th of the following month to the Saving Bank accounts of the Pensioners. In the case of new pensioners, the paying branch shall intimate the pensioner through the form prescribed for this purpose. As and when the pensioner appears and after satisfying the identity of pensioner, the Saving Bank Account of the pensioner will be allowed to be operated. On 8th of every month, the paying branch shall return the duplicate and triplicate copy of the said statement of the link branch. The link branch shall forward the duplicate copy containing the date of payment and other details on cessation of pension, if any, to the RO/SRO concerned on 12th of each month. A summary on total quantum of pension disbursed by each branch and the consolidated amount of pension disbursed by the bank during the current month will be sent alongwith the said statement duly indicating the balance available in the SB Account maintained at the Link Branch. DISBURSEMENT OF PENSION – AGENCIES – BANK [ PARA 33] The Commissioner shall with the approval of the Central Board, enter into arrangement for disbursement of pension and other benefits under this Scheme with disbursing agencies like Post Office or Nationalised Banks or Treasuries or Scheduled Commercial Banks including Regional Rural Banks or Co-operative Banks. The Commission payable to the disbursing agencies and other charges incidental thereto shall be met as provided in paragraph 27 of this Scheme. 144 Employees PF Organisation has finalised in Principle, an arrangement in consultation with IBA and Department of Banking, with the State Bank of India, HDFC Bank, ICICI Bank and other Nationalised Banks. Accordingly, the Regional Provident Fund Commissioners-in-charge of the Region are authorised to enter into an agreement with one or more banks having wider network of branches located throughout the Region. Such Nationalised Banks with whom agreement was entered into are called Designated Banks. Such Designated Banks have to identify a Bank to act as their agents (Link Branch). Such Link Branch of each designated Bank has to identify the Paying Branches of the Bank under its control with Branch code number. The Region-wise name of the disbursement agencies are furnished in the next page. 145 S.No. 1. NAME OF THE NAME OF THE DESIGNATED REGION BANK 1. ANDHRA BANK ANDHRA PRADESH 2. STATE BANK OF INDIA 3. SYNDICATE BANK 4. INDIAN BANK 5. HDFC BANK 6. ICICI BANK 7. UTI 1. PUNJAB NATIONAL BANK BIHAR 2. STATE BANK OF INDIA (including 3. BANK OF INDIA JHARKAND) 4. HDFC BANK 5. ICICI BANK 6. UTI 1. PUNJAB NATIONAL BANK DELHI 2. STATE BANK OF INDIA 3. INDIAN BANK 4. HDFC BANK 5. ICICI BANK 6. UTI 1. DENA BANK GUJARAT 2. STATE BANK OF INDIA 3. INDIAN BANK 4. HDFC BANK 5. ICICI BANK 6. UTI 1. PUNJAB NATIONAL BANK HARYANA 2. STATE BANK OF INDIA 3. HDFC BANK 4. ICICI BANK 5. UTI 1. PUNJAB NATIONAL BANK HIMACHAL 2. STATE BANK OF INDIA PRADESH 3. HDFC BANK 4. ICICI BANK 5. UTI 1. CANARA BANK KERALA 2. STATE BANK OF INDIA 3. SYNDICATE BANK 4. INDIAN BANK 5. HDFC BANK 6. ICICI BANK 7. UTI 1. CANARA BANK KARNATAKA 2. SYNDICATE BANK 3. STATE BANK OF INDIA 4. STATE BANK OF MYSORE 5. HDFC BANK 6. ICICI BANK 7. UTI POST OFFICES POST OFFICES 2. POST OFFICES 3. POST OFFICES 4. POST OFFICES 5. POST OFFICES 6. POST OFFICES 7. POST OFFICES 8. POST OFFICES 146 9. MAHARASHTRA (Including GOA) 10. MADHYA PRADESH (Including CHATTISGARH) 11. NORTH REGION EAST 12. ORISSA 13. PUNJAB 14. RAJASTHAN 15. TAMIL NADU (Including PONDICHERRY) 16. UTTAR PRADESH (Including UTARANCHAL) 17. WEST BENGAL 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 6. 1. 2. 3. 4. 5. 1. 2. 3. BANK OF INDIA PUNJAB NATIONAL BANK STATE BANK OF INDIA HDFC BANK ICICI BANK UTI PUNJAB NATIONAL BANK STATE BANK OF INDIA HDFC BANK ICICI BANK UTI PUNJAB NATIONAL BANK STATE BANK OF INDIA HDFC BANK ICICI BANK UTI BANK OF INDIA STATE BANK OF INDIA UCO BANK HDFC BANK ICICI BANK UTI PUNJAB NATIONAL BANK STATE BANK OF INDIA HDFC BANK ICICI BANK UTI S.B OF BIKANER & JAIPUR PUNJAB NATIONAL BANK HDFC BANK ICICI BANK UTI INDIAN BANK STATE BANK OF INDIA INDIAN OVERSEAS BANK HDFC BANK ICICI BANK UTI PUNJAB NATIONAL BANK STATE BANK OF INDIA HDFC BANK ICCI BANK UTI PUNJAB NATIONAL BANK UNITED BANK OF INDIA STATE BANK OF INDIA (for North Bengal only) 4. HDFC BANK 5. ICICI BANK 6. UTI POST OFFICES POST OFFICES POST OFFICES POST OFFICES POST OFFICES POST OFFICES POST OFFICES POST OFFICES POST OFFICES 147 DISBURSEMENT OF PENSION THROUGH THE POST OFFICES [PARA 33] Disbursement of Family pension under the erstwhile Employees’ Family Pension Scheme, 1971 is, however being made through Post Offices throughout the country. An agreement for the disbursement of Pension under the EPS 95 through Post Offices also has been finalised between the Department of Posts and the EPFO at the Headquarters level and will be made applicable for whole of the country. The copy of this agreement has been circulated by Headquarters vide its reference dated 14th May, 2001 / 19th June, 2001 As already stated the procedure of disbursement of pension through Post Offices will be similar to that of the existing arrangements as prevalent in the banks. However, the operational procedure in brief is detailed as hereunder :• • No separate agreement is required to be entered into at Regional / Sub-Regional level. “Head Post Offices” will be the “Link Offices” between the Regional Offices / Sub-Regional Offices of the EPFO and all “Sub-Post Offices” falling under the jurisdiction of respective “Head Post Offices”, are designated as paying offices. Unlike, the banking arrangement where there is only one Link Office attached to a RO/SRO, there may be more number of Head Post Offices which will function as Link Offices. In other words, a Regional Office / Sub-Regional Office, may have to deal with more than one Head Post Office. Depending upon the choice of the pensioner, Head Post Office itself may act as Paying Office in addition to its functioning as Link Office. • • DUTIES AND FUNCTIONS OF ROs/SROs (EPFO) The RO/SRO shall open a “Pension Payment Savings Account” with the Head Post Office(s) falling within their respective jurisdiction for depositing the money required for pension disbursement. The specimen signature of the authorised officer of the EPFO shall be provided to the respective Head Post Office. EXISTING PENSIONER OF EMPLOYEES’ FAMILY PENSION SCHEME, 1971 The existing pensioners under the erstwhile Employees’ Family Pension Scheme 1971 presently drawing Family Pension from the Post Offices shall continue to draw pension from their respective Post Office. The disbursement of Family Pension, shall, however, be switched over under the new agreement. CEPS software Programme has been appropriately modified to suit disbursement of Pension through Post Office also. 148 The modified version of the Programme has already been released separately vide Head Office Circular Letter No.Pension-1/7(2)2000/CEPS, dated 27/4/2001. As the arrangement for disbursement of pension under EFPS, 1971 is slightly different (one pension at a time only), it may be ensured that separate Monthly statements Paying Office (Bank or Post Office) and Link Office wise be generated, so as to have easy identification for smooth reconciliation. The facility of generation of separate statements has been provided in the modified version of CEPS. In order to have timely and continuous Reconciliation of Pension Payments, at monthly intervals, it is suggested to have a Monthly meeting with Postal Authorities (Head Post Offices), as is being done with Banks at present, to have a smooth working arrangement and stabilization of the procedure prescribed. The new arrangement will come into effect from 1st July 2001. It is requested that necessary arrangement may be made to disburse pension through the Post Office in addition to the existing arrangement of disbursement through the banks. “ Pensioner may, at their discretion opt to draw pension either from the designated Post Office or from a designated Bank”. SERVICE CHARGES IN RESPECT OF NATIONALISED BANKS AND POST OFFICES: As per the agreement, the Employees’ Provident Fund Organisation will pay service charges to the Bank and Post Offices on the turnover of the Pension amount disbursed. The rate of service charges currently in force is 1.25% for disbursement of monthly pension & 0.25% on non-recurring lump sum payments such as commutation, arrears etc The service charges should be claimed by the link branch from the concerned Regional Office / Sub-Regional Office on or before 15th of every month, furnishing a statement of pension actually disbursed by the paying branches (Annexure – 5) in the preceding month. The demand should be sent to Regional Provident Fund Commissioner in the prescribed form (Annexure – 15). The Regional / Sub-Regional Office will remit the service charges through a separate cheque and forward to the concerned link branch within 7 days of the receipt of the demand. Under no circumstances, the service charges due from Employees’ Provident Fund Organisation should be adjusted in the balance lying in the pension (Savings bank) account maintained at the link branch. Similarly, the cheque received towards service charges should not be reflected in this account. The above position is reiterated 1/7/(3)2002/CEPS/21757 dated 17.02.2004. vide H.O. Letter No.Pension- 149 LIFE CERTIFICATES / NON-REMARRIAGE CERTIFICATE CERTIFICATES TO BE FURNISHED BY THE PENSIONERS 1) LIFE CERTIFICATE: The pensioners are required to furnish a life certificate in November each year in the prescribed form indicated below. 2) NON-REMARRIAGE CERTIFICATE: In the case of widow / widower recipient family pension, the certificate of non-remarriage in the prescribed form indicated below is required to be furnished by the recipient, at yearly intervals i.e in November. The certificates mentioned above are required to be submitted by the concerned pensioner to the Paying Branch and the Paying Branch will retain it with the Pension Payment Order concerned and send a list of the certificates so received to the concerned Regional Office / Sub-Regional Office of the Employees’ Provident Fund Organisation. The details of the receipt of the above certificate must be updated in CEPS programme against each pensioner every year. Appropriate check point has also been provided in the CEPS programme for stopping the pension to the pensioner whose Life Certificate / Non-Remarriage Certificate has not been received. (CPFC’s Circular No.Pension-I/7(2)2000/CEPS/LC/Pt/23124 dated 19.07.2001) REVISED PROCEDURE FOR COLLECTION OF LIFE/NONREMARRIAGE CERTIFICATE FROM BANKS UNDER EPS, 1995: All the paying branches will notify in the month of October on their notice board the requirement of timely submission of the life and Non-marriage certificate for the benefit of pensioner, as non-submission of the certificate will result in discontinuance of release of pension by EPFO from January next. The Paying Branch shall collect the prescribed life certificate/non-marriage certificates from the pensioner in the month of November, once in a year. On obtaining such certificates the Designated Officer of the paying Branch shall verify each certificate and on being satisfied he will prepare a consolidated statement in respect of all pensioners and furnish it to the Link Branch, who will authenticate/certify the statement and forward it to the concerned office of the EPFO before 15th December. For certificate received after November intimation shall be given to RO/SRO/SAO concerned as and when it is received. [Ref: HO Lr. No. Pension-I/7(2)2000/CEPS/LC/Pt./22594 dated 17.9.2004.] 150 24 EMPLOYEES DEPOSIT LINKED INSURANCE SCHEME, 1976 – PROVISIONS IN BRIEF – CASE STUDY Introduction: The Central Government with the motive of providing additional social security in the form of life insurance to the family of the deceased member of the Provident Fund, introduced the Employees Deposit Linked Insurance Scheme with effect from 1.8.1976 as provided for under Section 6(C) of the EPF & MP Act, 1952. The benefit under the Scheme is so devised that it acts as an incentive to the members to save more in their Provident Fund Account. As the name of the Scheme says, the benefit is linked to the amount of accumulation in the Provident Fund Account of the member. Applicability: The Scheme applies to all the establishments to which the EPF & MP Act applies. Membership: All the members of the EPF Scheme (both exempted & unexempted) are covered as members of the EDLI Scheme also. Contribution: Under this Scheme, the members do not contribute any amount. However, the employer pays an amount equal to 0.5% of the total wages paid to the members as contribution. Administrative Charges: As regards Administrative charges, the employer is required to pay an amount equal to 0.01% of the wages subject to a minimum of Rs.2/- per month. Exemption: (Section 17(2A) of the Act and Para 28 of the EDLI Scheme, 1976): The provisions are available as per Section 17 (2A) of the Act and Para 28(1) and 28(4) of the EDLI Scheme, 1976, for grant of exemption to an establishment or to an employee or to a class of employees as the case maybe, from the operation of all or any of the provisions of the Scheme if without payment of any separate contribution/premium the employees are entitled to the life assurance benefit of the Scheme in the establishment which are more beneficial than the benefits provided under the statutory scheme. Inspection Charges: An employer of an establishment exempted from the provisions of the EDLI Scheme is required to pay inspection charges at the rate of 0.005% subject to a minimum of Re.1/- per month. Assurance Benefit: The benefit provided under the EDLI Scheme is called Assurance Benefit. On the death of the member while in service, the nominee or any other person 151 entitled to receive the Provident Fund benefits will, in addition to the Provident Fund, receive the Assurance Benefit under EDLI Scheme. Scale of Assurance Benefit: From 24.6.2000 onwards the amount of Assurance Benefit payable is an amount equal to the average balance in the account of deceased member in the Fund during the preceding 12 months or during the period of his membership whichever is less, except where the average balance exceeds Rs.35,000/- the amount payable shall be Rs.35,000/- plus 25% of the amount in excess of Rs.35,000/- , subject to ceiling of Rs.60,000/-. The form prescribed for claiming the Assurance Benefit under EDLI Scheme, 1976, is Form 5(IF). CHECK LIST FOR FORM – 5(IF) 1) Whether the Xerox copy of death certificate is attested by the authorised signatory. 2) Whether the beneficiary who prefers a claim under form 5(IF) is the same person who is entitled to receive the Provident Fund accumulations of the deceased member. 3) Whether the date and reason for leaving service given in the application tally with theForm-10 already submitted. 4) Whether the Death while in service certificate is furnished by the Employer. 5) Whether the contributions (both shares) for 12 months preceding the date of death furnished in page 3 of the form 5(IF) tally with the figures for the respective period shown in the Form 3A already submitted/to be submitted. 6) Whether claims have been preferred under EPFS ’52, EPS 95 and EDLIS ’76 have been submitted simultaneously. 7) Whether all the general check points for preferring a claim are observed such as filling the form without any omission and overwriting, furnishing the correct address and mode of payment, the bank details etc MODEL PROBLEM ON DETERMINING THE ASSURANCE BENEFIT PAYABLE Date of joining: 18.10.1991 Date of death : 9.8.2001 1. OB as on 1.4.2000 is Ee : Rs.45,320/Er : Rs.45,320/2. The contributions payable are as follows: (Both Shares) i. from March 2000 to May 2000 : Rs.627/- pm ii. from June 2000 to Sep2000 : Rs.674/- pm iii. for Oct 2000 : Rs.705/-pm iv. for Nov 2000 : Rs.736/-pm v. from Dec 2000 to Feb 01&May 01 : Rs.783/-pm vi. from June 2001 to July 2001 : Rs.1019/- pm 152 vii. • • • • • for August 2001 : Rs.305/- No wages for the months March and April 2001 Default on the months June, July and August 2001 Withdrawal in the month June 2001 – Rs.25,000/Interest : 2000-2001 - Rs.10,599/Interest : 2001-2002 - Rs.3,081/CALCULATION OF AVERAGE BALANCE FOR EDLI PAYMENTS MODEL WORKING SHEET SRI/SMT/KUM.________________________ P.F. A/C.No.____________ EDLI.A/C.No.___________ Member died on: - 9.8.2001 The Provident Fund Contribution on 12 months’ wages [from 1.8.2000 to 31.7.2001] are to be considered for calculation of average balance under Para 22 of EDLI Scheme 1976. I).Closing Balance as on 31.3.2000 Opening Balance as on 1.04.2000 II).Contributions received on wages for March to July 2000 | Total Month (in which Contribution on the wages for Aug 2000 to July 2001 were payable (1) 9/2000 10/2000 11/2000 12/2000 1/2001 2/2001 3/2001 4/2001 5/2001 6/2001 7/2001 Opening Balance Refund of Withdrawal | | | Rs.90,640/- Rs.3,229/---------------------Rs. 93,869/---------------------Both Share Of Contributions Interest Withdrawal Progressive Average Balance (2) 93,869 94,543 95,217 95,922 96,658 97,441 98,224 1,09,606 1,09,606 1,09,606 85,389 (3) - (4) 674 674 705 736 783 783 783 --@ --@ 783 1019@@ (5) 10,599* - (6) 25,000 - (7) 94,543 95,217 95,922 96,658 97,441 98,224 1,09,606 1,09,606 1,09,606 85,389 86,408 153 8/2001 Total 86,408 1019@@ 3,081** 90,508 11,69,128/- *Interest for the period 2000-2001 @ 12 % from 4/2000 to 6/2000 & 11 % form 7/2000 to 3/2001 ** Interest for the broken period (4 months) for 2001-2002 calculated on IBB @ Member has not earned any wages @@ Establishment has not remitted the amount of dues. Anyhow, the contributions due even though not paid, has been taken into account. Total Progressive Balance in 12 months Average Balance : 11,69,128 / 12 Assurance Benefit Payable : Rs.11,69,128/= Rs.97,427/- :-Rs.35,000/- + 25 % of the amount in excess of Rs.35000/- (Subject to a Maximum of Rs.60,000/-) = Rs.35,000/- + 25 % of Rs.62,427/= Rs.35,000/- + Rs.15,607/= Rs.50,607/-. Therefore the Assurance Benefit payable is Rs.50,607/NOTE: 1. If the Average Balance exceeds Rs.1,35,000/-, then the Assurance Benefit payable to the members family will be restricted to Rs.60,000/2. Opening Balance as on 1.4.2000 includes contributions in respect of wages of the member upto 29.2.2000 ( i.e wages for Feb 2000, paid in March 2000) 3. Contributions for 12 months upto the end of the month preceding the date of death are taken (i.e from August 2000 to July 2001 wage month) 4. The interest should be restricted to the month preceding the month in which the death occurred ( in this case upto 31.7.2001) EDLI CLAIM SETTLEMENT CHECKLIST – DRILL 1. Date of Death: 154 Verify the date of death. 2. Membership for EDLI: (Average Balance) a) Verify the membership – whether below 12 months or above 12 months. b) If more than 12 months – 12 months Wages prior to the month in which death occurred to be taken. If Less than 12 months – Actual period of membership to be taken. Opening Balance: Note the financial years falling in the above period. Note the opening balance as on 1st April, for the first financial year, with reference to Form 24. (Add both shares and note it). Contribution: Note both share of contributions from March of the first financial year and determine the opening balance at the commencement of first month. (First month with reference to 2). 3. 4. 5. Wage Period within the 12 months: Note the details of no wages for any month/months. reflected as ‘Nil’ in the statement. This will be 6. Default Period: Note default period. Even there is default, that should be taken into account for calculation purpose with contribution, as given in Form 3-A. Withdrawals: Note withdrawals within the given ‘period’ and post in the month in which it has been authorised. 7. APPROVAL OF GROUP LIFE INSURANCE POLICIES ISSUED BY PRIVATE SECTOR LIFE INSURANCE COMPANIES IN LIEU OF THE EMPLOYEES’ DEPOSIT LINKED INSURANCE SCHEME 1976: After the privatisation of the Insurance Sector, many Private Sector Life Insurance Companies have approached the Employees’ Provident Fund Organisation for approval of the Term Group Plan offered by them for issuance in lieu of Employees’ Deposit Linked Insurance Scheme, 1976. The Central Board of Trustees, in its various meetings had approved the proposal for allowing the following insurance companies in private sector coming under the regulatory control of IRDA to offer the Group Insurance Scheme conferring similar or better benefits than the Employees’ Deposit Linked Insurance Scheme, 1976. 155 LIST OF PRIVATE INSURANCE COMPANIES APPROVED BY HEAD OFFICE IN LIEU OF EMPLOYEES” DEPOSIT LINKED INSURANCE 1. M/s. MAX Newyork Life Insurance Co. Limited 2. M/s. Tata AIG Life Insurance Co. Limited 3. M/s. Birla Sun Life Insurance Co. Limited 4. M/s. SBI Life Group Insurance Scheme 5. M/s. AMP Sanmar Assurance Co. Limited 6. M/s. Om Kotak Mahindra Life Insurance Co. Limited 7. M/s. Allianz Bajaj Life Insurance Co. Limited 8. M/s. Metlife Indias” Group Insurance Co. Limited 9. M/s. AVIVA Life Insurance Co. India Private Limited 10. M/s. ING Vysya Life Insurance Co. Private Limited. 11. M/s. ICICI Prudential’s Group Insurance Scheme. 25 PROCEDURE FOR CREDITING OF INTEREST Interest on the amount standing to the credit of EPF Member’s account as on 1.4.93 onwards is to be paid on monthly running balance. The Government of India has notified the said decision and amended Para 60 of the Employees’ Provident Fund Scheme accordingly. Thus the claims to be settled from 1.4.93 will have to be paid interest on monthly running balance. A detailed procedure for calculation of this interest is as follows: i. On receipt of a claim application the ledger card of the particular member should be completed up to 31.3.2003 and opening balance as on 1.4.2003 be arrived at. ii. The current contribution i.e. the contribution during the year 1993-94 which is available in the claim application or in Form No.3A should be posted in the ledger card, as usual. iii. For calculating interest an interest calculation sheet should be prepared. a) b) Account No. and Name should be filled up from the ledger card. Opening balance i.e. Column No.2 for the moth of April, 1993 should be filled up with the opening balance of 1.4.1993 as arrived at in Ledger Card. Withdrawals if any in the Ledger Card are to be posted in Column No.4 against the months in which the withdrawals have taken place. c) 156 Current contribution as shown in the claim application or Form No.3A should be posted in Column No.l3 against the respective months. e) The amount of refund of withdrawals if any may be added to the contribution and shown in the month of deposit. f) Column No.2 of interest calculation sheet should be filled up to the month prior to the month of settlement. However if the claim is authorised on or after the 25th day of a particular month, interest for the current month is also to be allowed. g) The column of the remaining months should be left blank. h) Column No.2 and Column No.4 should be added and interest bearing balance marked ‘A” in the interest calculation sheet should be arrived at after subtracting total of Column No.4 from the total of Column No.2. i) Interest to be credited to the member’s account should be arrived at by the formula I.B.B. x R.O.I 100 x 12 Interest as calculated in the interest calculation sheet should be posted in the ledger card and claim be settled for net amount on the ledger itself. The interest calculation sheet should invariably be attached to the working sheet of claim. To illustrate clearly the procedure for calculation of interest on monthly running balance an example is enclosed in Annexure ‘A’. Interest payable to the out-going members during 1993-94 should be calculated as detailed above. In case of transfer of provident fund accumulations from exempted establishment to un-exempted establishment, the details of monthly contributions and withdrawals, if any should also be sent. Procedure for crediting interest in certain cases: Interest is to be credited at the rate declared under Para 60 of the EPF Scheme for the respective year. Interest on the amount standing to the credit of EPF member’s account as on 1.4.1993 onwards is to be paid on monthly running balance. Prior to 1.4.1993 interest was arrived on the Opening Balance, as on the first day of the financial year. In the case of settlement of claims, from 1.4.93, under para 69 or 70, interest is to be paid on monthly running balance, upto the end of month preceding the date on which the final payment is authorised irrespective of the date of receipt of the claim from the claimant. The interest upto and for the current month shall be payable on the claims which are authorised on or after the 25th day of a particular month but the actual payment is to be made after the end of the current month. If an establishment is covered for the first time under the Act/Scheme during the course of the current period the interest shall be allowed on all the sums credited to the member’s account on and from the first day of the month succeeding the month of credit to the end of the current year. d) 157 In cases of transfer of amount from one account to the other are: i. If it is from an Unexempted establishment to another Unexempted establishment, no interest to be allowed for the current year. Only the details of Opening Balance for the current year, details of monthly contributions and withdrawals, if any, should be communicated to the transferee RO/SROs. ii. In case of transfer from an exempted establishment or from an uncovered establishment, the amount transferred by cheque shall be credited to the account of the individual member in the month in which the cheque is received. Wherever the transfer amount is received in cheque, the date of receipt of cheque is to be taken irrespective of its date of realisation and credit to the EPF Account No.1. Interest shall be credited on the total amount of transfer credited to the member’s account, on and from the first day of the month succeeding the month of credit to the end of the current year. Where past accumulations are received in instalment, they should be posted in the ledger account of the members, as Opening Balance ( as on 1st April) only in the year in which the entire dues are received (i.e year in which Cash/Securities, credited to the account of Central Board of Trustees, EPF) and interest on the total dues should then be credited i.e. from the date of coverage/cancellation of exemption to the 31st March of the year preceding to the year in which the PA is credited and included as Opening Balance for the current year. Where arrears of contribution pertaining to the past years are received in the current year, it should be posted in the accounts of the members for the current year (as Opening Balance) and interest on the contributions pertaining to the past years should be credited at the rate declared for the related year on compound rate basis. The total interest due till the preceding year is to be credited as Opening Balance for the current year. (There is no need to recast the accounts of the previous years and once the account is closed for an accounting year any credit due for the past period is to be effected only in the current year.) Where the penal interest is recovered from the member for misuse of withdrawal made by him under para 68 B of the Scheme, it should be credited to the Interest Suspense Account only and not to the member’s account. Where the amount of contribution received are not required to be credited to the individual account of the member (Owing to wrong coverage, voluntary or erroneous deposit, etc) such amount is refundable along with interest. The interest on such refund should be credited on each month total amount of contributions at simple interest from the first day of the month following that on which the amount was received to the month preceding that of refund, at the declared rate. Where an exemption is granted (or Relaxation Order is issued) to an establishment/Class of employees/employee, no interest is to be allowed after the date of grant of exemption to the individual members’ account. However, where the cash is to be transferred, the interest at the declared rate is to be allowed on the 158 actual amount of cash transfer from the date of grant of exemption to the month preceding the month in which cash portion is transferred through cheque. (as per Para -60 of the Scheme). While transferring the PA dues to establishment partly in cash and partly in securities and wherever the withheld portion of cash transfers (i.e. 2 %) is to be released, the interest at statutory rate on compound rate basis be allowed from the date of grant of exemption to the month preceding to the month in which the withheld amount is released. Whenever part payment is allowed to a member or the beneficiaries the balance amount due to the member/ other eligible claimants, from whom the claim is yet to be received should be retained in the account and interest allowed, (U.P.-60) till the payment is fully and finally authorised to eligible persons or when their share is released. 26 NOMINATION – IMPORTANCE - HANDLING OF DEATH CLAIMS IN THE ABSENCE OF NOMINATION Nomination: Each member shall make in his declaration in Form 2, a nomination conferring the right to receive the amount that may stand to his credit in the fund in the event o his death before the amount standing to his credit has become payable, or death before the amount standing to his credit has become payable, or where the amount has become payable, before payment has made. A member may in his nomination distribute the amount that may stand to his credit in the Fund amongst his nominees at his own discretion. If a member has a family at the time of making a nomination, the nomination shall be in favour of one or more persons belonging to his family. Any nomination made by such member in favour of a person not belonging to his family shall be invalid. [Provided that a fresh nomination shall be made by the member on his marriage and any nomination made before such marriage shall be deemed to be invalid] If at the time of making a nomination the member has no family, the nomination may be in favour of any person or persons but if the member subsequently acquires a family, such nomination shall forthwith be deemed to be invalid and the member shall make a fresh nomination in favour of one or more persons belonging to his family. 159 [Where the nomination is wholly or partly in favour of a minor, the member may, for the purposes of this Scheme appoint a major person of his family, as defined in clause (g) of paragraph 2, to be the guardian of the minor nominee in the event of the member predeceasing the nominee and the guardian so appointed: Provided that where there is no major person in the family, the member may, at his discretion, appoint any other person to be a guardian of the minor nominee.] A nomination made under sub-paragraph (1) may at any time be modified by a member after giving a written notice of his intention of doing so in Form 2 annexed hereto. If the nominee predeceases the member, the interest of the nominee shall revert to the member who may make a fresh nomination in respect of such interest. A nomination or its modification shall take effect to the extent that it is valid on the date on which it is received by the Commissioner. Nomination Form: Every employee on becoming a member of Employees’ Provident Funds Scheme, 1952 and Employees’ Pension Scheme, 1995 should furnish the particulars concerning himself, his nominee for Provident Fund and his family/nominee for Employees’ Pension Fund in Form 2 (Revised). As the nomination made by the minor is not valid, minor member should furnish the above particulars in Form 2 (Revised) only on becoming a major. Prior to 1.9.1991, the member was furnishing particulars of nominee for Provident Fund in Form 2 and his family for Family Pension Fund in Form 2 (FPF) separately. With effect from 1.9.1991, both these forms have been combined and a single form has been introduced furnishing the above particulars. Consequent on introduction of Employees’ Pension Scheme, 1995, this form has been further modified to keep the requirement of both the Schemes. It has also been decided to get the Form 2 (Revised) from all the existing members of Employees’ Provident Fund and Pension Fund members under exempted Provident Fund to create a date base in the Computer. The nomination earlier made by the members to the extent it is valid holds good till the receipt of Form 2 (Revised). On its receipt, the earlier nomination made by the member should be treated as cancelled and the Form 2 (Revised), after due verification with reference to Form 9 (Revised), Form 3 (PS) and observing the prescribed cheque, should then be sent to EDP for storing the data in the Employees’ Member’s Master file. Similarly, the Form 2 (Revised) received along with the Form 5 / Form 4 (PS) should be sent to EDP for its inclusion in the Member’s Master and thereafter it should be sent to the concerned accounts group or centrally maintained in a cell setup for this purpose. The required information can be retrieved from this master, as and when necessary. In view of the great importance and value of nomination forms, it is necessary that the Regional / Sub-Regional Office handle and maintain them very carefully and arrange to keep them bound securely between thick cardboard pads and inside locked steel cupboards. The cupboards should remain close to the place where the Assistant Accounts Officer or Section Supervisors are seated and the keys of each cupboard should remain one (original) with the AAOs and other (duplicate) 160 with the S.S. Under no circumstances, should the bundles of Form 2 be allowed to be kept unattended to either on the tables or side racks of the dealing assistant. The AAOs should ensure proper maintenance of the stock register of Form 2 and periodical check up of the register to ensure that all the wanted Form 2 have not only been received from the establishment but also are safely lodged and properly maintained. On change of charge, the handing over and taking over certificate in respect of these forms should signed by both the officials. Nominee ( Legal Provisions) The member may nominate one or more persons from among the family members as defined Para 2(g) of the EPFS, 1952. The family for the purpose of EPFS is as follows: (i) in the case of a male member, wife, children (including legally adopted children) whether married or unmarried, major or minor, dependant parents deceased son’s widow and children, whether married or unmarried, major or minor; (ii) in the case of a female member, her husband, children (including legally adopted children) whether married or unmarried, major or minor, her dependant parents, her husband’s dependant parents, deceased son’s widow and children, whether married or unmarried, major or minor; (iii) if the male member proves that his wife has ceased, under the personal law governing him or the customary law of the community to which the spouse belongs, to be entitled to maintenance shall no longer be deemed to be part of the member’s family for the purpose of this Scheme, unless the member subsequently intimates by express notice in writing to the Commissioner that she shall continue to be so regarded; (iv) if a female member by notice in writing to the Commissioner expresses her desire to exclude her husband from the family, the husband and his dependant parents shall no longer be deemed to be a part of the member’s family for the purpose of this Scheme, unless the member subsequently cancels in writing any such notice. (v) if the child of a member or, the child of a deceased son of the member as the case may be, has been adopted by another person and if, under the personal law of the adopted, adoption is legally recognised, such a child shall be considered as excluded from the family of the member. The child is no longer deemed to be a ‘family member’ of the member. In view of this, the nomination in favour of such child given on adoption to another person is not valid, if other ‘family’ members are alive. However, such child shall deemed to be the ‘family’ member of the adopted persons. If the adopted persons are member of the Provident Fund, they may nominate such child, as a member of the ‘family’. If, at the time of making nomination the member has no family or deemed to have no family in the circumstances stated in Para (iii) & (iv) above, he may nominate a person of his choice even an institution. If he subsequently acquires a 161 ‘family’, such nomination shall forthwith deemed to be invalid. He should make a fresh nomination in favour of one or more persons of his family. On his marriage, any nomination made by him before his marriage even if, it is in favour of his dependent parents shall be deemed to be invalid. He should make fresh nomination. However, where a member has made a nomination in favour of the dependent parents after his marriage, such nomination is valid. The unmarried daughter on her marriage, the minor son on becoming a major, continues to be a family members and as such the validity of nomination in their favour is not affected and there is no need to change the nomination, if the member, so desires. Where a nomination is wholly or partly in favour of a minor, the member may appoint major person of his family, as guardian of the minor. If, however, there is no person of his family, he may appoint a person of his choice as guardian for the minor. The member may modify his nomination at any time by submitting a fresh Form 2 (Revised), but if he has got a family, he has to nominate a person belonging to his family. A nomination or its modification shall take effect from the date on which it is received in the Regional/ Sub-Regional Office. In view of this, acceptance or otherwise of Form 2 does not have any bearing on the validity of the nomination. However, the prescribed check should be made. Where a Hindu member nominates two wives or his second wife when his first wife is alive, such nomination in favour of his second wife is not valid under the Hindu Marriage Act. The nomination made by the male member in favour of his wife continues to be valid even if she remarried after the death of her husband (member). The nomination made by the employee under the EPFS,1952 shall hold good for the payment of Assurance Benefit payable to the nominee and nominees under EDLI , 1976. NOMINATION FOR PENSION NOMINATION AND NOMINEE PENSION A member is required to execute nomination in Form 2 (Revised) in favour of a person to receive pension in the event of his death under following contingencies. 1). A member who is not married or who does not have a living spouse and or children below the age of 25 years 2). A member who is married but does not have a living spouse and living children. 3). If the member has no living spouse and all children attained the age of 25 years. The nominee appointed by the member will be paid pension. If the member has a Family, the person nominated should fall within the scope of definition of “Family”. 162 Nomination in favour of spouse has no relevance as he/she is an automatic beneficiary for family pension. A member who is not married or who does not have a living spouse and or children below the age of 25 years shall nominate a person of his choice. The nomination should be in favour of one person only. In the event of member acquiring a family subsequently, the nomination made in favour of a person not falling within the family shall become void. Normally, children who attained the age of 25 years are not eligible for children pension. However, if the member has no living spouse and all children attained the age of 25 years, he should nominate any one of his children, irrespective of their age and marital status to receive the monthly pension. The eligibility of pension to nominee would arise only when a member who does not have any living spouse and or eligible child dies while in service or after the date of exit (before 58 years). Further in the case of death after leaving service, before 58 years of age, the member should have rendered 10 years eligible service and should not have availed reduced monthly pension. In case requisite service of 10 years is not there, the nominee shall entitled to ROC only under para 13 (1) of the EPS, 1995. Wherever the member, without having eligible members of family, draw MMP and dies subsequently, his/her nominee is not entitled for pension. Thus, after commencement of MMP, the nominee is ineligible for pension. The nomination made by the employee under the EPFS,1952 shall hold good for the payment of Assurance Benefit payable to the nominee and nominees under EDLI , 1976. 27 ISSUE OF PF ANNUAL STATEMENT OF ACCOUNTS The foremost responsibility of the Employees’ Provident Fund Organisation in the field of Service to Subscribers, apart from timely payment of Provident Fund amount and other benefits to the members and their beneficiaries, is the prompt and accurate issue of Annual Provident Fund Statement of Accounts to the members. Para 73 of the Employees’ Provident Fund Scheme, 1952, stipulates that the Accounts Section in Regional Office/Sub-Regional Offices should issue an Annual Provident Fund Statement of Accounts soon after the close of each financial year. The promptness in compiling the Annual Statement of Accounts of the Provident Fund member will accelerate the pace of settlement of Provident Fund Accounts and grant of withdrawal/advance. 2. The compilation of Annual Statement of member’s Account is the responsibility of the Accounts Branch. The benefits payable to an EPF member is directly linked with the contribution with interest standing to his credit in his EPF account. Hence, a running account is maintained in respect of each EPF member, whereas no such running account is maintained in EPS, 1995/EDLI, 1976 where 163 benefits are not related to the contributions paid in respect of a member. Hence the Annual Statement of Accounts is required to be issued to a PF member and should reflect the correct balance of a member in his PF account and not in respect of his pension or EDLI account. This position should be explained to the member through a note on the reverse of Form 23. 3. The member’s Annual Statement of account will reflect the following: a) Opening Balance of the Provident Fund amount standing to the credit of the member at the beginning of the financial year i.e., as on 1st April b) Contributions (both member and employer shares i.e. employer’s share being the excess of 8.1/3% of pay in respect of pension members) made during the financial year (i.e. from wages paid for March to February); c) Refund of withdrawal received, if any, during the financial year; d) Interest credited to the account annually on the last day of financial year i.e.31st March calculated on the monthly balance method; e) Withdrawal made during the financial year (including part settlement, if any); f) Closing balance of the Provident Fund amount as on 31st March of each year. For example, the annual accounts issued for the year 2004-05 will reflect the following: a. 2) 3) 4) 5) 6) O.B. as on 1.4.2004 Contribution received for the wages from March,2004 to Feb.2005 Refund of withdrawals received during 1.4.2004 to 31.3.2005 Interest at declared rate Withdrawal from 1.4.2004 to 31.3.2005 C.B. as on 31.3.2005 ADD: ADD: ADD: LESS: The software viz. CAMPS 95(Revised) facilitates the job of compiling the Annual Accounts through computer. 4. DUE DATE FOR ISSUE OF ANNUAL STATEMENT OF ACCOUNTS: The Annual statement of Accounts is required to be issued for each financial year before 30th September of the following year. The data shown in the Annual Statement of Account will reflect the receipt transactions in a financial year i.e. 1st April to 31st March. To suit this, the wage period is taken from March to February. The withdrawals availed by the member from 1st April to 31st March will be included in the Annual Accounts. Due date for submission of Form 3A/6A by the Establishment: 30th April of each year. It is desirable to collect the same through floppy along with hard copy in respect of the establishment having the membership of 200. 164 5. DOCUMENTS THAT ARE REQUIRED FOR COMPILING THE ANNUAL ACCOUNTS. 1. Form 9 (Revised), duly updated with reference to Form 5 for the period from March to February. 2. Reconciled and approved Form 24 of the preceding financial year. 3. Form 12A for the period from March to February. 4. Form 3A and 6A of the current Financial year. 5. DCB Register kept in Accounts alongwith the EDP generated report through CCTS. 6. Withdrawal register alongwith the details of payment from EDP. 7. Transfer in and out registers (both Inter and Intra Office transfers) 8. Payment made from SRF, DRF & UCD. 9. Default position of the establishment in the submission of returns and remittances of dues and details of Excess/short remittances made. 6. CHECKS TO BE EXERCISED BEFORE COMPILING THE ACCOUNTS THROUGH COMPUTER. Whether the Form 9 (Revised) is up-to-date, giving the enrolment of members up to the month of February. (ii) Whether the establishment has paid the dues in EPF Account No.1, both employees and employers share for the current financial year i.e. the dues upto the wage month of February paid in March. (iii) Whether the Form 3A/6A is received in respect of all the members enrolled up to February. (iv) Whether the Form 6A reflects the contributions in respect of ceased members, for whom Form 3A were already sent. In the case of settled accounts, the contributions extracted from the Form 3A received alongwith the claim should be taken into account. (v) Whether the DCB Register is reconciled – duly verified with the schedule of receipts and also tallied with the statement of dues, remittances generates through CCTS report and supplied by the EDP Section. (vi) Whether the matured Insurance Policy are properly credited to the members account – whether the premium released is properly included in the current financial year. (vii) Whether the penal damages has been levied and interest on 7Q has been determined. (viii) Whether the Form 24 for the preceding year is approved and Form 23 is despatched, and intimated to EDP through Despatch Register. (i) CERTIFICATE FOR GENERATION OF FORM 24/23 BY EDP SECTION Code No…………………… …………………….. Year………………………… A/cs Group: 165 EDP Section is requested to generate the Checklist followed by Form-24/23 with reference to the documents listed in the forwarding letter annexed. It is certified that the following checks have been made with reference to Form-3A & 6A. 1. The Name and Account No. given in Form 3A are correct. 2. The dues as per Form-12A & 3A are tallied with the dues as per Form-6A 3. Receipt of remittances to cover the dues as per Form No.6A as verified with reference to Form 3A are confirmed. 4. Form 3A is authenticated by the authorised officer of the employer; 5. The wages are posted in respect of all the months; 6. The rate of contributions is properly reflected; if there is any change in the rate in any month, the correct rate should be indicated against the relevant month(s). 7. The non-contributory period of service is furnished under Col.7, where no wage is posted against a month, the entire month should be taken as noncontributory period; 8. Wherever the member is contributing to Provident Fund at a higher rate, the rate of contribution is furnished. 9. Wherever the member is contributing to Provident Fund over and above Rs.5,000/-such information is furnished; 10. Wherever the member opts for pension fund contribution over and above Rs.50,000/- for enhanced pension such information is furnished; 11. The Form 3A in respect of settled cases also enclosed duly verifying the correctness of the recovery and remittance of contribution. 12. A top list to Form-3A showing the monthwise employment strength and statutory rate of contribution with reference to Form-12A (Revised) is furnished/not furnished. 13. The DCB Register of the Establishment has been reconciled and the excess/short remittances in Account No.1,2,10,21 & 22 has been arrived at. CLERK: VERIFIED AND FOUND CORRECT DATE: SECTION SUPERVISOR/ASST. ACCOUNTS OFFICER To EDP Section. FOR THE OFFICE OF EDP SECTION -Date of receipt of ______________________________________________ -Date entry made _____________________________ on Form 3A/6A: _______________________ by -Checklist sent to Accounts _________________________________________ section on 166 7. PERIOD FOR WHICH THE ACCOUNT IS TO BE COMPILED. In case of regular establishment i.e. where the employer has sent all the returns and remitted the dues upto date. Please verify – (i) whether the DCB Register is properly reconciled and item numbers are verified from the Schedule of receipts and tallied with the EDP Statement of DCB extracted from CCTS Report. Whether Form 3A has been received in respect of all the members including members who have already left the service/where accounts settled. Whether Form 6A reflects the Contribution in respect of all the members who have contributed during the financial year. The last account No. shown in Form 6A should tally with the one given in Form 9(R), upto February. Whether the Form 3A has been prepared on remittance basis. Where any member has contributed in excess of the statutory rate or the statutory limit or a member’s Pension contribution is beyond the wage ceiling. These factors should be verified and noted. Whether the non-contributory period of service is properly filled in Form 3A and wherever there is no wages, the non-contributory period should be taken as 30 days ( if it occur between the two spells of wage period). Forward the Annual returns alongwith the prescribed documents to the EDP for generation of Check list. Wherever the Annual Returns are received in floppy, the hard copy should be received and the prescribed checks should be exercised before the floppy is sent to the EDP Centre. (A) (ii) (iii) (iv) (v) (vi) (vii) Compiling of accounts in respect of defaulting establishments:(Where all the Monthly and Annual Returns are received but the employer is in default in payment of dues for part of the year or default in payment of employers share only). In certain cases, employer is in default in payment of the dues whereas the Form 3A is prepared for the whole year with reference to the due amount. In such case, it is incorrect to compile the accounts for the whole year. When there is no remittances even for one month, the accounts should not be compiled for the whole year but only upto the month of payment of dues. The default period should not be treated as short remittances for the purpose of compiling the accounts. Under no circumstances, the Annual Statement of accounts should be prepared for the whole financial year in respect of a defaulting establishment. The default denotes only in respect of remittances in respect of EPF Account No.1. The default in other accounts will not affect the issue of Annual statement of accounts. However, efforts should be made to realize the dues, invoking recovery and Penal measures. (B) 167 (C) Where the establishment is closed and no compliance: If annual accounts has already been prepared up to the preceding financial year, the accounts should be compiled giving interest on the opening balance and also taking into account the withdrawals, if any. (D) Triplicate challans received, but not reflected in Schedule of Receipt/Credit not given by the SBI to EPF Accounts: The remittances are to be accounted only where it is confirmed through schedule of Receipts and the related Credit item No. to be verified. The compiling of Annual Accounts on the basis of Triplicate challans alone is highly irregular and this is totally prohibited. Efforts to be made to confirm the realisation in EPF accounts before approving the Annual Account. (E) Where an employer has erroneously remitted the PF dues in other accounts After due verification and examination, Cash section should be advised to transfer the funds from one account to another, before approving the Annual Account. The employer need not be asked to make good the shortfall by deposit. (F) Where there is no compliance for the whole year or where the Monthly/Annual Returns are not forthcoming from the date of coverage. Examine the position with Compliance Wing and Enforcement Officer concerned. If no account is to compiled, open a folio of Form 24 and record the full facts of the establishment and reason for non compilation duly indicating penal action taken and the EOs report to be attached. This Form 24 to be approved at the level of APFC. Thereafter the Establishment may be shown as disposal or clearance of Annual accounts for the year. Necessary note to be sent to EDP / Co-ord. Section for the purpose of compiling data on issue of Annual Accounts. 8. “COMPLIANCE”- Definition: If an establishment is said to have complied, it is construed that the employer has submitted the prescribed returns and remitted the dues in full and the office in turn compiled the Annual statement and the statement issued to all the subscribers; then only the establishment is said to have been complied. 9. “BROAD SHEET” – The compilation of Annual Accounts is completed only when the ‘Broad sheet’ is prepared and reconciled and the closing balance is certified by the AAO. Annual Accounts once compiled can not be revised and any additions/deletions should be incorporated in the current years account only. There is no question of provisional issue of Annual Statement of Accounts. PA dues or any arrear dues for the past period should be included in the current year account with due interest. The clerks in Accounts Section is required to maintain the prescribed Register for the 168 receipt and disposal of Form 3A & 6A and the progress in compilation of Account of each establishment. Transfer of UCD Accounts to the Form 24: The members PF accounts transferred to UCD account in accordance with the provisions of Para 72(6) of the EPF Scheme, 1952, prior to generation of Form 24 through computer are required to be reflected in the Form 24 of the current year, providing upto date interest. This should be done with the approval of APFC and duly linking the relevant ledger accounts and Form 9/UCD Register etc. THE MANUAL OF ACCOUNTING PROCEDURE HAS GIVEN THE PROCEDURE ELABORATELY ON PROMPT AND PROPER COMPILATION OF ACCOUNTS. THIS SHOULD BE STUDIED. (Refer: Part II-A – Chapter 12). 28 TRANSFER OF PROVIDENT FUND ACCUMULATION ON GRANT/CANCELLATION OF EXEMPTION Hitherto, on grant of exemption under Section 17 of the Act, or Para 27/27A of the Employees’ Provident Funds Scheme 1952, the past accumulations have been transferred partly in cash and partly in securities. 2. The Central Board of Trustees at its 163rd meeting held on 19.08.2003 has decided that consequent to grant of exemption or in any other eventually necessitating transfer of past accumulations to an establishment or trust, 100% of past accumulations be transferred in cash in all cases. All pending cases are also required to be regulated accordingly, However, where the requisition for transfers are pending in Headquarters Office, the decision to transfer 100% past accumulations in cash may be made after getting specific instructions from Headquarters Office in each individual case. 3. The amount transferred in cash should be invested as per the prescribed pattern of investment immediately and submit the proof thereof to the Regional Provident Fund Commissioner. (Authority : Headquarters Office Lr.No.Invest.I/1(10)2000/42517, dated 4.9.2003) PROCEDURE FOR TRANSFER OF PREVIOUS ACCUMULATIONS A. Procedure for transfer of Special Deposit Account on cancellation of exemption or on coverage of the establishment. 1. The deposit Bank which holds the Special Deposit Accounts, should be approached by preferring an application for transfer of Special Deposit Account in favour of Central Board of Trustees, Employees’ Provident Funds and also to transfer the balance to the State Bank of India, Securities Services Branch, Mumbai 169 Main Branch, Mumbai, where the Special Deposit Account of Central Board of Trustees is being maintained. 2. Memorandum in Form Annexure VIII addressed to the State Bank of India, Securities Services Branch, Mumbai. (This form is available with Bankers). 3. A copy of the Regional Provident Fund Commissioner’s order/coverage Notice instructing the establishment to transfer the funds. 4. Statement showing the details of deposits made, interest due, collected, etc., as on the date of coverage(Applicability of the Act to the establishment or as on the date of cancellation of exemption as the case may be) should be submitted in quadruplicate together with the SDS Pass Book with upto date entries. 5. The interest upto 31st December of the previous year should have been realized and credited to the account. 6. Copy of the resolution passed by the Trustees for transfer of Special Deposit Account. 7. Acceptance of Special Deposit Account towards previous accumulation dues should be only through transfer of balances from the books of deposit bank to the State Bank of India, Securities Services Branch, Mumbai and not by closure of the account and remitting the proceeds in cash or by cheque, etc, to the Account of Central Board of Trustees, Employees’ Provident Funds. 8. After the transfer is effected, SDS Pass Book with due endorsement thereon should be collected from the transferor branch of the Bank and submitted to the Regional Provident Fund Commissioner along with photocopy of the Pass Book. B. Procedure for Transfer of other Securities (Paragraph 28 of Employees’ Provident Fund Scheme, 1952). (1) Previous accumulation dues should be transferred only in cash. Wherever the instruments are kept in Government/Guaranteed securities, Post office Term Deposit, Special Deposit Account, Certificates, etc., they may be accepted only if the instrument is transferable to the Central Board of Trustees, Employees’ Provident Funds, otherwise cash should be paid. (2) The securities should be endorsed/transferred through transfer deed in favour of Central Board of Trustees, Employees’ Provident Funds irrespective of the fact, whether they are Stock Certificate, Government Promissory Notes, etc. (3) The endorsement should be made only by the authorised Trustees of the Fund. (4) Endorsement should be certified by the public Debt Office of Reserve Bank of India/authority issued the securities, by affixing the seal on the instrument itself. 170 (5) Endorsed securities should be forwarded to the Regional Provident Fund Commissioner for onward transmission to the State Bank of India, Securities Services Branch, Mumbai. (6) Actual purchase price of the securities should be intimated to this office duly certified by the area Enforcement Officer of the Employees’ Provident Fund Organisation. (7) Original or authenticated copy of the memorandum and articles of association, copy of Certificate of Incorporation and the appointment and the authority in favour of the authorised Trustees of the Fund to deal with securities should be forwarded. (8) Securities which have already been notified for repayment and securities which are in the ‘short period’ i.e. which are due for repayment within a period of one month cannot be accepted on account of the past accumulations. (9) A certificate from the Income-Tax Commissioner approving the transfer of the accumulated assets of the Old Private Provident Fund to the new one, i.e. Employees’ Provident Funds, should be obtained and forwarded as and when received. The transfer need not be delayed only on account of this. (10) Securities purchased after the date of application of the Act should not be transferred, i.e all accumulation after the date of application of the Act should be transferred only in cash, by deposit in EPF Account No.1 in State Bank of India. (11) The details of interest due on securities but not collected beyond the notified period should be furnished. (12) Income Tax deduction certificate, if any, should be surrendered. (13) Wherever any security is not transferable by endorsement in favour of Central Board of Trustees, Employees’ Provident Funds such securities should not be forwarded. In lieu of this, the transfer should be made in cash only. (14) Wherein a previous accumulation bearing no guarantee as regards principal and interest, it can be transferred only if the deposit account is transferable in the name of Central Board of Trustees, Employees’ Provident Funds, by the bank on the instrument as well as in the books of the bank, subject to acceptance of Central Govt., failing which the amount kept in such deposits should be transferred in cash. (15) In the case of NSC and NPSC, appreciated value will be taken into account in determining the amount for transfer, in case the difference between face value and appreciated value has been credited to the members. (16) Securities etc., to be transferred within thirty days and cash in hand/Savings Bank Account of the Trust should be transferred within ten days. 171 29 TRANSFER VALUE OF PENSION FUND FROM EXEMPTED TO UNEXEMPTED OR UNEXEMPTED TO EXEMPTED FUND ON GRANT/CANCELLATION OF EXEMPTION UNDER EMPLOYEES’ PENSION SCHEME 1995 TRANSFER VALUE: In case exemption is granted to any establishment or in the case of a member being transferred from pension fund of one exempted establishment to another pension fund of exempted establishment or statutory pension fund or vice-versa, a transfer value payment will be made which will consist of the following :a) Withdrawal benefit relating to past service period upto 15.11.1995 as per Table-A multiplied by Table-B factor for the period between 16.11.1995 to the date of exemption/transfer, and Transfer value for Pensionable service as per Table E for the service rendered from 16.11.1995 or from the date of joining the establishment to the date of exemption/transfer as the case may be. In the event of cancellation of exemption granted under Para 39, transfer of fund; will be made as per the conditions mentioned in the exemption notification. (New Para No.39B of EPS’95) ( effective from 23.5.2003) b) c) “TABLE-E (see paragraph 39-B) (Transfer of contribution from Employees Pension Scheme, 1995 to exempted or other pension fund or vice-versa) Number of full year’s contribution paid last contribution month 1 2 3 4 5 6 7 8 9 Proportion of pay payable on 0.978 1.979 3.003 4.051 5.124 6.221 7.345 8.494 9.671” [F.No.S-65012/1/2000-SS-II] D.S.POONIA,Jt.Secy. 172 FORM 1A (Please see para 39-B) Application for transfer of past accumulation from 16.11.1995 to the date of effective date of exemption/transfer in respect of members of Employees Pension Scheme, 1995 working in ------ (Name of the Establishment) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Name of the Establishment and full address Code No. Name of the R.O/SRO/SAO of E.P.F.O Date of Initial coverage under the Scheme Effective date of grant of Exemption under Para 30 of EPS 95 No. and date of Exemption notification Total Nos. of Employees as on date No. of EFPS 1971 members as on 15.11.1995 No. of Employees/Members covered under the EPS 95 as on effective date of Exemption. No. of EPS members left the estt. between 16.11.1995 and effective date. (individual details to be furnished separately with A/c PF No., date of joining, date of exit, Pensionable service, salary at exit on which contribution paid to Employees Pension Fund) Name of the Trust as registered with RBI Registration no. of the Trust with Public Deptt. Office of RBI Date of Registration of the Trust with Public Dept Office of the RBI Name and address of the Trustees 3A/7PS in respect of above employees have submitted for the period upto ________ and 3A/7PS for the remaining period is enclosed herewith Individual details of membership & contribution details are attached in the prescribed annexure 1B Amount claimed as per Annexure: Rs. 11. 12. 13. 14. 15. 16. 17. Certified that above particulars are correct and the amount claimed are as per Table E of EPS 1995 against the existing Pension Fund Members of the _______________ Employees Pension Fund Trust. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Name & signature of authorized official of Establishment with stamp and date 173 Form 1A contd. For office use Certified that the claim for refund by________________ have been verified as per Form 3A/7PS and ledger and found to be correct. The claim has been processed as per Table E of EPS 1995 as under: Amount as per annexure to Form 1A as on ___________ = ______________ Add Simple Interest declared under Para 60 EPF Scheme for the relevant period upto last date of the month prior to transfer as on date of refund/release = __________________ Total = _____________________________ 2. Accordingly Rupees (in words)/Rs. (in figure) is to be transferred from Employees Pension Fund to the/Trustees. 3. Certified that full particulars of the claim has been verified with the records available with this office and Rs.__________________ is recommended for refund to the Trust namely _________________. Date, Name and Signature RC(F & A) _____________________________________ Name & Signature of RC in charge of the Region ____________________________ 4. A sum of Rupees __________________ (in figures and in words) is sanctioned for refund of past accumulation for the period ________________ to the Trust namely _________________. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Date, Name and Signature of the FA & CAO Note: Past accumulation under EFPS 1971 for the period up to 15.11.1995 is to be claimed by submitting separate claim for the existing members. 174 Statement showing service & contribution details of employees of M/s._________________________ (For Establishment) Provident/ Pension Fund Account No. Date of joining EPFS 1971 Break in reckonable service upto 16.11.95 Details of (NCP) non contributory period from 16.11.95 to the date of exemption/ cancellation (years/months/ days) In case of cancellation of exemption wage particulars from 16.11.95 to date of cancellation (furnish in Form 7PS) Wages Date of as on joining EPS 1995 15.11.95 Wages as on date of exemption/ cancellation 3A/7PS submitted up to which period 3A/7PS Amount enclosed payable as for the per Table E period for which it was not sent to EPFO Name of Date of Father’s/ the birth Husband’s member (Enclose Name Form 2) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Total amount claimed in Rupees: ____________________________ List of enclosures: ________________________________________ 175 APPENDIX I IMPORTANT CIRCULARS USE OF ASHOKA EMBLEM AS THE OFFICE STAMP OF RECOVERY OFFICERS Ministry of Home Affairs has objected the use of Ashoka Emblem as the office stamp by the autonomous bodies. Headquarters has also taken a serious view of the use of Ashoka Emblem without any authority and sanction and also directed that the practice of using Ashoka Emblem as the office seal by some of the Recovery Officers of the Employees Provident Fund Organisation has to be stopped with immediate effect. The officers of the EPFO including the Recovery officers shall use only the approved symbol of the EPFO in their office stamp as well as for letterheads. Any deviation will be viewed seriously. [Hqrs letter No.RRC/28(13)2003/7A-14B/Pt./87609 dated 17.02.2004] RECOVERY CERTIFICATES – ISSUE AND EXECUTION Recovery Certificates are issued in respect of all cases of demand raised during the financial year which remain uncollected as on 31st March of the year, during the first week of April itself. Recovery Certificates relate to contributions, damages u/s 14B or interest levied u/s 7Q of the Act. In the Recovery Certificates item-wise details is required to be given as to the nature of the dues, period of default etc. While issuing the Recovery Certificates care may be taken to ensure that interest u/s 7Q is calculated up-to the date of issue of the Recovery Certificate and shown separately by the authorised officer and added to the total dues. Thereafter, admissible interest u/s.7Q shall be collected by the Recovery Officer executing the certificate until the date of realization of the dues. This shall be specifically reported and accounted against each Recovery Certificate. The Recovery Officer shall show specifically the nature of dues in the challans while making remittance on execution of the certificate. The Assessing Officer shall ensure that there is no confusion in accounting, that the interest and damages are accounted properly and not accounted against the PF dues. While executing the Recovery Certificates instances of seizure/recovery of liquid cash and negotiable instruments also occur. Wherever such instances arise, an official receipt in CTR Form No.5 shall be issued under the signature of the Recovery Officer. As soon as the cash is brought to the office, the same shall be entrusted with the office cashier for immediate deposit of the same in the banks if not already done by the Recovery Officer. Copies of the challans shall be received by the Recovery Officer and the triplicate copy shall be sent to the authorised officer with a report. The quadruplicate copy shall be kept on files of the Recovery Officer and necessary entries shall be made in his books of accounts. [H.O.Letter No.RRC/28(13)03/91371 DATED5.3.2004] 176 ASSESSMENT OF DUES UNDER SECTION 7A AND 14B OF THE ACT: When the Compliance 01 program was introduced during 2001 detailed instructions were issued to all the field formations to scrupulously follow certain norms for accountability and transparency in quantification of dues under the Act. They were also required to maintain the basic books of accounts and furnish the information to the Recovery Officer as per the existing instructions. The Circle Officer was made the centre point of compliance in all matters regarding to arrear management including recovery up to the end of the financial year. Specific work norms were fixed for the Assessing Officers as well. However, it is a matter of record that many regions do not adhere to these instructions strictly with the result the arrears mount up which are not brought to the books of accounts. Directions were also issued making it imperative on the part of the supervisory officers like RPFC-II and RPFC-I to scrutinize the assessment orders, at least eight orders of each Assessing Officer every month. Out of the eight orders, four were to be selected by the supervisory officer whereas four were to be submitted by the Assessing Officer as per his choice. This should be communicated to the Head Office for every month before 10th of the subsequent month. Except from a very few regions, such information is not received in the Head Office, which has been viewed seriously by the Central Provident Fund Commissioner. [vide H.O. Letter No.RRC/28(3)2003/7A-14B/68533 dated 9.12.2003] RELAXATION UNDER PARA 79: It has been observed by Internal Audit Party that a large number of establishments have been enjoying relaxation under para 79 of the EPF Scheme, 1952 for the past several years without issue of notification for grant of exemption by the Appropriate Government. It may be mentioned that relaxation under Para 79 is only a temporary arrangement to avoid delay and facilitate the establishments to implement their PF Scheme pending notification by Appropriate Government granting theme exemption from the operation of the provisions of the employees Provident Fund Scheme, 1952. The compliance position of the establishment concerned is to be kept under observation during this period, on the basis of which Regional Provident Fund Commissioner may take a decision regarding suitability of the case for recommendation to Head Office for issue of Notification by Appropriate Government. All such cases which are pending as relaxed under Para 79 for more than two years may be reviewed and their proposal may be submitted to Head Office along with all supporting documents. In case the establishment does not satisfy all the condition required for exemption, the matter for withdrawal of relaxation be considered after following the due procedure as laid down in this regard without any delay. [Head Office letter no.E.III/18(8)2001/68427 dated 11.12.2003] 177 DISCONTINUATION OF SPECIMEN SIGNATURE FOR TRANSFER OF SECURITIES: In continuation of the Head Office letter No.Invst.I/6(4)96/Authorisation dated 23.9.2002 on forwarding of specimen signatures of all the Regional PF Commissioners, who authorise the requisition for transfer of past accumulations by way of securities to establishments exempted from the purview of Employees’ PF Act, 1952 and Schemes framed there under for verification by Central Office before the State Bank of India and regarding transfer of provident fund accumulations in shape of cash/securities to exempted establishment 100% in cash vide Head Office letter No.Invst.I/1(10)2000 dated 4.9.2003, specimen signature for transfer of securities are not required and the same is discontinued. [H.O.Letter No.Invst.II/6/MR/RO/98/03/MH/77945 dated 12.01.2004] REGARDING COST OF RECOVERY INCLUDING COST OF LITIGATION: Employees Provident Fund Organisation has been incurring heavy expenditure towards stationary, postage, transport and communication litigation, advertisement etc. for recovery of dues from the defaulting establishments. Auction sale of movable and immovable properties, arrest and detention of defaulters are also expensive exercises for the Employees Provident Fund Organisation. Substantial amounts are being spent from the administrative account by the field offices regularly. Very often these amounts are either not recouped at all or recouped only partially. Approach to realization of cost also differs from office to office. It is to be ensured that our recovery exercise should not be at the cost of the revenue health of the organization. Moreover the defaulters need to bear a cost for their non-compliance as well. The rule 5 of the II schedule to the IT Act also emphasizes this. The expenses towards recovery exercises are to be recovered from the defaulters and all the field offices shall have a uniform approach to the same as detailed below: Nature of services Cost/Fees S.NO. 1. Summons and notices Rs.50/- or actual cost whichever is including letters sent by post higher. 2. Attachment of properties Actual cost incurred subject to a minimum of Rs.500/-. 3. Cost of litigation Actual cost subject to a minimum of Rs.500/- per case. 4. Auction, sale, release etc. of Actual cost incurred for valuation, movable properties transportation, auctioneer and also for process subject to a minimum of Rs.1000/-. 5. Auction, sale, release etc. of Cost incurred for prohibitory order, movable properties valuation, auctioneer, processing including cost oftransportation incurred for the third parties subject to a minimum of Rs.1000/-. 178 6. 7. 8. 9. Warrant of arrest, detention Actual cost including transportation and release charges subject to a minimum of Rs.1000/- per case. Cost of advertisement for Actual cost + 10% processing charges. sale proclamation, sale etc. Attachment of bank account Rs.500/- per attachment. Appointment of receiver Actual cost involved including receivers’ remunerations subject to a minimum of Rs.1000/-. [Hqrs letter No.RRC/28(13)03/87579 dated 17.02.2004] ENTITLEMENTOF ASSURANCE BENEFIT UNDER EDLI SCHEME 1976 – CLARIFICATION IN RESPECT OF CASES PERTAINING TO MISSING EPF MEMBERS The spirit behind the scheme is to provide some additional social security to the family of the member in the form of insurance if he dies in service while being a member of the Fund. In case of a missing member it cannot be established that member died while in service. In view of the above, payment of Assurance Benefit under EDLI Scheme 1976 in respect of missing EPF members is not contemplated. Accordingly, Para 10.07.02 (ii) in Manual of Accounting Procedure Part II A may be treated as deleted. [vide H.O.Letter No.WSU/5(3)2002/EDLI/79087 dated 20.01.2003] RETURN OF CAPITAL OPTION IN THE CASE OF DISABLEMENT PENSION On application of explanation 3 to Para 13(1) of Employees’ Pension Scheme 1995, the following case has been received from one of the PF Member, the details of which are as under:The Original pension in the case is Rs.250/- and Return of Capital accordingly Rs.25,000/. However the member aged 18 years and on his reduction @Rs.1000/- for every year by which the age falls short of 50 years amounts to Rs.32000/-. Therefore the total amount of Return of Capital Rs.25000/-. Whereas the total amount to be deducted comes to Rs.32000/-. amount is death the (32 years) benefit is Wherever on the application of the above provision results in minus payment, the option for ROC in such cases may not be entertained. [CPFC Circular No.Pen/Misc/2002/68101 dated 10.12.2003] 179 PAYMENT OF WITHDRAWAL BENEFITS IN CASE OF DEFAULTING ESTABLISHMENT – CLARIFICATION ON PARA 16A OF EMPLOYEES’ PENSION SCHEME 1995: Para 16A of Employees’ Pension Scheme 1995 provides guarantee of pensionary benefits in the event of default by the employer in remittance of contribution. According to the said provisions, none of the pensionary benefits under the Scheme shall be denied to any member or beneficiary for want of compliance of the requirement by the employer under Para 3(1) of Employees’ Pension Scheme 1995. Consideration of withdrawal benefits as pensionary benefits has been clarified by Ministry of Labour, Government of India vide their letter No.S-16015/5/2001-SS II dated 02/12/2003 as follows:“the issue (Payment of withdrawal benefits in case of defaulting establishments) has been examined as per the provisions of the scheme and it is clarified that withdrawal benefits as envisaged in para 14 of EPS 1995 is not to be considered as one of the pensionary benefits as mentioned in para 16A of the scheme.” (H.O. Letter No. Pen-2/7/Clarif/97/A/73834 dated 31.12.2003.) In continuation to the above circular, it is further clarified that in respect of an establishment defaulting in remitting contribution to the Employees Pension Fund 1995 for any period, withdrawal benefit will not be paid to the member in respect of the default period. In other words, period of default shall not be counted for the purpose of calculating quantum of benefit under para 14 of Employees’ Pension Scheme 1995. The member is entitled to withdrawal benefits only in respect of the period for which the contributions are received. (H.O. Letter No. Pen-2/7/Clarif/97/A/ dated 29.01.2004.) CLARIFICATION ON CHANGE OF DATE OF BIRTH OF EMPLOYEES PENSION FUND MEMBERS: In order to avoid delay in pension payment, it has been decided by Headquarters that all Regional Provident Fund Commissioner-in-Charge of the Regions are permitted to consider the genuine cases of change of date of birth where the variation is up to a period of two years plus or minus between the age/date of birth recorded in our records and date of birth/age claimed by the member through his employer. It is reiterated that while considering all such cases the guidelines issued by this office vide circular No.Pension.3/8/Orissa/96-97 dated 8.1.02 should strictly be followed. [Hqrs letter No.Pen/3/8/OR/2003 Pt./87172 dated 16.02.2004] 180 PRIORITY PAYMENT OF PF DUES – ORDERS OF DEBT RECOVERY TRIBUNAL, MUMBAI: The Debt Recovery Tribunal, Mumbai has held that the EPF Organization has got priority in securing payment and also initiating recovery action for realizing its dues. The Recovery Officer of the EPFO is entitled to sell even the mortgaged properties of the secured creditors and can not be restrained from conducting the auction. The Debt Recovery Tribunal has agreed that EPF dues has got priority as contemplated under Section 11(2) of the EPF & MP Act, 1952. Ref: (i) HO Circular No. Compliance 04/Recovery/2004-05/Cir/23834 dated 23.7.2004. (ii)Misc. Appln. No.24 of 2004 in judgement dated 29.6.2004 of Mumbai D.R.T.-I. WITHDRAWAL OF INSTRUCTION FOR REFUND OF CONTRIBUTION TO THE MEMBER EXITING WITH SERVICE LESS THAN SIX MONTHS UNDER – EPS-1995: As per the provisions of Para-9 of EPS-1995 while arriving at eligible service, period of service less than six months shall be ignored and period of service of 6 months and above shall be rounded off to one year. Therefore, no benefit is payable to members exiting with less than 6 months service. No refund of contribution shall be paid to members exiting with less than 6 months service and claiming benefit. [Hqrs letter No. Pen/12/33/EPS Amend/96/Pt.V/54310 dated 04.11.2004] CLARIFICATION ON PROVISO TO PARA 11(3) OF THE EPS, 1995 The employees whose salary as on 16.3.96 was above statutory limit or exceeded the wage limit after 16.3.96, but remittances made by the employer to A/c No.10 is upto wage ceiling and not on such higher wages drawn by the employee, such workers can not be allowed now to contribute at higher wages. If any workers wages was over and above the salary ceiling and whose options were (exercised) forwarded to RPFC but contribution were not on such higher wages drawn by them, retrospective remittance cannot be allowed. The establishment was not expected to forward the option on piecemeal at their discretion, if any worker has exercised option to contribute on such higher salary with retrospective the same cannot be allowed. In some cases it is revealed that though the workmen salary was over and above the wage ceiling prescribed under EPS, 1995 but contribution were restricted to the wage ceiling up to 31.5.2001 and some have exercised option to contribute on such higher salary w.e.f. 1.6.2001 to avoid back period contributions. Such practice should not be allowed. [Hqrs letter No. Pen.4 (38)/96/WB/59867 dated 01.12.2004] 181 RECOVERY OF PF DUES BY AUCTION/SALE OF ATTACHED MOVABLE/IMMOVABLE PROPERTY OF DEFAULTERS The instructions issued vide Letter No.RRC/Misc/Circular/2001/4410 dated 16 /18 April, 2002 are withdrawn forthwith. Henceforth the Recovery Officer shall exercise the recovery powers vested in them under Section 8B to 8G of the EPF & MP Act read with IInd Schedule and IIIrd Schedule of Income Tax Act, 1961 and Part III of Income-tax (Certificate Proceedings) Rules, 1962 without any approval from their administrative authority. In order to streamline and expedite the recovery of arrears & arrest the growth of default, the recovery powers in respect of the cases involving more than 10 lakhs shall be exercised by RPFC II in his original jurisdiction. In respect of the arrears below 10 lakhs, APFCs shall continue to discharge the functions of Recovery Officer. In respect of SROs/SAOs, with the Officer-in-charge of the level of APFC it shall be the responsibility of the Officer-in-charge to exercise jurisdiction in respect of the cases involving more than 10 lakhs and that of APFC(Compliance) for the cases below 10 lakhs. [Authority: Hqrs. Letter No.RRC/Misc/Circular/2001/6942 dated 28.4.2005/3.5.2005] th th REALISATION OF PROVIDENT FUND DUES FROM DEFAULTING ESTABLISHMENTS All the assessing officers are requested to follow the following drill to tackle the defaulters and arrest the growth of arrears: (i) Enquiry under section 7A should be initiated on month to month basis against all persistent and chronic defaulters. Officer-in-charge shall ensure the assessment of dues on monthly basis against all such defaulters; (ii) In case of default in payment of employees’ share deducted from the wages of the workers, the assessing officers shall ensure that the police complaint u/s 405 explanation (1) are filed on monthly basis without fail. It shall be the responsibility of the RC(C&R) and Officer-in-charge of the SROs/SAOs to ensure the logical end as per law to all such complaints filed with the police authorities. (iii)In case of failure on the part of the establishment to remit the dues as per the time given in the Order under section 7A, the Prosecution cases u/s 14 of the Act shall be launched against the estts. and its’ responsible persons. It shall be the responsibility of Officer-in-charge in case of SROs/SAOs and of RC(C&R) & RC(I) in case of ROs to ensure that the Prosecution Cases are filed against the persistent and chronic defaulters. It is to clarify that the establishments which are in default of more than 10 lakhs shall come within the definition of persistent and chronic defaulters. The estts. which fail to remit the dues for three months in the financial year shall also be treated as the persistent and chronic defaulters. These instructions are in modification of the instructions issued vide Circular No. PQ Cell/1(1)87/Vol-I dated 12.5.1993 wherein the Regional Commissioners are restrained from prosecuting the sick estt. registered with BIFR without prior approval of Central Office. Henceforth, no approval of Head Office is required. 182 (iv) The Recovery Officers and the Assessing Officers shall invoke all the actions provided in Section 8B to 8G of the Act for the realization of dues. Any failure on the part of the concerned officer to invoke timely recovery action such as attachment and auction of movable and immovable property, arrest and detention in the civil prison of the defaulting employer and appointment of receivers shall be viewed seriously. It is to emphasise that all movable and immovable properties attached uptil now should be put up for auction for the realization of dues. There should not be any un-reasonable delay in putting the property to auction after attachment of the same. RC (I) of the region and Officer-in-charge shall review the cases of establishments in more than 10 lakhs on fortnightly basis and record their observations in the concerned file of the estts. (v) In case of delay in remittances of dues, assessing officers shall, besides timely levy & recovery of damages u/s 14B of the Act shall ensure collection of interest u/s 7Q of the Act as well for delayed payment including delay in remittances of damages after the expiry of time granted in the 14B Order. [Hqrs letter No. RRC/Comp-05/18(6)05/73703 dated 06.01.2005] DELEGATION OF POWERS FOR THE SETTLEMENT OF CLAIMS OUT OF UNCLAIMED DEPOSIT ACCOUNTS : 1. AAO in charge of Accounts Group may authorize claims up to Rs.10000/- out of UCD accounts provided the same is counterchecked by another AAO. 2. APFC may authorize claims up to Rs.50000/- out of UCD account provided the same is counterchecked by another APFC. 3. Claims of Rs.50000/- and above out of UCD accounts may be authorized by OIC or RC (F&A) only. It is however, reiterated that all the existing procedures provided in the Manual of Accounting Procedure and instructions issued by HQ be scrupulously followed while processing such claims out of UCD Accounts. [vide H.O.Letter No.WSU/5(1)2003/Clar/71618 dated 28.12.2004] LEAVE ENCASHMENT SALARY: The Leave encashment salary comes under the ambit of basic wages for payment of P.F. contributions vide circular No.Co-ord/3(4)2002 clarification/7731-2844 dated 6th May, 2004 and Circular No.C-I/(20)(1)2003/Misc/DL/72311 dated 3.3.2003. For uniform application, it has been decided that Leave Encashment paid on or after 1.10.1994 i.e. the date of the judgement of the Hon’Ble High Court of Bombay shall be liable for Provident Fund deductions. (Authority : Head Office Circular No.Co-ord/3(4)2002/clarifications/2002 dated 16.5.2005) It is advised to enforce the recovery of PF contribution on leave encashment paid on or after 01st May 2005 and keep the actions of recovery upto 30.04.2005 in abeyance. [Authority: H.O.Letter No.Co-ord/3(4)2002/clarifications/50673 dated 09.09.2005] 183 DISPENSING WITH SUBMISSION OF NON-REMARRIAGE CERTIFICATE EVERY YEAR BY WIDOW PENSIONERS: The widow pensioner under EPS, 1995 shall not be required to submit Nonremarriage certificate every year, instead an undertaking to the effect that, in the event of her remarriage she would report this fact to the Pension disbursement agency/EPFO immediately, shall be taken at the time of commencement of pension. The modified Proforma of Non-re-marriage certificate is annexed. However, widower pensioner will continue to submit non-remarriage certificate as usual in the month of November every year. All widow Pensioners may also be asked to provide the certificate in modified Proforma this year, so that they will not be required to furnish Non-remarriage certificate from next year. Name of the Pensioner____________________ Bank_________________ PPO No.________________ Branch_________________ S.B. A/c. No._____________ (b) LIFE CERTIFICATE Certified that I have seen the pensioner whose details are given above and that he/she is alive on this date. Signature/Thumb impression of pensioner Guardian of Minor Children Pensioner Place: Date: Signature of the Manager with Bank Seal II. (a) CERTIFICATE OF NON RE-MARRIAGE (Applicable to widow family pensioner and to be furnished only once) I hereby declare that I have not re-married and I undertake to report such an event promptly to the Pension Disbursing Agency/EPFO. (b) (Applicable to widower family pensioner to be submitted in the month of November every year) I hereby declare that I have not got re-married till date. Date: Signature/Thumb impression of pensioner Place: 184 I certify to the best of my knowledge and belief that the above declaration is correct. Signature of a responsible officer or a well-known person Place: Date : Name_____________ Designation____________________ (For the use of Disbursing Branch) Forwarded to Regional P.F. Commissioner through Link Branch. One copy of the above certificate is retained. Place: Date : Signature of Manager Office Seal (For the use of Regional P.F. Commissioner’s Office) Entered in the Computer (Bank Reconciliation statement) for updation. (To be preserved in the PPO file) D.E.O. (EDP Section) A.A.O.(Pension Section) RATE OF INTEREST FOR THE BROKEN CURRENCY PERIOD In exercise of the powers conferred by Sub-section (1) of Section 7 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1951 (19 of 1952), the Central Government hereby makes the following Scheme further to amend the Employees’ Provident Funds Scheme, 1952, namely:(1) (i) This Scheme may be called the Employees’ Provident Funds (Amendment) Scheme, 2007. (ii) It shall come into force on the date of its publication in the Official Gazette. (2) In the Employees’ Provident Funds Scheme, 1952, in paragraph 60, after the second proviso to clause (b) of sub-paragraph (2), the following proviso shall be added, namely:“Provided also that the rate of interest to be allowed on claims for refund for the broken currency period shall be the last declared rate on Employees’ Provident Fund and if the rate declared for any current year happens to be less than the previous year’s declared rate, then it would accrue as bonus to the outgoing members and it shall be incorporated into calculation for deriving the current year’s rate of interest at the end of the year and the claims settled under this proviso shall be final.” (Authority: H.O. Lr. No. Co-ord./13(Notification)07/1268 dated 10.4.2007) 185 CHANGE OF NOMENCLATURE OF “UNCLAIMED DEPOSITS ACCOUNT” AS “INOPERATIVE ACCOUNT” The Government of India, Ministry of Labour and Employment has issued notification dated 22.3.2007 vide which the following amendment has been made in Para 72(6) of the EPF Scheme, 1952. (i) (ii) In paragraph 72 in Sub-paragraph (6), for the words “Unclaimed Deposits Accounts”, the words “Inoperative Account” shall be substituted. In paragraph 72 in Sub-paragraph (6), in the proviso, for the words “Unclaimed Deposits Account”, the words “Inoperative Account” shall be substituted. The above amendment in the nomenclature of “UCD Account” as “Inoperative Account” is to be incorporated henceforth in all correspondence and also in the Balance Sheet for the financial year 2006-07. (Authority: H.O. Lr. No. Bkg/Inoperative Account/2007/Analysis/1369 dt.20.4.2007)
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