Supreme Court Refers Issue Regarding Discretion Of Authorized Officer To Levy Penalty U/S.14B Of EPF Act To Larger Bench

The Apex Court was considering an appeal challenging the impugned orders, passed at the instance of the Central Board of Trustees (under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952), which imported the finding of the Court that ‘the share of workmen dues’ shall be kept outside the liquidation as such and concerned workmen/employees shall have to be paid the Provident Fund (PF) or Gratuity Fund (GF) to the resolution plan implementation.

The Division Bench of Justice J. B. Pardiwala and Justice K. Vinod Chandran held, “We are, hence, in doubt of the proposition laid down in Horticulture Experiment Station Gonikoppal by a Coordinate Bench; with due respect to the learned Judges. While directing the deposit of the dues as computed under the EPF & MP Act including that levied under Section 7Q of that Act, we refer the question as to whether there is a discretion under Section 14B on the Authorized Officer to levy or not to levy the penalty.”

Senior Advocate Prasenjit Keswani represented the Appellant while AOR Mukund P. Unny represented the Respondent.

Arguments

The respondent EPFO asserted the application of the dictum in Maharashtra State Cooperative Bank Limited v. Assistant Provident Fund Commissioner and Others (2009), to the Provident Fund (PF) dues, even when a Resolution Plan (RP) is in operation, as approved by the Tribunal in Jet Aircraft Maintenance Engineers Welfare Association v. Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Ltd. and Others (2022).

Reasoning

The Bench noted that in Jalgaon District Central Coop. Bank Ltd. v. State of Maharashtra and Others(2025), the statutory charge, as created under the EPF & MP Act, was found to prevail over a non-obstante clause, overriding the provisions of any law in force at the time of the enactment. The statutory first charge under the EPF & MP Act was found to override the non-obstante clause in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The Bench noted that the Second Proviso to Section 11B clothes the Central Board with the power to reduce or waive the damages under Section 14B, 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 (BIFR) under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 19856 (SICA). Considering that the SICA is no more in force having been repealed by Act of 2003, made effective from 2016, and the Insolvency and Bankruptcy Code, 2016, took over the rebuilding of companies facing insolvency by an elaborate procedure, the Bench stated, “Though, a statutory amendment has not been brought correspondingly in the EPF & MP Act, we are of the opinion that the Central Board could consider the application of waiver or reduction, which the SRA could make before it, considering the fact that the resolution plan sought to be implemented, is akin to a plan of rehabilitation as sanctioned by the BIFR under the SICA.”

Referring to the amendments made in Section 14B and Section 7Q being incorporated by the Amendment Act, the Bench stated that the words employed under the amended Section 14B is to the effect that the Commissioner or the Authorised Officer, ‘may recover’ by way of penalty such damages. “Hence, the discretion is still left with the authority to decide as to whether there should be an imposition of penatly at all. If the Authorized Officer is satisfied that the imposition of penalty has to be made in the facts and circumstances, then the levy shall be under the scheme; which alone is outside the discretion of the authority”, it added.

The Bench further noticed that the Authorised Officer could waive the penalty as such in extenuating circumstances, necessarily not solely based on financial difficulties and in the event of finding justification in imposing the penalty, the quantum would be regulated by the Scheme.

The Bench thus referred the issue of whether there is discretion under Section 14B on the Authorized Officer to levy the penalty before a larger Bench. “We make it clear that the reference would not impair the right of the appellants herein, SRAs, to approach the Central Board under the Second Proviso of Section 14B”, it clarified.

Cause Title: M/s Kerala Industrial Infrastructure Development Corporation v. Central Board of Trustees and Anr. (Neutral Citation: 2026 INSC 990)

Appearance

Appellant: Senior Advocate Prasenjit Keswani, Senior Advocate Ritin Rai, Advocates Haris Beeran, Azhar Assees, Rizwana R. Raj, Shaswat Jena, AOR Radha Shyam Jena, AOR M/S. Legal Options, Advocates Sonia Dube, Pratham Mehrotra, Kanchan Yadav, Upmanyu Tewari, Saumya Sharma, AOR P. S. Sudheer, Advocates Rishi Maheshwari, Anne Mathew, Bharat Sood, Jashan Vir Singh, Ritika Sinha

Respondent: Senior Advocate Ritin Rai, AOR Mukund P. Unny, Advocate Vinay Mathew Joseph, AOR Sandeep Jindal, Advocates Pramod Kumar Goel,Akansha Bharti, M. A. Shaji, Anchal Sharma, K. J. Karthika, Shantanu Pandit, Robin George, R S Sharma, Vivek Bansal, Deepak Sharma, Ajay K Tyagi, AOR Abhishek Sharma, Shruti Jose, AOR M/S. Mukesh Kumar Singh And Co., Advocates Mukesh Kumar Singh, Rahul Saini, Vikash Kumar, Pushkar Singh Mall, Jeetendra Kumar, Kajal Rani, Komal Singh, Abhay Jadaun, Harsh Chaturvedi, Pawan Kumar Dhiman, AOR Abdulla Naseeh V.T., Advocates Musthafa Atheeq, Rachel Sara James, AOR P. S. Sudheer, Advocates Rishi Maheshwari, Anne Mathew, Bharat Sood, Jashan Vir Singh, Ritika Sinha

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