Page 303 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes Table 13.1: Offences and Penalties

Offence Penalty
1. Making any false statement or misrepresentation Imprisonment up to one year of fine of
to avoid any payment towards provident fund, 5000/- or both.
family pension fund or deposit-linked insurance
fund.
2. Default in payment of administrative charges Imprisonment up to 3 years and a fine of
towards Provident Fund (Para 38) or payment of 5000/- (Minimum imprisonment for 6 months).
inspection charges [Sec. 17(3)(a)]
3. Default in payment of employees’ contribution Imprisonment up to 3 years and a fine of
[Sec.6]. 10,000 (Minimum imprisonment for 1 year)
4. Default in payment of contribution or Imprisonment up to 1 year or a fine up to
administrative charges or inspection charges
5000/-, or both. (Minimum imprisonment for 6
towards the Deposit-linked Insurance Fund. months).
5. Contravention of or default in complying with, Imprisonment up to 1 year or fine up to 4000 or
any of the provisions. both.
Imprisonment up to 6 months (minimum 1 month)
6. Contravention of or default in complying with,
and fine up to 5000.
any of the conditions, subject to which exemption
was granted u/s 17.
7. Any subsequent offence committed after previous Imprisonment up to 5 years (minimum 2 years) and
fine up to 25,000.
conviction (sec. 14AA)

13.6.5 Damages and Penalties

When an employer fails to remit the dues under the Scheme within 15 (20 days with 5 days grace
period) days of the close of each month, the employer will be liable to pay penal damages as
may be determined by the Regional Commissioner (RC) not exceeding 37% of the arrears.
Any amount outstanding from the employer can be recovered by the Regional Commissioner
as an arrear of land revenue. The powers for revenue recovery and issue of recovery certificates
are vested with the Regional Commissioner (with effect from 1/7/90).
An employer, who fails to remit the contributions and administrative charges and/or submit
the monthly and other periodical returns, is liable to be prosecuted under Section 14 of the Act.
For failure to remit employees' share recovered from the wages, the employer shall also be
liable for prosecution under Section 406/409 of the I.P.C.
The employers are liable for action under the penal provisions of the Act, in case they default
compliance with the provisions of the Scheme. This is apart from the provisions relating to
levying of penal damages and recovery of the outstanding dues as revenue under the Revenue
Recovery Act.

13.6.6 Appraisal of the Act

Corruption by the enforcement officers has been a serious problem facing the organisation,
since joining the scheme is compulsory and the subscription rate being high, many of the
smaller companies avoid joining the scheme. The organisation, having legal powers to prosecute
such companies, and make ad-hoc assessments and recover past arrears including interest and
penalty, many of the field official connive with such companies for consideration. The interest
rate being offered to subscribers is still very high and the investment of the corpus of fund by the
organisation is not fetching such interest, resulting in drawal from surplus. This is a major
concern for government and the organisation.

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