Binding Force of BIFR’s Rehabilitation Scheme Prevails Over EPFO’s Discretion in Waiver of Damages under Section 14B
- REEDLAW
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The CGITLC held that the binding force of the BIFR’s rehabilitation scheme prevails over the EPFO’s discretion in waiving damages under Section 14B of the EPF Act.
On 24 June 2025, the Central Government Industrial Tribunal-cum-Labour Court (CGITLC), Delhi, presided over by Mr. Atul Kumar Garg, while adjudicating an appeal, held that once the Board for Industrial and Financial Reconstruction (BIFR) has sanctioned a rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985, and has specifically directed the waiver of damages under Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Employees’ Provident Fund Organisation (EPFO) is legally bound to comply. The EPFO cannot reject such a waiver on the grounds such as the absence of a change in management or by invoking a discretionary interpretation of the scheme. The Tribunal reaffirmed that the orders of the BIFR, having attained finality, override any contrary administrative decisions by statutory authorities such as the EPFO.
The Central Government Industrial Tribunal-cum-Labour Court, by its order dated 25.04.2017, set aside the rejection issued by the Employees’ Provident Fund Organisation (EPFO) declining the appellant company’s request for waiver of damages under the second proviso to Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The Tribunal held that the EPFO’s rejection, as conveyed through its notice and order dated 25.04.2017, was contrary to the binding orders passed by the Board for Industrial and Financial Reconstruction (BIFR), which had sanctioned a rehabilitation scheme for the appellant company, M/s Tirupati Fibres & Industries Ltd., a declared sick industrial company.
The Tribunal noted that the BIFR, in its orders dated 17.12.2013 and 30.01.2014, had clearly directed the EPF authorities to waive damages recoverable from the appellant under Section 14B in accordance with the terms of the sanctioned scheme dated 18.10.2011. Despite such directives attaining finality and not being challenged by the EPFO, the respondent failed to comply. It was further observed that the EPFO’s grounds for rejection—absence of a change in management and BIFR’s mere recommendation rather than direction—were without merit. The Tribunal clarified that the second proviso to Section 14B read with Para 32B of the EPF Scheme empowers the Central Board to waive damages either upon a change in management or where such waiver is recommended by BIFR. The presence of both conditions is not mandatory.
Additionally, the Tribunal took judicial notice of the binding precedent from the Delhi High Court in DGIT (Admn) and Anr. v. BIFR and Ors., wherein it was emphasised that a sanctioned BIFR scheme is legally enforceable and binding upon all stakeholders, including statutory authorities such as the EPFO. It was held that non-compliance with BIFR's directions frustrates the very objective of corporate rehabilitation under the Sick Industrial Companies (Special Provisions) Act, 1985.
The Tribunal found that the EPFO acted arbitrarily and contrary to law by refusing to waive damages despite clear BIFR directives and the payment of principal and interest by the appellant in accordance with the sanctioned scheme. It further observed that the EPFO failed to disclose or consider material facts, including the final BIFR orders, at the time of adjudication.
Accordingly, the Tribunal allowed the appeal, set aside the demand notice dated 24.03.2014 and the rejection order dated 25.04.2017, and recalled all consequential proceedings.
Ms. Purti Gupta, Ms. Heena George and Ms. Pooja Aggarwal, Advocates, represented the Appellant.
Mr. Ajay Vikram Singh, Advocate, appeared for the Respondent.
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