The Patna High Court has held that where an employer deposits money pursuant to a court order for maintaining an appeal under the EPF Act, and the original assessment order is subsequently set aside by the Appellate Tribunal, continued retention of that amount by the EPFO without timely refund amounts to unjust enrichment. In such circumstances, even in the absence of an express statutory provision for payment of interest, the Court can direct payment of interest as restitution and compensation for deprivation of the use of money.
The Court held that interest on delayed refund is not a penalty, but the normal accretion on capital, and when a person is deprived of money to which he is legitimately entitled, he has a right to be compensated for such deprivation by way of interest or compensation. Accordingly, finding no perversity in the order of the Single Judge, the Division Bench dismissed the Letters Patent Appeal and upheld the direction to pay simple interest at 6% per annum on Rs. 10.12 lakhs from June 02, 2011 till the date of actual payment.
The Division Bench comprising the Chief Justice Sangam Kumar Sahoo and Justice Harish Kumar noted that despite repeated opportunities, the respondent-authorities did not explain how the deposited amount of Rs. 10.12 lakhs were utilized or whether it had been kept in a bank and earned interest. The supplementary counter affidavit remained silent on the specific queries raised by the Court, and therefore an adverse inference was drawn that the authority had retained the money and earned interest on it.
The Division Bench held that there was no dispute that the petitioner had deposited Rs. 10.12 lakhs in 2009 pursuant to the High Court’s order and received it back only on October 16 and 17, 2023. The Bench accepted that the appellants had utilized the money by keeping it in the bank and earning interest thereon, and therefore found the direction to pay simple interest at 6% per annum justified.
The Bench further observed that the doctrine of unjust enrichment applied squarely, since once the original assessment order had been set aside by the Appellate Tribunal on June 02, 2011, retention of the petitioner’s money by the EPFO was no longer justified. The plea that delays occurred because of adherence to natural justice was rejected, especially when no negligence or delaying tactics on the part of the petitioner were shown.
The Bench also referred to Rule 14(2) of the Tribunal (Procedure) Rules, 1997, which provides that every appeal shall, as far as possible, be heard within six months from the date of registration, and contrasted this with the nearly eleven-year delay in the present matter, holding that such delay was not attributable to the respondent establishment.
Briefly, the petitioner had challenged the communication dated February 22/23, 2023 issued by the Regional Provident Fund Commissioner-II, which imposed conditions while processing refund of the excess amount of Rs. 10.12 lakhs, and had also sought refund of that amount with up-to-date interest.
An order under Section 7A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 was passed on August 31, 2007 directing the petitioner to deposit Rs. 12.82 lakhs towards provident fund contribution and Rs. 7.42 lakhs towards interest, aggregating Rs. 20.25 lakhs for the period April 1999 to March 2004. The petitioner filed an appeal under Section 7-I of the 1952 Act, but the appeal was initially dismissed on May 28, 2009 for non-deposit of 50% of the assessed amount as directed by the Appellate Tribunal.
The petitioner then approached the High Court, which directed the petitioner to deposit 50% of the assessed amount within 30 days, whereupon the Appellate Tribunal was to decide the appeal on merits. In compliance, the petitioner deposited Rs. 10.12 lakhs through four challans within the stipulated period, and the appeal stood revived.
Later, the EPF Appellate Tribunal by final order dated June 02, 2011 set aside the original assessment order and remanded the matter for fresh determination. Thereafter, although the Area Enforcement Officer reported on December 14, 2011 and May 08, 2012 that the petitioner’s liability for the relevant period was only Rs. 49,453/-, the Regional Provident Fund Commissioner-II passed the final order only on September 29, 2022, assessing liability at Rs. 49,453/-.
The final assessment order of September 29, 2022 did not provide for adjustment or refund of the amount of Rs. 10.12 lakhs already deposited by the petitioner. The petitioner sought review and requested adjustment of Rs. 49,453/- and refund of the balance Rs. 9.63 lakhs with interest, but the review was rejected on the ground that refund would be dealt with separately. After depositing Rs. 49,453/- on January 25, 2023, the petitioner again requested refund, yet the authority issued a letter dated February 22/23, 2023 stating that penal damages and interest, if any, would first be calculated and adjusted before refund of the excess amount.
Appearances:
Advocates Ravi Kumar and Priya Choubey, for the Appellant
Senior Advocate Rajiv Kumar Singh and Advocate Manish Kumar, for the Respondent
CGC Alok Kumar, for the UOI
