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New employer to pay PF penalty

The Supreme Court has held that a company which takes over another is liable to pay damages for default in payment of contributions to the provident fund committed by the latter. The damages is punitive in nature and it could be recovered from the transferee employer, the court held in the judgment, Mcleod Russel India vs Regional PF Commissioner, Jalpaiguri. In this case, Saroda Tea Company defaulted in payment of PF contributions. Later it was taken over by Eveready Industries, later named Mcleod Russel. According to the take-over agreement, the Mcleod cleared all PF arrears of the tea company. However, it contested the imposition of penalty for the default of the tea company. It pointed out the agreement in which the damages was the liability of the tea company. The Calcutta High Court rejected the argument. On appeal, the Supreme Court upheld the high court view and underlined that even if there was such an agreement, the liability was that of the new employer. The court asked the company to pay interest on the damages also.

CIVIL APPEAL No. 5927 OF 2014
MCLEOD RUSSEL INDIA LIMITED vs REG. PROVIDENT FUND COMMISSIONER, JALPAIGURI & ORS

Article referred: http://www.business-standard.com/article/opinion/new-employer-to-pay-pf-penalty-114072000755_1.html

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