11. Priority of payment of contributions over other debts
(1) Where any employer is adjudicated in solvent or, being a company, an order for winding up is made, the amount due
(a) from the employer in relation to [an establishment] to which any [Scheme or the insurance Scheme] applies in respect of any contribution payable to the Fund [or, as the case may be, the Insurance Fund], damages recoverable under section 14B, accumulations required to be transferred under sub-section (2) of section 15 or any charges payable by him under any other provision of this Act or of any provision of the
[Scheme or the Insurance Scheme]; or
(b) from the employer in relation to an exempted [establishment] in respect of any contribution to the provident fund or any insurance fund] (in so far as it relates to exempted employees), under the rules of [the provident fund or any insurance fund] [any contribution payable by him towards the [Pension] Fund under sub-section (6) of section 17,] damages recoverable under section 14B or any charges payable by him to the appropriate Government under any provision of this Act under any of the conditions specified under section 17, shall where the liability therefor has accrued before the order of adjudication or winding up is made, be deemed to be included] among the debts which under section 49 of the Presidency Towns Insolvency Act, 1909, or under section 61 of the Provincial Insolvency Act, 1920, or under [section 530 of the Companies Act, 1956], are to be paid in priority to all other debts in the distribution of the property of the insolvent or the assets of the company being wound up, as the case may be.
[Explanation: In this sub-section and in section 17, “insurance fund” means any fund established by an employer under any Scheme for providing benefits in the nature of life insurance to employees, whether linked to their deposits in provident fund or not, without payment by the employees of any separate contribution or premium in that behalf.]
[(2) Without prejudice to the provisions of sub-section (1), if any amount is due from an employer, [whether in respect of the employee’s contribution (deducted from the wages of the employee) or the employer’s contribution], the amount so due shall be deemed to be the first charge on the assets of the establishment, and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts.]
12. Employer not to reduce wages, etc.
No employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to [the Fund or the Insurance Fund] or any charges under this Act or the [Scheme or the Insurance Scheme], reduce, whether directly or indirectly, the wages of any employee to whom the [Scheme or the Insurance Scheme] applies or the total quantum of benefits in the nature of old age pension, gratuity 74[provident fund or life insurance] to which the employee is entitled under the terms of his employment, express or implied.]
13. Inspectors
(1) The appropriate government may, by notification in the Official Gazette, appoint such persons as it thinks fit to be Inspectors for the purposes of this Act [, the Scheme [, the [Pension ] Scheme or the Insurance Scheme]], and may define their jurisdiction.
(2) Any Inspector appointed under sub-section (1) may, for the purpose of inquiring into the correctness of any information furnished in connection with this Act or with any [Scheme or the Insurance Scheme] or for the purpose of ascertaining whether any of the provisions of this Act or of any [Scheme or the Insurance Scheme] have been complied with [ in respect of [an establishment] to which any [Scheme or the Insurance Scheme] applies or for the purpose of ascertaining whether the provisions of this Act or any [Scheme or the Insurance Scheme] are applicable to any [establishment] to which the [Scheme or the Insurance Scheme] has not been applied or for the purpose of determining whether the conditions subject to which exemption was granted under section 17 are being complied with by the employer in relation to an exempted [establishment].
(a) require an employer [or any contractor from whom any amount is recoverable under section 8A] to furnish such information as he may consider necessary;
(b) at any reasonable time [and with such assistance, if any, as he may think fit, enter and search] any [establishment], or any premises connected therewith and require any one found in charge thereof to produce before him for examination any accounts, books, registers and other documents relating to the employment of persons or the payment of wages in the [establishment];
(c) examine, with respect to any matter relevant to any of the purposes aforesaid, the employer [or any contractor from whom any amount is recoverable under sections 8A], his agent or servant or any other person found in charge of the [establishment], or any premises connected there with or whom the Inspector has reasonable cause to believe to be or to have been, an employee in the [establishment];
(d) makes copies of, or take extracts from, any book, register or other document maintained in relation to the establishment and, where he has reason to believe that any offence under this Act has been committed by an employer, seize with such assistance as he may think fit, such book, register or other document or portions thereof as he may consider relevant in respect of that offence;]
(e) exercise such other powers as the [Scheme or the Insurance Scheme] may provide.
(2A) Any Inspector appointed under sub-section (1) may, for the purpose of inquiring into the correctness of any information furnished in connection with the [Pension] Scheme or for the purpose of ascertaining whether any of the provisions of this Act or of the [Pension] Scheme have been complied with in respect of an establishments to which the [Pension] Scheme applies, exercise all or any of the powers conferred on him under clause (a), (b), (c) or (d) of sub-s. (2).]
(2B) The provisions of the [Code of Criminal Procedure, 1898], shall, so far as may be, apply to any search or seizure under sub-section (2) [or under sub-section (2A), as the case may be,] as they apply to any search and seizure made under the authority of a warrant issued under [section 98] of the said Code.
14. Penalties
(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act [the Scheme, ,the [Pension] Scheme] or the Insurance Scheme] or of enabling any other person to avoid such payment knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to one year, or with fine of five thousand rupees, or with both].
(1A) An employer who contravenes, or makes default in complying with, the provisions of section 6 or clause (a) of sub-section (3) of section 17 in so far as it relates to the payment of inspection charges, or para 38 of the Scheme insofar as it relates to the payment of administrative charges, shall be punishable with imprisonment for a term which may extend to [three years] but
(a) which shall not be less than [one year and fine of ten thousand rupees] in case of default in payment of employees’ contribution which has been deducted by the employer from the employees’ wages;
(b) which shall not be less than six months and fine of five thousand rupees, in any other case:]
PROVIDED that the court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term
(1B) An employer who contravenes, or makes default in complying with, the provisions of section 6C, or clause (a) of sub-section (3A) of section 17 in so far as it relates to payment of inspection charges, shall be punishable with imprisonment for a term which may extend to [one year] but which shall not be less than [Six months] and shall also be liable to fine which may extend to [five thousand rupees]:
PROVIDED that the court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term ]
(2) [Subject to the provisions of the Act, the Scheme,] the Pension Scheme or the Insurance Scheme] may provide that any person who contravenes, or makes default in complying with any of the provisions thereof shall be punishable with imprisonment for a term which may extend to [one year, or with fine which may extend to four thousand rupees, or with both].]
[(2A) Whoever contravenes or makes default in complying with any provision of this Act or of any condition subject to which exemption was granted under section 17 shall, if no other penalty is elsewhere provided by or under this Act for such contravention or non-compliance, be punishable with imprisonment which may extend to 146[six months, but which shall not be less than one month, and shall also be liable to fine which may extend to five thousand rupees].]
14A. Offences by companies
(1) If the person committing offence under this Act, the Scheme , the [Pension] Scheme or the Insurance Scheme] is a company, every person, who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
PROVIDED that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act , the Scheme, the [Pension] Scheme or the Insurance Scheme]] has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation: For the purposes of this section
(i) “company” means any body corporate and includes a firm and other association of individuals; and
(ii) “director”, in relation to a firm, means a partner in the firm.]
14AA. Enhanced punishment in certain cases after previous conviction
Whoever, having been convicted by a court of an offence punishable under this Act, the Scheme, , the [Pension] Scheme or the Insurance Scheme], commits the same offence shall be subject for every such subsequent offence to imprisonment for a term which may extend to five years, but which shall not be less than two years, and shall also be liable to a fine of twenty-five thousand rupees.]
14AB. Certain offences to be cognizable
(1) Notwithstanding anything contained in [Code of Criminal Procedure, 1898 (5 of 1898)], an offence relating to default in payment of contribution by the employer punishable under this Act shall be cognizable.
14AC. Cognizance and trial of offences
(1) No court shall take cognizance of any offence punishable under this Act, the Scheme or, the [Pension] Scheme or the Insurance Scheme], except on a report in writing of the facts constituting such offence made with the previous sanction of the Central Provident Fund Commissioner or such other officer as may be authorized by the Central Government, by notification in the Official Gazette, in this behalf, by an inspector appointed under section 13.
(2) No court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence under this Act or the Scheme or , the [Pension] Scheme or the Insurance Scheme.]
14B. Power to recover damages
Where an employer makes default in the payment of any contribution to the Fund [, the [Pension] Fund or the Insurance Fund] or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 [or sub-section (5) of section 17] or in the payment of any charges payable under any other provision of this Act or of [any Scheme or Insurance Scheme] or under any of the conditions specified under section 17, [the Central Provident Fund Commissioner or such other officer as may be authorized by the Central Government, by notification in the Official Gazette, in this behalf] may recover [from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme:]
PROVIDED that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:]
PROVIDED FURTHER that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which Scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.]
Comment: “Nor can it be accepted that there are no guidelines provided for fixing the quantum of damages. The power of the Regional Provident Fund Commissioner to impose damages under Section 14-B is a quasi-judicial function. It must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard. The discretion to award damages could be exercised within the limits fixed by the Statute. Having regard to the punitive nature of the power exercisable under Section 14-B and the consequences that ensue there from, an order under Section 14-B must be a ‘speaking order’ containing the reasons in support of it.” AIR 1979 SUPREME COURT 1803, Organo Chemical Industries v. Union of India
14C. Power of court to make orders
(1) Where an employer is convicted of an offence of making default in the payment of any contribution to the Fund , the [Pension] Fund or the Insurance Fund] or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17, the court may, in addition to awarding any punishment, by order in writing require him within a period specified in the order (which the court may, if it thinks fit and on application in that behalf, from time to time, extend), to pay the amount of contribution or transfer the accumulations, as the case may be, in respect of which the offence was committed.
(2) Where an order is made under sub-section (1), the employer shall not be liable under this Act in respect of the continuation of the offence during the period or extended period, if any, allowed by the court, but if, on the expiry of such period or extended period, as the case may be, the order of the court has not been fully complied with, the employer shall be deemed to have committed a further offence and shall be punished with imprisonment in respect thereof under section 14 and shall also be liable to pay fine which may extend to one hundred rupees for every day after such expiry on which the order has not been complied with.