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CMA Intermediate · Business Laws and Ethics · Employees Provident Fund and Miscellaneous Provisions Act, 1952

Sagar Textiles Ltd, with 250 employees, applies with the majority of its employees to maintain its own provident fund account. Eighteen months ago it defaulted in paying provident fund contribution. What is the position under the Code on Social Security, 2020?

No authorisation can be made. The proviso prohibits authorisation where the employer defaulted in provident fund contribution, or committed any other offence under the Code, during the three years immediately preceding the authorisation. An 18-month-old default is within that period, and employee consent does not cure it.

  1. ANo authorisation can be made, because of the default within the preceding three yearsCorrect
  2. BAuthorisation can be made after the default is paid, since the proviso only applies to defaults in the last month
  3. CAuthorisation can be made if the majority of employees consent, whatever the default
  4. DAuthorisation can be made only for establishments with over 500 persons

Explanation

The proviso bars authorisation if the employer defaulted in provident fund contribution, or committed any other offence under the Code, during the three years immediately before the authorisation. A default 18 months ago falls within that window, and employee consent does not override it.

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