Telangana High Court has given an important decision for EPFO account holders. The court has clearly said that the PF money once paid to the employee cannot be taken back. If there is any rule violation in PF payment, then the responsibility will be of the employer and the concerned PF Trust, and not of the employee. The court also said that EPFO cannot recover from the employee and can take action against the company or trust if necessary.
This case is related to an employee named JV Nripendra Rao, who worked in a company which had its own PF trust. This trust had the status of Exempted Establishment since 1981. However, this status was returned on March 1, 2023. After this, on July 21, 2023, the Trust made a PF payment of about Rs 2.50 crore to the employee. The employee was to get approximately Rs 70 lakh more. During this time, some of the trust's money was invested in Yes Bank bonds, which got stuck after the orders of RBI. Later EPFO claimed that making PF payment directly to the employee after the exemption ended was against the rules and the amount should be refunded from the employee along with interest.
In this case, EPFO issued a recovery notice against the employee on 17 February 2025. The department said that as per the rules, after the exemption ends, the PF amount should have been transferred to EPFO first. Only after this the employee could be paid. On this basis, the process of taking back the amount from the employee was started. However, the employee approached the Telangana High Court challenging this action. His argument was that he was paid PF legally and if there was any administrative or procedural mistake, then the responsibility lies with the company and the trust, not the employee.
After the hearing, Telangana High Court ruled in favor of the employee. The court said that the PF amount is the legal right of the employee and it is not appropriate to demand it back. The court accepted that after the end of the exemption, the responsibility of transferring the PF funds to EPFO was entirely that of the company and its trust. If there is any rule violation in this then action should be taken against the management and the trust. The court also said that before issuing the recovery notice, the employee was not given a show cause notice nor was given an opportunity of personal hearing, which is a violation of the rules. On this basis, the court canceled the recovery notices of EPFO and clarified that the department can take action not against the employee but against the concerned management and trust.
