The Labour Ministry has proposed that the Employees’ Provident Fund Organisation (EPFO) should have the first right to assets of a company that goes bankrupt, according to a report by Mint.
As per the report, the proposal says that the pension fund money should receive priority over other debts during the recovery or liquidation process of the company.
“Priority of payment of contribution over other debts: Notwithstanding anything contained in any other law for the time being in force, any amount due under this (EPF) Act shall be the first charge on the assets of the establishment and shall be paid in priority to all other debts,” said the proposal.
The proposal is significant as it comes a time when the EPFO is struggling to recover nearly Rs 1,800 crore of its subscribers’ money from companies like Infrastructure Leasing and Financial Services Ltd (IL&FS) and Dewan Housing Finance Corp. Ltd (DHFL).
According to the report, EPFO is seeking to recover Rs 574 crore from IL&FS and Rs 700 crore from DHFL, while another Rs 500 crore is due from some other companies that have collected but not deposited EPF contributions of their workers for months.
The said proposal, according to the report, has been circulated for consultation among relevant ministries and experts and will be later forwarded to the cabinet. If approved, it may be tabled in the winter session of Parliament, the report said.
For those unaware, EPFO is a retirement benefits scheme under which employees pay 12% of their basic salary as mandatory EPF deductions every month and a matching contribution is made by the employer. The scheme covers all formal sector establishments employing 20 or more employees. Currently, EPFO has around 60 million active subscribers.