The dispute that started between an employee and EPFO regarding the PF amount to be received after retirement finally reached the court. EPPO demanded return of Rs 2.5 crore PF from an employee, after which he went to court. On this, Telangana High Court said in its important decision that EPFO cannot demand return of the PF received from any employee, even if the payment is made in violation of the rules. The court made it clear that if there has been any irregularity, then the responsibility lies with the company and its PF Trust, and not with the employee. This decision is considered important for lakhs of employees.
This matter is related to retired employee J.V. Nripendra Rao, who retired in the year 2023. At the time of retirement, he was paid Rs 2.5 crore from his company’s PF Trust. Apart from this, he was also to get an additional amount of about Rs 70 lakh, but that amount could not be released as it was stuck in the bonds of YES Bank.
The company had given up the status of exempt trust
As per the case, the concerned company shall first EPFO Was working as an exempted trust under. The company gave up its exempt trust status on March 1, 2023. After this, on July 21, 2023, the company paid Rs 2.5 crore to Nripendra Rao. The controversy started from here. EPFO said that once the exempt status ended, the company’s trust did not have the right to make direct payments to the employees. According to the rules, the entire amount should have been transferred to EPFO.
EPFO sent recovery notice
After about one and a half years, on 17 February 2025, EPFO issued a recovery notice to Rao. In the notice, he was asked to deposit back Rs 2.5 crore with 12 percent annual interest within seven days. EPFO’s argument was that the company’s trust made the payment after the exemption ended, which was against the provisions of the EPF law and the scheme. Therefore, the amount received by the employee should be taken back.
The employee approached the court
After receiving the recovery notice, Rao filed a petition in the Telangana High Court. He said that this money is part of his own PF contribution and he has legal right on it. He also argued that EPFO issued recovery notices without issuing any show cause notices and without giving any opportunity of being heard, which is against the principles of natural justice. Rao also told the court that he has not yet received the remaining amount of Rs 70 lakh, which is stuck in YES Bank bonds.
High Court did not accept EPFO’s argument
During the hearing, EPFO told the court that as per paragraph 28(1)(ii) of the EPF Scheme, 1952, after the exemption ends, the trust has to transfer the entire amount to EPFO. But instead of doing so, the company paid the employee. However, the court said that if the rules are violated then the responsibility lies with the company and its PF Trust. The employee cannot be held responsible for this.
Court notice canceled
According to the report of Live-Law, Justice Nagesh Bhimpaka said that EPFO could not point out any legal provision under which PF amount can be recovered from any employee. The court also said that there is no allegation of fraud, false information or collusion against the employee. The court admitted that before issuing the recovery notice, neither a show cause notice was given nor an opportunity of personal hearing was given. Therefore this action is against the principles of natural justice.
The way for action against the company is open
The High Court canceled the recovery notice of EPFO, but also made it clear that if the company or its PF trust has violated the EPF law, then EPFO can take separate legal action against them. The court said that the EPF Act is a welfare law, the objective of which is to provide social security to the employees. In such a situation, the burden of responsibilities of the employer and the trust cannot be put on the employee. This decision is considered important for those lakhs of employees who are worried about the security of their retirement funds. The court made it clear that the cost of any administrative or legal lapse cannot be recovered from the employee.
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