Mentoassociates.com – Legal Articles

The Prevention of Money Laundering Act, 2002 (PMLA) is a law enacted by the Indian Parliament to combat money laundering and to provide for the confiscation of property derived from or involved in money laundering.

The key objectives of the act are to prevent and control money laundering, confiscate and seize property obtained from laundered money and to deal with any matters connected with or incidental to the crime.

Section 3 of the act defines, Money Laundering. Accordingly, it refers to directly or indirectly attempting to indulge in, knowingly assisting, or being involved in any activity connected with the proceeds of crime, including its concealment, possession, acquisition, or use.

As per section 5, authorities can provisionally attach property suspected to be involved in money laundering for 180 days, subject to confirmation by the Adjudicating Authority. Adjudicating Authority is a special body appointed to decide if the attached property is involved in money laundering. Appeals against the Adjudicating Authority’s decisions can be made to the Appellate Tribunal and further to the High Court.

Special Courts are designated courts under the Act to try offences of money laundering, set up in consultation with the Chief Justice of the High Court.

Banks, financial institutions, and intermediaries are required to verify the identity of clients, maintain records, and report suspicious transactions to the Financial Intelligence Unit – India (FIU-IND).

Enforcement Directorate (ED) is the primary agency responsible for investigating offences under PMLA. If one or more transactions are part of a series and one is proved to be involved in money laundering, it is presumed that all are involved. The accused must prove that the property in question is not the proceeds of crime.

Amendments: The PMLA has been amended several times (notably in 2005, 2009, 2012, and 2019) to expand the list of predicate offences (scheduled offences), to empower the ED with more authority and to enhance punishments and compliance requirements.

Punishment: Rigorous imprisonment for 3 to 7 years (may extend to 10 years for offences under the NDPS Act). Fine (no upper limit).

INTRODUCTION: The Employees’ Provident Fund (EPF) was established with the objective of safeguarding the financial welfare of employees in both the private and public sectors. It functions as a long-term savings mechanism, accumulating contributions throughout an employee’s tenure with an organization. The primary purpose of the EPF is to manage and secure retirement benefits for employees by ensuring a steady source of income after their service ends. The scheme is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. To remain compliant with EPF regulations, employers must adhere to a range of statutory requirements and due diligence measures. Failure to comply may attract penalties, as outlined in the following sections.

1. False Statements to Avoid EPF Payments- [Section 14(1)]: If any person knowingly makes a false statement to avoid EPF payments he is liable to punishment of jail up to 1 year, or fine up to ?5,000, or both

2. Default in Depositing EPF Contributions- [Section 14(1A)]: If an employer fails to deposit employee contributions deducted from salaries, or pay administrative/inspection charges, he is liable to minimum 1 year imprisonment + ?10,000 fine, if employees’ deducted contributions are not deposited or minimum 6 months imprisonment + ?5,000 fine in other cases. Courts can reduce the jail term for valid and recorded special reasons.

3. Default in Insurance Fund or Inspection Charges – [Section 14(1B)]: On failure to pay insurance-related contributions or inspection charges, punishment includes jail from   6 months to 1 year and fine up to ?5,000. Court may reduce jail term with valid justification.

4. Other Violations Under EPF/Pension/Insurance Scheme – [Section 14(2)]: For any other non-compliance punishment is jail up to 1 year fine up to ?4,000 or both.

5. Breach of Exemption Conditions – [Section 14(2A)] : If an employer violates conditions of exemption granted under section 17, the punishment will be jail from 1 to 6 months and fine up to ?5,000

6. Offences Committed by Companies- [Section 14A]: When a company violates EPF laws, every person responsible for running the company (directors, managers, etc.) may be held liable. They can escape liability only if they prove lack of knowledge or due diligence. If the offence happened due to the consent or neglect of a specific officer, they will be held responsible.

7. Repeat Offenders – [Section 14AA]: If an individual or company repeats the same offence after a conviction, then the punishment will be jail for 2 to 5 years and fine of ?25,000

8. Cognizable Offence – [Section 14AB]: Failure to pay EPF contributions is treated as a cognizable offence, meaning the police can arrest without a warrant.

9. Legal Procedure for Prosecution – [Section 14AC]: – Legal action can begin only with a written report by an EPF Inspector, with prior approval from the Central PF Commissioner or an authorised officer. Only courts with the rank of Presidency Magistrate or First-Class Magistrate can try EPF offences.

10. Recovery of Penalty – Damages – [Section 14B]: For default in payments, the EPF Commissioner can impose penalty damages (up to the amount of arrears).Employers will be given a fair chance to be heard. In case of sick companies under rehabilitation, damages can be waived or reduced.

11. Court-Ordered Payment Deadlines – [Section 14C]: If convicted, courts can direct employers to make the payment or transfer the pending amount within a time limit. If not complied with, it will be treated as a new offence, punishable under Section 14. An additional fine of ?100 per day can also be imposed for continued delay.

CONCLUSION:

The EPF Act imposes strict penalties for employers who fail to meet their legal responsibilities. Non-compliance—whether by delay, default, or dishonesty—can attract serious consequences, including imprisonment and financial penalties. Employers are advised to ensure timely contributions, maintain proper records, and follow due process to stay compliant and avoid legal trouble.