EPFO SEEKS FIRST RIGHT TO ASSETS IN BANKRUPTCIES

NEWDELHI: The Employees’ Provident Fund Organisation (EPFO) may gain the first right to assets of a company that goes bankrupt, according to an amendment proposed by the labour ministry.

The move comes as the pension fund struggles to recover nearly ₹1,800 crore of its subscribers’ money from companies including crisis-ridden shadow lender Infrastructure Leasing and Financial Services Ltd (IL&FS) and troubled mortgage lender Dewan Housing Finance Corp. Ltd (DHFL).

The proposal says that during recovery or liquidation process, the pension fund money should receive priority over other debts.

“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,” according to the proposal, a copy of which was reviewed by Mint.

The proposal has been circulated for consultations among various stakeholders including the relevant ministries and experts. It will be later forwarded to the cabinet. If approved, the proposal may be tabled in the winter session of Parliament.

There are two categories of firms that may fall under this priority payment to EPFO in case they go bankrupt. The first are those companies where EPFO has invested such as IL&FS and DHFL, while the second are those that owe employees money as part of their EPFO obligations.

EPFO is seeking to recover ₹574 crore from IL&FS and ₹700 crore from DHFL. It is also trying to recover around ₹500 crore from some other companies.