Damages and Recovery of Amounts Due

In one line

An employer who fails to pay may be made to pay damages up to the amount of the arrears, and the money is then recovered by a certificate to a Recovery Officer who can attach property, arrest him, or take the money from anyone who owes him.

In exam wording: section 128 of the Code on Social Security 2020 empowers the Central Provident Fund Commissioner or the Director General of the Corporation to levy damages not exceeding the amount of arrears on an employer in default, after an opportunity of being heard; and sections 129 to 132 provide for recovery by certificate to a Recovery Officer, by attachment and sale, arrest and detention, appointment of a receiver, and by garnishee style recovery from third parties.

Why the law has these at all

Because an assessment that cannot be collected is a piece of paper. The Code's benefits are funded by contributions, and every rupee not collected is a benefit somebody does not receive.

The design has three layers, and naming them is a good way to open an answer.

A penalty for the default itself, in section 128, so that late payment is not a cheap source of working capital.

A summary recovery route, in sections 129 and 130, modelled on land revenue recovery: a certificate is issued to a Recovery Officer, and the certificate is not open to challenge before him.

A route round the defaulter altogether, in section 131, which reaches money other people owe him.

Some words this chapter uses

Damages, here, means a statutory sum levied for default, not compensation for loss. Certificate is the document by which the assessing authority sets recovery in motion. Recovery Officer is defined in section 2(68). Attachment is the legal seizure of property to satisfy a debt. Receiver is a person appointed to manage property. Garnishee describes a third party who owes the debtor money and is ordered to pay the creditor instead. Resolution plan is a plan approved under the Insolvency and Bankruptcy Code 2016 for a distressed business.

Section 128: damages

Where an employer makes default in:

• payment of any contribution he is liable to pay under Chapter III or Chapter IV or a scheme under them; or
• the transfer of accumulations under Chapter III; or
• payment of any charges payable under any other provision of the Code,

the Central Provident Fund Commissioner or the Director General of the Corporation, or such other officer as the appropriate Government authorises by notification, may levy on and recover from the employer, by way of damages, an amount not exceeding the amount of arrears.

The manner is as specified in the regulations for Chapter IV, and for the Provident Fund, Pension and Insurance Schemes as specified in the respective schemes.