EPFO Cannot Retain Deposited Amount After Assessment Is Set Aside, Must Pay Interest For Unjust Enrichment: Patna High Court
The Patna High Court has held that authorities cannot retain money deposited by an assessee after the assessment itself has been set aside, and must compensate the party by paying interest, invoking the doctrine of unjust enrichment.A Division Bench comprising Chief Justice Sangam Kumar Sahoo and Justice Harish Kumar was hearing a Letters Patent Appeal filed by the Employees' Provident Fund...
The Patna High Court has held that authorities cannot retain money deposited by an assessee after the assessment itself has been set aside, and must compensate the party by paying interest, invoking the doctrine of unjust enrichment.
A Division Bench comprising Chief Justice Sangam Kumar Sahoo and Justice Harish Kumar was hearing a Letters Patent Appeal filed by the Employees' Provident Fund Organisation (EPFO) challenging the order dated 11.07.2024 passed in C.W.J.C. No. 6784 of 2023.
By the impugned order, the learned Single Judge had directed the appellants to pay simple interest at the rate of 6% per annum on ₹10,12,692/- from 02.06.2011 (date of appellate order) till the date of actual refund in October 2023.
The case arose from an assessment order passed under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, directing the respondent establishment to deposit over ₹20 lakh towards provident fund dues. The respondent challenged the order before the EPF Appellate Tribunal, which ultimately set aside the assessment on 02.06.2011 and remanded the matter. However, despite the assessment being set aside, the amount of ₹10,12,692/- deposited by the respondent pursuant to earlier court directions was retained by the EPF authorities for over a decade.
It was the respondent's case that after remand, the proceedings remained pending for nearly 11 years, and though the final reassessment in 2022 determined liability at only ₹49,453/-, the excess amount was not refunded promptly.
The EPFO contended that there was no statutory provision mandating payment of interest on such deposits and that the amount had been deposited pursuant to court directions. Rejecting this contention, the High Court noted that it was undisputed that the amount had been deposited in 2009 and refunded only in October 2023, and that the authorities had retained and utilised the money during this period.
Relying on the Supreme Court's judgment in Indian Council for Enviro-Legal Action v. Union of India (2011) 8 SCC 161, the Court invoked the doctrine of unjust enrichment and held:
“The ratio laid down in the case of Sahakari Khand Udhyog Mandal Ltd. (supra) and other decisions cited above are squarely applicable in the present case relating to the doctrine of unjust enrichment which postulates that no person can be allowed to enrich inequitably at the expense of another and unjust enrichment arises where retention of the benefit is considered contrary to justice or against equity.”
The Court further observed that once the assessment order was set aside in 2011, there was no justification for the authorities to retain the deposited amount. It also rejected the explanation of delay on account of quasi-judicial proceedings, noting that the Tribunal Rules require disposal of appeals, as far as possible, within six months, whereas in the present case the matter lingered for nearly 11 years without any fault attributable to the respondent.
Emphasising the prejudice caused, the Court held that by retaining the money, the authorities not only unjustly enriched themselves by earning interest, but also deprived the respondent of the opportunity to utilise the funds.
Finding no infirmity in the Single Judge's order, the Court declined to interfere and upheld the direction to pay interest at 6% per annum.
Case Title: The C.B.T./Board of Trustees (Central Board), Employees Provident Fund Organisation and Anr v. M/s The Longia Bidi Company, Barahdari.
Case No.: Letters Patent Appeal No. 115 of 2025 (in C.W.J.C. No. 6784 of 2023).
Appearance: Mr. Ravi Kumar and Ms. Priya Choubey appeared for the Appellant. Senior Advocate Mr. Rajiv Kumar Singh, assisted by Mr. Manish Kumar, appeared for Respondent No.1. Mr. Alok Kumar appeared for the Union of India.