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Karma Management Global Consulting Solutions Pvt. Ltd. one of the top 5 labour law consulting firms in the country, has recently hit upon yet another significant milestone in the journey of tying up  SUNDEEP PURI ASSOCIATES AND ADVOCATE, where both these Firms have formally joined hands together to collaborate and create a bigger alliance by scaling up its business on Pan India basis and Internationally to give greater reach of its services together,  to its hundreds of clients all over.

Sundeep Puri & Associates (SD Puri& Co.) with 55+ years of existence and helmed by Adv Sundeep Puri & Adv Ravi Paranjpe is one of the largest retainer firms in India specializing in “Employment Laws” advising the Corporate Sector. The Firm boasts of some clients being associated for the last 55+ years and the majority for the last 30-40 years. They have extensive experience in counseling Foreign MNCs and Indian MNC Clients having multi-locational Factories &/or Offices Pan-India on a daily basis on a wide range of “Employment & Labour” issues, keeping in view the cultural diversity of the workforce such as Acquisitions, Mergers, Consolidations, Reductions in the workforce, Maintaining union-free environment by not undermining the principles of collective bargaining & also preserving operational flexibility in unionized settings, providing tailor-made models for conflict-free productivity that is conducive Industrial Environment, as also in respect to the applicability of the various labor laws.  They believe in Solution oriented Practical Advice backed by Law.

On the other hand,  Karma Management Global Consulting Solutions Pvt. Ltd. since 2004 is backed by 25 years of prior experience since 1979, operating on Pan India basis and Internationally in the Americas and EMEA, helmed by Pratik Vaidya,  is a leading giant in payroll management, compliance, and governance, human resource services, professional employment staffing and onboarding, recruitment and talent acquisition, advisory and consultations thereby offering a plethora of services with quick turn-around solutions including in-house flagship AI/ML based tech solutions so as to help organizations of different types and stature to perform better in Human Resource ensuring Risk Management, Compliance and Governance across Environmental, Social and Corporate laws and grow bigger.

So in this regard, besides the business profile of Karma relating to labor laws, it will now focus whole time also on legal and paralegal issues and matters with the collaboration of Sundeeep Puri & Associates who are already into legal matters such as disputes, litigation, arbitration, layoffs, retrenchment, and court cases.



Issues considered by the Supreme Court are as follows :  

  • Should allowances be treated as wages for PF purposes? 
  • The SC has considered multiple appeals, given the commonality of the issues 
  • Employers were paying various cash allowances but were not including the same for PF wages, which was disputed by the PF authorities.
  • A Special Leave Petition was filed before the SC against the decisions of lower Courts to decide what constitutes PF wages. 

SUPREME COURT FINAL RULING –  Principles laid down for allowances to be excluded

  • Allowances that are variable in nature; 
  • Allowances that are linked to any incentive for production resulting in greater output by an employee; or 
  • Allowances that are not paid across the board to all employees in a particular category; 
  • The allowance is paid especially to those who avail of the opportunity.


This case came up for hearing on 30.03.2021 and this Industrial Tribunal-cum-Labour Court issued the following order on 31/08/2021.

The present appeal is filed from order No. KR / KC / 13213 / ENF-IV(5) / 2015 / 16510 DT. 01/02/2018 assessing dues on various allowances U/s 7A of EPF & MP Act, 1952 (hereinafter referred to as ‘the Act’). for the period from 2 06/2005 to 02/2009. The total dues assessed are Rs. 16,42,814/-.

Nature of salary payment :

The employees were paid basic wages, HRA, and other similar allowances. The appellant is not paying any DA to its employees. As per this settlement, basic wages only will be taken for payment of contribution to the provident fund. 

Apart from basic wages, the employees were paid HRA, special HRA conveyance allowance, special conveyance allowance, night allowances, Sunday allowance, and skilled allowance. These allowances are not paid to all employees of the appellant. 

Skilled allowance is paid only to less than 10% of the employees who are skilled workmen like carpenters, fabricators, electricians, welders, insulations, etc. 

Night allowance is paid to only those who worked the night based on a minimum period of service. 

Sunday allowance is paid to employees who worked on Sundays but based on a minimum period of service. 

Conveyance and special conveyance allowances are paid only to those who have a minimum period of 14 to 17 years standing. 

Special HRA is paid only to those having a minimum experience of 3 years and also having minimum of 86% attendance every year.

Issued impugned order 

After hearing the appellant,  the respondent issued the impugned order, considering all allowances paid by the appellant to its employees except HRA as basic wages and quantifying the dues.

RPF Appellate Tribunal upheld the order 

Order 5 was challenged before the EPF Appellate Tribunal New Delhi in ATA No. 521 (7) 2002 and EPF Appellate Tribunal vide its order dt. 08/09/2010 dismissed the appeal upholding the order issued by the respondent.

Final High Court verdict 

The High Court observed that the PF Authority while calculating the contributions due from the petitioners, included the amounts paid by the employer with respect to special house rent allowance, conveyance allowance, and Sunday wages which were given to a few select employees. 

The petitioners challenged the assessment and an Appellate Tribunal decided the same be valid. 

The petitioner filed the following writ petition in the High Court after the Appellate Tribunal upheld the observation of the Assessing Body.

The petitioner argued that only a few of the employees who engage in extra and skilled duty are entitled to receive the special allowances, therefore they would not fall under the same category as basic wages. 

The High Court while setting aside the order of the Assessing body ruled that “any variable earning, varying from individual to individual according to their efficiency and diligence will stand excluded from the term basic wages”. 

Hence it was held that the observations made by the Appellate Tribunal were not sustainable, as it is repugnant and against the definition of basic wages. 

Accordingly, the High Court quashed the order passed by the tribunal and the subsequent writ petition stands allowed.

CONCLUSION – EPFO issued a circular setting out guidelines for the initiation of inquiries under section 7A and to avoid resentment amongst employers.

The Employees Provident Funds and Miscellaneous Provisions Act, 1952 (“EPF Act”) provides for the institution of provident funds, pensions funds, and deposit-linked insurance schemes for employees in factories and other establishments. 

It also provides for the appointment of Provident Fund commissioners to initiate inquiries for assessment under section 7A of the EPF Act in case of a shortfall in the contributions remitted by employers. 

Section 7A  provides for determination of money due from employers after quantification which is recovered in accordance with the procedure prescribed under the Act. 

The proceedings are quasi-judicial and the Employees’ Provident Fund Organization (“EPFO”) exercises the powers of a civil court under the Civil Procedure Code. 

The commissioner is expected to act in a reasonable and fair manner though, in practice, there is scope for abuse of statutory powers and EPFO has initiated inquiries mechanically, and without due regard to all relevant considerations. 

Further, in instances of default in the deposit of contributions, the commissioners have wide powers to recover money, which includes attachment of bank accounts.

Given the absence of effective enforcement and inconsistent application of relevant provisions across the country, on February 14, 2020, EPFO issued a circular setting out guidelines for the initiation of inquiries under section 7A.

 It noted that often, in many cases, inquiries are initiated for “insufficient and untenable reasons and even without ascertaining sufficient grounds which leads to general resentment amongst employers, on the one hand, and prolonged pendency of such inquiries on the other.”

Karma Global are professionals who have rich experience in their field of over 18 years since its inception in 2004, and the experts in Karma have a deeper understanding of the field that they are in and provide quick and easy solutions to all the challenges faced by its clients of over 10 years. Based on the queries of the clients, it offers expertise and provides expert opinion, analysis, and recommendations to a specific type of clients relating to the industry that they come from, who may be an individual, an organization, or a group of people, or a small and medium enterprise, or to institutions, Government bodies, Agencies, Associations, etc. to help them improve their business performance or activities that they are into so as to leave aside the complexities of laws to Karma Management for them to handle on their behalf. 

  Proprietary blog of Karma Management Global Tech Firm

This blog has been collated and compiled by the internal staff of Karma Global  with the knowledge and expertise that they possess,  besides adaptation, illustration, derivation, transformation, collection as well as auto-generation from various sources, for its monthly newsletter Issue 09  of  March  2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – /


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