SEEA/P/PF/0612
Nov.01, 2006

Regional Provident Fund Commissioner,
Employees P. F. Organisation Regional Office,
Bhagirathi Complex, Near Circuit House,
Karamtoli, Ranchi –834001 (Jharkhand)

(Attn: Sri P.B.Verma, RPFC II)

Sub: Non-implementation of the directive of your Central Office by HSPF Trust for payment of P.F. Revenue surplus for the years 1996-97 to 2000-2001 and 2002-03 to its members.

Ref.: Your letter Nos. JH/RO/RNC/ EXM/ 935/ 2003/7297 dated 8th Dec 2003 and JH/RO/RNC/ EXM/ 935/06/1369 dated 14th June 2006 and our recent meeting with you.

Dear Sir,

1. Further to our above referred meeting with you we obtained detailed information alongwith enclosures of relevant documents from SAIL/ RDCIS under RTI Act 2005. The same is enclosed herewith. Produced below is the summary of the contents of the RDCIS letter and the enclosures which indicate the following basic points:
(i) Amended Rule 24 of HSPF Trust Rules deals with statutory rate of interest only and does not deal with crediting of additional interest beyond statutory rate. Payment of additional interest to PF members is the prerogative of Trustees (Para 2,3,4,5(4) & 6(2) of RDCIS letter)
(ii) SAIL Corporate Office issued guidelines to release part of additional interest and to hold back the balance part as Reserve and Trust has followed Corporate Guidelines and released payments accordingly for the years 1996-97 to 2000-2001 and 2002-2003.
(iii) CPFC in his letter dated 21.11.2003 has not given direction to pay entire interest rather they have given clarification and hence the same is not statutorily binding (Page 4 of RDCIS letter).
(iv) A private Auditor was hired who certified that everything is correctly done by HSPF Trust managers on the issue.

2. Our observation to the aforesaid Para 1 is that there appears to be acute misunderstanding with SAIL as well as HSPF Trust about the legal position of HSPF Trust. The Company seems to be treating the Trust as one of its departments and taking decision as per its convenience. The Trustees appear to be more interested in following Company’s guidelines than the provisions of HSPF Trust Rules and EPF & MP Act 1952. We are giving below our stand and opinion on the legal PF provisions.
a) HSPF trust enjoys the statutory protection accorded under EPF & MP Act 1952. CPFC has also confirmed this fact in their letter No. E-III(3)(1) 2000/BR/70438 dated 17.01.2002 (Annexure 4 of RDCIS letter).
b) The company may as per Rule 3(b) of HSPF Trust Rules amend the HSPF Rules in consultation with the Trust, PF and Income Tax Departments. Without amendment Company can not interfere in Trust functions. The Fund shall be governed by HSPF Rules (Rule 3(9)).
c) As per Rule 17 of HSPF Trust Rules the Functions and Responsibilities of Trustees is to manage the Fund as per these Rules. Neither the Trustees nor SAIL Board have any prerogative to decide anything against these Rules.
d) HSPF Rules do not provide for creation of any Reserve out of Revenue Surplus of the Trust.
e) As per provision of Rule 3(a) of HSPF Rules PF Department’s clarification on disputes between the Trust and the PF members about interpretation of any PF Rules will be final and binding on both. As such CPFC clarifications vide their letter No. E III 3(1)2000/BR-GEN/6269 dated 21.11.2003 (Annexure 11 of RDCIS letter) about distribution of entire surplus to member is binding on HSPF Trust. Your above referred advice also contains ‘as directed by our Central Office’.
Rule 24 of HSPF Rules provides for distribution to members of entire net balances in the Revenue Account of the Trust. Holding back any sum out of the net balance is against Rule 24. CPFC vide their letter No. 6269 dated 21.11.2003 addressed to RPFC Ranchi also upheld this view. This will naturally be extended to distribution of Surplus Revenue in 2002-03. Para 2 of CPFC’s above letter is given below for your ready reference:
“As per Rule 24 of the HSPF Trust Rules the entire surplus earned by the Trust in a year is to be distributed among the members of the Trust on pro-rata basis in the same year which implies that surplus available with the Trust is to be distributed among all members of the Trust existing between 96-97 to the date of declaration of surplus interest”.
f) The 1990 amendment of Rule 24 has not withdrawn any existing benefits rather it has added one more benefit to the members. Before amendment the methodology to be adopted for distribution of interest was on the basis of Annual opening balance in case of insufficient revenue surplus and progressive monthly opening balance basis in case of sufficient revenue generation by Trust. Amendment has improved this. Methodology of Progressive monthly balance basis is to be adopted even in case of insufficient Surplus Revenue. This means the members will get more benefit and Company will make good the shortage in Revenue. There is no other change in Rule 24 due to this Amendment. Statutory rate at minimum was available earlier also as well as after amendments. Hence it is incorrect on part of RDCIS to say that Amended Rule 24 deals with statutory rate only.
g) In view of the aforesaid facts the engagement and report of private Auditors has no locus standi in the matter (Annexure 13 of RDCIS letter). It has been included only to confuse the issue and, somehow or the other, delay the payment. Therefore, this needs to be ignored at your end.

3. From the facts stated above it would be very clear that non-distribution of the entire Revenue Surplus for the years 1996-97 to 2000-2001 and 2002-03 tantamount to violation of PF Rules. Company’s directives and Trustees actions in holding back part of Revenue Surplus undistributed even after directions given by CPFC and repeated requests by various PF members may be treated as willful disobedience of PF Rules.

4. The PF Act puts liability on Employer for proper functioning of PF Trust. It seems to us that the Trust is failing in its duties and needs speedy corrective measures.
In view of the facts stated above we request you to kindly order for payment of the entire Revenue Surplus for the years 1996-97 to 2000-2001 and 2002-03 to the PF members in the form of a directive, which should be final and binding, without further delay. Please note that the issue is already nine years old and three years after CPFC finally clarified the issue in no uncertain terms. The delay becomes painful to those who are retired and who are very much dependent on such returns.

Thanking You,

Yours Faithfully,

(V.N.Sharma)

Encl: 26 pages of documents