MTNL no longer absolved from the Provident Fund Act: Delhi HC

MTNL no longer absolved from the Provident Fund Act: Delhi HC

Provident fund is also denoted as a pension fund. In most of the developing countries, some fixed amount held in the private savings accounts in order to provide comfort to the families after the life of retirement. It is kind of benefit account for the worker that later on helps him to use the fund of account after retirement. If in any case, the worker dies before claiming those fund then his legal heir has entitled to claim those amount.

This is the step taken by the government of many developing countries for providing financial support to the retirees provided under the Provident fund act. In a certain condition like in case of a medical emergency, the pre-retirement withdrawal may be allowed to the employee. It applies to every establishment which has 20 or more person as an employed. 

The provident fund is based on the contribution of employee and employer. Both will contribute equally to the funding account. The contribution paid by the employer based on the fixed percentage of the wages and dearness allowance plus retaining allowance and the same amount was contributed by the employee into the fund account.

Brief facts:

The appellant was a Government Company and imparted his telephonic services in the cities. The present appeal was filed to set aside the show cause notice issued by the Provident Fund Commissioner as the relaxation granted to Company were withdrawn under the Provident Fund Act.

The company have suffered the loss for three consecutive financial years and the relaxation grant to the company not to contribute to the provident fund of its employee. The order was withdrawn by the Provident fund Commissioner as it violates the Section 27AA of the provident fund act and the Company filed an appeal to quashed the order. The relaxation was given to the company under section17 of the Provident Fund Act. 

Key feature:

  • The appellant was provided relaxation under section 17 of the provident fund officer not to contribute in MTNL Employee Provident Fund Trust as the company is going through losses from the 3 consecutive years.
  • The appellant takes a plea that they have to make an upfront payment to Government of India for 3G and BWM spectrum of about 11,000crores and for the purpose to meet this the company already raised the loan.
  • The Provident fund commissioner withdraws the said relaxation as it violates section 27AA of the provident fund act.


The Delhi High court denied the appeal of the MTNL against the order of the Provident Fund Commissioner related to withdrawal of relaxation on contribution to the employee provident fund trust of the MTNL as it violates section 27AA of the Provident Fund Act.

As MTNL takes a plea as the company suffered losses in three consecutive year and they have to make an upfront payment to the Government of India for 3G and BWA spectrum of Rs.11,000 crore. The court states that it doesn’t affect the MTNL contribution required to be made under the provident fund act for their employees. 

Edited by Vartika Gajendra Singh

Approved & Published – Sakshi Raje