Successor Employer Held Liable For Social Security Default Prior To Transfer

• Transferor entity had defaulted on its social security obligations towards its employees, prior to the date of transfer.
• As per the agreement between the transferor and the transferee, the transferor entity continued to be liable for payment of any damages to the provident fund authorities for defaulting on its social security obligations.
• Irrespective of an express agreement, transferee entity was held liable to pay damages to the provident fund authorities for default in payment of contributions by the transferor entity, during the period preceding the transfer.

The Supreme Court of India ("Supreme Court") has, in a recent judgment¹, held the successor employer liable to pay damages for any default in remitting provident fund (social security) contributions. While the default was committed by the transferor entity prior to the date of transfer of employees, the Supreme Court has clarified that the successor employer (i.e. the transferee) shall not stand