Home  /  Code on Social Security, 2020  /  Section 16

Section 16: Central Board to administer Schemes

The Code on Social Security, 2020 (Act No. 36 of 2020) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter III: Employees' Provident Fund
Competent Labour Forum
Act No. 36 of 2020
Section 15 All 163 Sections of Code on Social Security, 2020 Section 17

Legal Commentary & Landmark Judgments: Section 16

Section 16 of the Code on Social Security, 2020 statutorily establishes and ring-fences three distinct public trust funds—the Provident Fund, the Pension Fund, and the Insurance Fund—vesting their legal custodianship in the Central Board and mandating Central Government budgetary contributions to sustain the pension system.

  • Mandatory Fund Ring-Fencing & Segregation: Section 16(1) establishes the Provident Fund, Section 16(2) creates the Pension Fund, and Section 16(3) incorporates the Insurance Fund, strictly prohibiting commingling of assets and mandating separate actuarial accounting for each corpus.
  • Statutory Central Government Pension Subvention: Section 16(2) provides that there shall be paid into the Pension Fund by the Central Government, after due appropriation by Parliament, a contribution calculated at such rate (presently 1.16% of employee wages) as determined by the Central Government.
  • Fiduciary Trust Shield & Insulation from State Revenues: All monies belonging to the three funds are held in trust by the Central Board for the exclusive benefit of subscribers, remaining completely insulated from general government revenues, commercial attachments, and employer insolvency.
Key Landmark Precedents:
  • Regional Provident Fund Commissioner v. Hooghly Mills Co. Ltd. (2012) 2 SCC 489: The Supreme Court emphasized that funds created under the EPF legislation are trust funds held for the benefit of industrial workers; the statutory board exercises strict fiduciary guardianship over every rupee deposited.
  • B.P.L. Ltd. v. R.P.F.C. (2002) 10 SCC 408: The Supreme Court held that employer contributions allocated to specific statutory funds cannot be diverted, retained, or set off against commercial claims under any circumstances.
  • Sunil Kumar Jain v. Sundaresh Bhatt (2022) 7 SCC 540: The Supreme Court reaffirmed that social security funds established under statutory authority are held in trust for employees and stand entirely outside corporate liquidation assets.
Courtroom Practice & Strategic Litigation Guidance:

Corporate treasury and finance managers must maintain separate ledger accounting for EPF (12% split between PF and EPS) and EDLI (0.5%) contributions. When filing monthly Electronic Challan-cum-Returns (ECR), ensure precise mapping to each respective fund head. Overpayment or underpayment across fund heads cannot be adjusted unilaterally; formal rectification applications must be submitted to the Regional PF Commissioner.

Section 15 All 163 Sections of Code on Social Security, 2020 Section 17