India's largest chain of discount supermarkets, Subhiksha has come under the scanner of the provident fund authorities in Chennai for failing to deposit provident fund arrears of Rs5 crore for its nearly 4,500 employees, which it said had not been paid since June last year.
Subhiksha, which operates about 1,600 stores across the country, ran its operations mostly on a cash basis. Its trade cycle collapsed in October resulting in a halt in fresh purchases. Moreover, the retailer was unable to pay salaries, vendor bills and rentals for various stores as banks refused to extend it any credit.
Its employees have not been paid a salary since October 2008 with the retailer piling up Rs20 core in unpaid salaries and the Employees Provident Fund Office in Chennai hearing the case yesterday on non-payment of PF dues by Subhiksha, has adjourned the final hearing to 19 February.
The EPFO office claims that Subhiksha has not paid PF dues from June to the tune of Rs5 crore, which includes interest although the Subhiksha managing director R Subramanian said that the figures are grossly inflated but refused to comment any further as the case was being heard by the EPFO currently.
Reports say that the dues that the EPFO is claiming, is for the months from October onwards, when Subhiksha was unable to pay salaries to its employees.
The EPFO office also claims that Subramanian had said in a recent TV interview that it employed 10,000 people, while the records with the EPFO reflects only 4,500. The PF authorities presume that the remaining 5,500 could be working on contract, with the contract workers, perhaps, being supplied by contractors.
The EPFO officials claim that under the law, Subhiksha will be held responsible if the contractor has defaulted in paying the PF dues since the main employer is the retailer.
Once the hearing is over and if the PF office does confirm that Subhiksha owes money to the EPF, the retailer will be given 15 days to either pay the dues or invite penal provisions under the Act, which could also lead to the properties of its promoters being attached.
Meanwhile, the retailer said yesterday that the top five executives from its management team have resigned during the past month.
But Subramanian said he had no regrets about their departure they had left for better opportunities and that they had done an excellent job in spite of facing enormous difficulties even though they could not be paid salaries for three or four months.
Subramanian said that although these executives were not from the retail industry, each one of them had contributed to the fast growth of the company, which was able to establish nearly 1,600 stores in a very short span and was considered as the most aggressive player in the retail industry.
Last weekend, some 600 odd stores and warehouses across the country were looted and ransacked as security guards abandoned the premises when the liquidity crunch prevente the company from being able to pay salaries. (See: Subhiksha's 600 stores and warehouses across the country looted)