Full Judgment Text
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CASE NO.:
Appeal (civil) 4285 of 1998
PETITIONER:
M/S S.K. NASIRUDDIN BEEDI MERCHANT LIMITED
Vs.
RESPONDENT:
CENTRAL PROVIDENT FUND COMMISSIONER & ANR.
DATE OF JUDGMENT: 30/01/2001
BENCH:
S. Rajendra Babu & S.N. Variava.
JUDGMENT:
RAJENDRA BABU, J. :
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The appellant before us is a manufacturer of beedis. He
challenged an order made by the respondents under Section
7-A of the Employees Provident Fund and Miscellaneous
Provisions Act, 1952 (hereinafter referred to as the Act].
The appellant had not deducted from the wages of the home
workers employed through contractors for manufacture of
beedis because of pendency of litigation in order to
contribute towards the provident fund on the ground that the
Act would not be applicable in cases of such employees.
Earlier on the receipt of a notice under the Act from the
respondents the appellant challenged the notice in the High
Court in C.W.J.C. No. 4089 of 1988 on the ground that the
Act has no application in respect of home workers engaged in
rolling the beedis engaged through independent contractors.
An interim stay had been granted by the court during the
pendency of the proceeding. By an order made on July 27,
1989 the said writ petition was dismissed by holding that
the provisions of the Act are applicable in respect of home
workers engaged in rolling the beedis of the petitioners
establishment through contractors. This decision was
questioned before this Court in Special Leave Petition No.
10538 of 1989. In the meanwhile, the Provident Fund
Commissioner determined the amount due from the appellant
and called upon it to deposit a sum of Rs. 66,84,930.50
being employers and employees contribution towards the
provident fund from July 1977 to August 1986. By another
order made on December 18, 1989 the appellant was called
upon to pay a sum of Rs. 28,72,383.85 within stipulated
time. These demands were also challenged in two writ
petitions, C.W.J.C. No. 1114 of 1990 and C.W.J.C. 1115 of
1990. This Court by an order made on August 22, 1989
disposed of S.L.P.(C) No. 10538 of 1989 observing that the
question involved in the matter could be heard and decided
in the proceedings pending before the High Court. The two
writ petitions, namely, C.W.J.C. No. 1114 of 1990 and
C.W.J.C. 1115 of 1990 came to be dismissed on August 19,
1992. A sum of Rs. 46,90,051/- out of a total demand of
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Rs. 95,57,314.35 was realised by the Provident Fund
Commissioner. When the order made by the High Court in
C.W.J.C. No. 1114 of 1990 and C.W.J.C. 1115 of 1990 was
questioned in Special Leave Petitions (C) Nos. 15312-13 of
1992 filed in this Court, the same were dismissed on May 3,
1993 by stating as follows :
The SLPs are dismissed. It is open for the petitioner
to collect the names of the Bidi workers who work for them
through their contractors and furnish the names of all the
workers to the Provident Fund Commissioner. The Provident
Fund Commissioner thereafter will verify these names and
calculate the liability of the petitioner on the basis of
such verification. If any excess amount is found due from
the petitioner, the Provident Fund Commissioner will recover
such amount from the petitioner, on the other hand, if any
amount is found due to the petitioner, the Provident Fund
Commissioner will refund the same. The petitioner to
furnish names of the workers, as above within six months
from today.
Thereafter the appellant furnished the particulars of
home workers stated to be engaged by the contractors to the
best of information available with the appellant for final
determination of its liability under Section 7-A of the Act
as noticed by this Court. A claim was made by the appellant
for waiver from payment of employees contribution for the
period from October 1985 to May 3, 1993 on the ground that
he had not been able to collect the same. But the said
claim was disallowed. The Regional Provident Fund
Commissioner issued a certificate for recovery of the
outstanding liability of Rs. 46,17,538.20 through the
Recovery Officer, Bihar. This action of the respondent was
called in question before the High Court. Three contentions
were raised before the High Court, vis-Ã -vis :
(i) In the circumstances arising in this case the
appellant cannot be asked to pay retrospectively employees
contribution to the provident fund without deducting that
from their wages as it is not possible to comply with the
provisions of Para 32 of the Statutory Scheme. This
situation arose on account of uncertainty of their liability
until the same was settled by an order made under Section
7-A of the Act on June 2, 1994 by the Regional Provident
Fund Commissioner;
(ii) There is a bona fide dispute as to the
applicability of the Act and payment by the employer towards
the employees contribution to the fund would arise only
after making deductions from their wages and that the
employer cannot be made liable to pay that contribution from
an anterior date to the final determination of their
liability under Section 7-A of the Act, and
(iii) The demands in question are arbitrary and
unreasonable in violation of Article 14 of the Constitution
in view of the admitted position that the appellant had bona
fide not deducted the employees contribution from the wages
of the employees due to various uncertainties arising out of
litigation before the courts.
The contesting respondents before the High Court
submitted that after the law was settled in P.M. Patel &
Sons v. Union of India, AIR 1987 SC 447, there was hardly
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any scope for litigation regarding applicability of the Act
in respect of home workers employed by the appellant through
contractors. When the liability became clear a formal
notice as to coverage under the Act had been sent to the
appellant in January 1977 to the effect that the
notification issued by the Central Government applied to the
appellant with effect from July 1976 to December 1977 and
the Code Number is BR/7 A- Cell/1365/88/3445 in respect of
the establishment of the appellant. Thus it was contended
that the formal notice had already been issued as to the
coverage and, therefore, it is not open to the appellant to
contest their liability arising under the Act by stating
that it is the date of determination that will attract the
provisions of the Act and not the date of notification
extending the application of the Act to the industry in
which the appellant is engaged. The learned Single Judge of
the High Court concluded as follows :
In the instant case, I have found that the petitioner
raised dispute as regards the applicability of the Act bona
fide and that until collection of particulars of the
home-workers engaged by the contractors and furnishing
thereof in compliance with the order dated 3.5.1993, passed
by the Honble Supreme Court, the petitioner did not have
the particulars of the home-workers engaged by the
contractors. The petitioner also did not get deduction of
those employees contributions from their wages by the
contractors for the period from October, 1985 to 3.5.1993,
as the petitioner bona fide took the view that the employers
of these home-workers were the contractors and not the
petitioner. As such, it cannot be said that the petitioner
deliberately or negligently did not make deduction of the
employees contribution from the wages of the home-workers
for the period from October, 1985 to 3.5.1993. No doubt, as
per the provision of paragraph 30 of the Employees Provident
Funds Scheme, 1952 (hereinafter mentioned as The Scheme),
the employer is required to pay both contributions payable
by the employer as well as the employees and the employees
contributions, equal to the contribution of the employer,
are to be deducted from their wages. Now, in case the
petitioner is required to pay the employees contribution
for the period from October, 1985 to 3.5.1993, in view of
the provisions of paragraphs 31 and 32 of the Scheme, the
petitioner will not be able to make deduction of the
employees contribution from the wages of the home- workers
for the said period.
In this background, the learned Single Judge is of the
view that it is inequitable and unfair to saddle the
petitioner with the liability to pay the employees
contribution for the period from October 1985 to May 3, 1993
which the appellant could not and did not deduct through its
contractors on bona fide ground. In reaching this
conclusion, the learned Judge placed reliance upon the
decision of Calcutta High Court in Mantu Biri Factory (P)
Ltd. v. Regional Provident Fund Commissioner, Civil Appeal
6 of 1993 decided on March 8, 1994. The matter was taken up
in appeal before the Division Bench of the High Court in
Letters Patent Appeal No. 403 of 1996. The Division Bench
did not agree with any of the contentions raised on behalf
of the appellant and held that the appellant is liable to
make payments. Thus the High Court allowed the appeal and
set aside the order made by the learned Single Judge.
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In this appeal the contentions urged before the High
Court are reiterated before us and in support of the same
strong reliance is placed on the decision of this Court in
District Exhibitors Association Muzaffarnagar & Ors. v.
Union of India & Ors., 1991 (2) SCR 477.
The contention raised by the appellant is two fold.
Firstly, that the Act is not applicable in respect of the
beedi rollers engaged through contractors and, secondly, the
contention put forth is that even if the Act is applicable,
the same cannot be enforced for the period in question
inasmuch as on account of various circumstances the
appellant has not been able to deduct the employees
contribution towards the provident fund from their wages
and, therefore, in terms of para 32 of the Scheme framed
under the Act the appellant will not be able to recover the
same and the liability under the Act is only to make payment
after deduction of the contribution towards provident fund
from the wages of the employees and not otherwise.
So far as the first contention is concerned, law is
clear and this Court in the two decisions in Mangalore
Ganesh Beedi Works v. Union of India, AIR 1974 SC 1832, and
P.M. Patel & Sons (supra) held that the Act would be
applicable even in respect of home workers engaged through
contractors and cannot be cavilled any more.
So far as the second contention is concerned, the
argument of the learned counsel proceeds on the basis that
the liability was not clear in view of the various
circumstances and, therefore, deduction could not be made
from the wages of the employees and that circumstance leads
to anomalous position making the employer to pay the
employees contribution towards provident fund without the
facility of deduction from their wages. We do not think
that this argument is well founded. The applicability of
the Act to any class of employees is not determined or
decided by any proceeding under Section 7-A of the Act but
under the provisions of the Act itself. When the Act became
applicable to the employees in question, the liability
arises. What is done under Section 7-A of the Act is only
determination or quantification of the same. Therefore, the
contention put forth on behalf of the appellant that their
liability was attracted only from the date of determination
of the matter under Section 7-A of the Act does not stand to
reason. Indeed, the coverage was indicated to the appellant
as early as in January 1977, as already noticed by us. In
fact, the Government issued a clarification that the
employees share of contribution from pre-discovery period
which has not been deducted from the wages of employees
shall not be recovered and that pre-discovery period is
explained in the following terms :
(i) Pre-discovery period : This will include the
period commencing on the date from which the Act is legally
applicable to factory or establishment and the date on which
a formal notice for coverage under the Act is served on the
employer by the employer by the provident fund authorities.
In all such cases, the employees share of contribution
shall be payable from the first of the month following the
issue of the notice for coverage under the Act.
(ii) Period covered by general stay order given by the
Supreme Court on the application challenging the
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notification extending the provisions of the Act to an
industry/class of establishments : This will include the
period from the date of extension of the Act to the date of
final judgment of the Court. In all such cases, the
employees share of contribution shall be payable from the
first of the month following the judgment.
the general Inasmuch as the appellant is protected for
the period of coverage by stay order given by this Court on
the applicability of the Act to the industry in question
till the date of the final judgment otherwise steps would
have been taken in terms of the formal notice issued to the
appellant in 1977 itself. Thus in respect of period from
June 1977 to September 1985 there was waiver of the
liability by reason of the clarification issued by the
Government under para 78 of the Scheme. On the disposal of
the matter by this Court in September 1985 the liability to
deposit the employees contribution became very clear.
Though in law respondents were entitled to recover even for
the period from June 1977 in view of the directions issued
by the Government but that was not demanded. For period
upto September 1985 and for subsequent period there is no
manner of doubt and the dispute raised by the appellant
cannot be stated to be bona fide at all. In the
circumstances, we fail to understand as to how the appellant
can rely upon his own laches in not deducting the wages from
1985 onwards to enable him to make employees contribution
to the fund.
The learned counsel relied upon the decision of this
Court in District Exhibitors Association Muzaffarnagar &
Ors. (supra) to contend that inasmuch as paragraphs 30 and
32 of the Scheme are not capable of implementation which
provided for the employer in the first instant paying both
the contributions by him and he employees and Para 32
enabled the employer to recover the employees contribution
that has been paid by him under Para 30 could make it clear
that the liability is limited; that no such deduction can
be made from any wage other than that which is paid in
respect of the period of which the contribution is payable;
that from that it is obvious that the employer has to pay
the contribution of the employees share but he has a right
to recover that payment by deducting the same from the wage
due and payable to the employees; that no deduction can be
made from the wages payable for any period but only from the
wages for the period in respect of which the contribution is
payable; that no deduction can be made from any other wages
payable to the employees, that is, the payment of employees
contribution by the employer with the corresponding right to
deduct the same from the wages of the employees could be
only for the current period during which the employer has
also to pay his contribution.
This enunciation of law was made in the context of the
Scheme having been made applicable with retrospective effect
to the employees concerned therein. Therefore, in that
context this Court examined the scope of the Scheme and
decided the matter. But that benefit cannot be availed of
by the appellant in the present case inasmuch as it was open
to the appellant to avail of the benefit of para 32 of the
Scheme in the year 1985 itself when their liability became
clear by the declaration of law made by this Court in P.M.
Patel & Sons case [supra]. Therefore, the appellant cannot
take advantage of this decision. The decision of the
Calcutta High Court in Mantu Biri Factory (P) Ltd. [supra]
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is also in line with the decision of this Court in District
Exhibitors Association Muzaffarnagar & Ors. case [supra]
and, therefore, we are of the opinion that neither the
decision of this Court in District Exhibitors Association
Muzaffarnagar & Ors. case (supra) nor of Calcutta High
Court in Mantu Biri Factory (P) Ltd. [supra] can be of any
assistance to the appellant.
In the circumstances, we think that the view taken by
the Division Bench of the High Court appears to be correct.
Accordingly, the appeal is dismissed. No costs.