Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5821 OF 2019
(Arising out of SLP (Civil) No. 22243 of 2015)
The Officer InCharge, SubRegional …Appellants
Provident Fund Office & Anr.
versus
M/s Godavari Garments Limited …Respondent
J U D G M E N T
INDU MALHOTRA, J.
Delay condoned.
Leave granted.
1. The present Civil Appeal has been filed to challenge the Order
dated 27.04.2012 passed in W.P. No. 1615 of 1993 by the
Bombay High Court, Aurangabad Bench.
Signature Not Verified
Digitally signed by
ANITA MALHOTRA
Date: 2019.07.24
16:56:21 IST
Reason:
1
2. The background facts in which the present Civil Appeal has
been filed are briefly stated as under:
2.1. The Respondent Company is a subsidiary of the
Marathwada Development Corporation, which is an
undertaking of the Government of Maharashtra. It was
covered under the provisions of the Employees’
Provident Fund and Miscellaneous Provisions Act, 1952
(hereinafter referred to as “the EPF Act”) with effect from
01.01.1979.
2.2. The main objective of the Respondent Company, as per
its Memorandum of Association, was to encourage,
promote, develop, setup or cause to be setup a
readymade garments industry in the Marathwada
Region, with a view to provide gainful employment to
people possessing skills in stitching, tailoring, and allied
activities, especially to women from the economically
weaker sections of the Society.
2.3. The Respondent Company engaged women workers who
were provided with cut fabric, thread, buttons, etc. to be
made into garments at their own homes. The sewing
2
machines used by the women workers were owned by
them, and not provided by the Respondent Company.
2.4. On 12.03.1991, Appellant No. 1 – Officer InCharge,
SubRegional Provident Fund Office, issued a Show
Cause Notice to the Respondent Company calling upon
it to pay the Provident Fund contributions for the
women workers. The Balance Sheet of the Respondent
Company for the year 1988 – 89, revealed large debits
towards salary and wages for direct and indirect
workers, but the Respondent Company made a false
statement that it had only 41 employees.
2.5. On 30.11.1992, Appellant No. 1 issued summons to the
Respondent Company for personal hearing under
Section 7A of the EPF Act.
2.6. The representative of the Respondent Company
appeared before Appellant No. 1, and contended that
the women workers who were fabricating garments for
the Respondent Company, were not their employees,
and hence not covered by Section 2(f) of the EPF Act.
Therefore, even though wages were paid to those women
3
workers, the Respondent Company was not liable to pay
Provident Fund contribution in respect of them.
2.7. The Provident Fund Officer – Appellant No. 1 vide Order
dated 19.04.1993 held that the women workers engaged
for stitching garments were covered by the definition of
“employee” under Section 2(f) of the EPF Act. An
amount of Rs. 15,97,087/ was assessed towards
Provident Fund dues of the Respondent Company for
the period from November, 1979 to February, 1991. The
Respondent Company was directed to pay the said
amount within 7 days.
2.8. The Respondent Company challenged the aforesaid
Order by filing W.P. No. 1615 of 1993 before the
Bombay High Court.
The Bombay High Court, Aurangabad bench vide
Final Judgment and Order dated 27.04.2012 allowed
the Writ Petition filed by the Respondent Company, and
set aside the Order dated 19.04.1993 passed by the
Appellant No. 1. It was held that the Respondent
Company had no direct or indirect control over the
4
women workers. The conversion of cloth into garment
could be done by any person on behalf of the women
workers. Hence, the Respondent Company did not
exercise any supervisory control over the women
workers.
2.9. Aggrieved by the aforesaid Judgment, the present Civil
Appeal has been filed by the Provident Fund Office.
3. We have heard the learned Counsel for the parties, and
perused the pleadings and written submissions filed by the
parties.
4. Mr. R.R. Rajesh, learned Counsel appearing on behalf of the
Appellants, submitted that the women workers employed by
the Respondent Company fall within the definition of
“employee” under Section 2(f) of the EPF Act.
Reliance was placed on this Court’s decision in M/s P.M.
1
Patel & Sons and Ors. v. Union of India and Ors. to contend
that the women workers employed by the Respondent
Company were covered by the definition of “employee” under
Section 2(f) of the EPF Act. Hence, the Respondent Company
1 (1986) 1 SCC 32.
5
is liable to pay Provident Fund contribution in respect of
those women workers.
5. Mr. Anoop Kandari, learned Counsel appearing on behalf of
the Respondent Company, submitted that there was no
employeremployee relationship between the Respondent
Company and the women workers. The women workers were
not employees under Section 2(f) of the EPF Act. They were
independent contractors.
It was further submitted that the sewing machines used by
the women workers were owned by them, and not provided by
the Respondent Company. The women workers worked from
their homes, and not at the production centers of the
Respondent Company. Hence, the work performed by them,
could be done by their relatives, or any other person on their
behalf. Furthermore, the women workers were not bound to
report to the production centers regularly, nor were they
required to work at the production centers. The Respondent
Company exercised no supervisory control over the women
workers.
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6. The short issue which arises for consideration is whether the
women workers employed by the Respondent Company are
covered by the definition of “employee” under Section 2(f) of
the EPF Act or not.
Section 2(f) of the EPF Act is setout hereinbelow for ready
reference:
“(f) “employee” means any person who is
employed for wages in any kind of work,
manual or otherwise, in or in connection with the
work of an establishment, and who gets, his
wages directly or indirectly from the employer,
and includes any person,
(i) employed by or through a contractor in or in
connection with the work of the establishment;
(ii) engaged as an apprentice, not being an
apprentice engaged under the Apprentices Act,
1961 (52 of 1961), or under the standing orders
of the establishment;”
(emphasis supplied)
6.1. The definition of “employee” under Section 2(f) of the
EPF Act is an inclusive definition, and is widely worded
to include any person engaged either directly or
indirectly in connection with the work of an
establishment.
6.2. In the present case, the women workers employed by
the Respondent Company were provided all the raw
7
materials, such as the fabric, thread, buttons, etc. from
the Respondent – Employer. With this material, the
women workers were required to stitch the garments as
per the specifications given by the Respondent
Company. The women workers could stitch the
garments at their homes, and provide them to the
Respondent Company. The Respondent Company had
the absolute right to reject the finished product i.e. the
garments, in case of any defects.
6.3. The mere fact that the women workers stitched the
garments at home, would make no difference. It is the
admitted position that the women workers were paid
wages directly by the Respondent Company on a per
piece basis for every garment stitched.
6.4. The issue in the present case is squarely covered by the
decision of this Court in Silver Jubilee Tailoring House
and Ors. v. Chief Inspector of Shops and Establishments
2
The appellants therein were engaged in the
and Ors.
business of producing garments. They employed
2 (1974) 3 SCC 498.
8
workers who were provided with the cloth, and were
instructed by the appellants how to stitch it. The
workers were paid on piecerate basis. If a worker failed
to stitch a garment as per the instructions, the
appellants rejected the work, and asked the worker to
restitch the garment. This Court held that such
workers fell within the definition of “person employed”
under Section 2(14) of the Andhra Pradesh (Telangana
Area) Shops and Establishments Act, 1956. It was held
that:
“35. Quite apart from all these circumstances, as
the employer has the right to reject the end
product if it does not conform to the instruction of
the employer and direct the worker to restitch it,
the element of control and supervision as
formulated in the decisions of this Court is also
present.”
(emphasis supplied)
6.5. On the issue where payment is made by piecerate to
the workers, would they be covered by the definition of
“employee”, this Court in Shining Tailors v. Industrial
3
Tribunal II, U.P., Lucknow and Ors. , held that:
“5. We have gone through the record and
especially the evidence recorded by the Tribunal.
The Tribunal has committed a glaring error
apparent on record that whenever payment is
3 (1983) 4 SCC 464.
9
made by piece rate, there is no relationship of
master and the servant and that such
relationship can only be as between principal
and principal and therefore, the respondents
were independent contractors. Frankly, we must
say that the Tribunal has not clearly grasped the
meaning of what is the piece rate, If every piece
rated workmen is an independent contractor,
lakhs and lakhs of workmen in various
industries where payment is correlated to
production would be carved out of the expression
‘workmen’ as defined in the Industrial Disputes
Act. In the past the test to determine the
relationship of employer and the workmen was
the test of control and not the method of
payment. Piece rate payment meaning thereby
payment correlated to production is a well
recognised mode of payment to industrial
workmen. In fact, wherever possible that method
of payment has to be encouraged so that there is
utmost sincerity, efficiency and single minded
devotion to increase production which would be
beneficial both to the employer, the workmen
and the nation at large. But the test employed in
the past was one of determining the degree of
control that the employer wielded over the
workmen. However, in the identical situation in
Silver Jubilee Tailoring House and Ors. v. Chief
Inspector of Shops and Establishments and Anr.
(1973) IILLJ 495 SC Methew, J. speaking for the
Court observed that the control idea was more
suited to the agricultural society prior to
Industrial Revolution and during the last two
decades the emphasis in the field is shifted from
and no longer rests exclusively or strongly upon
the question of control. It was further observed
that a search for a formula in the nature of a
single test will not serve the useful purpose, and
all factors that have been referred to in the cases
on topics, should be considered to tell a contract
of service. Approaching the matter from this
angle, the Court observed that the employer's
right to reject the end product if it does not
conform to the instructions of the employer
10
speaks for the element of control and
supervision. So also the right of removal of the
workman or not to give the work has the element
of control and supervision. If these aspects are
considered decisive, they are amply satisfied in
the facts of this case. The Tribunal ignored the
well laid test in law and completely misdirected
itself by showing that piece rate itself indicates a
relationship of independent contractor and error
apparent on the record disclosing a total lack of
knowledge of the method of payment in various
occupations in different industries. The right of
rejection coupled with the right to refuse work
would certainly establish master servant
relationship and both these tests are amply
satisfied in the facts of this case. Viewed from
this angle, the respondents were the workmen of
the employer and the preliminary objection
therefore, raised on behalf of the appellant
employer was untenable and ought to have been
overruled and we hereby overrule it.”
(emphasis supplied)
6.6. In M/s P.M. Patel & Sons and Ors. v. Union of India and
4
Ors. , the appellants therein were engaged in the
manufacture and sale of bidis . The appellants engaged
contractors, and the contractors engaged workers who
rolled the bidis at their own homes after obtaining the
raw materials either directly from the appellants, or
through the contractors. The appellants contended that
those workers were not covered by the definition of
“employee” under Section 2(f) of the EPF Act. This Court
4 (1986) 1 SCC 32.
11
rejected the contentions raised by the appellants
therein, and held that:
“8. … Clause (f) of Section 2 of that Act defines
an “employee” to mean “any person who is
employed for wages in any kind of work,
manual or otherwise, in or in connection with the
work of an establishment, and who gets his
wages directly or indirectly from the employer,
and includes any person employed by or
through a contractor in or in connection with the
work of the establishment.” It will be noticed
that the terms of the definition are wide. They
include not only persons employed directly by
the employer but also persons employed through
a contractor. Moreover, they include not only
persons employed in the factory but also
persons employed in connection with the work of
the factory. It seems to us that a home worker,
by virtue of the fact that he rolls beedis, is
involved in an activity connected with the work
of the factory. We are unable to accept the
narrow construction sought by the petitioners
that the words “in connection with” in the
definition of “employee” must be confined to
work performed in the factory itself as a part of
the total process of the manufacture.
…
10. In the context of the conditions and the
circumstances set out earlier in which the home
workers of a single manufacturer go about their
work, including the receiving of raw material,
rolling the beedis at home and delivering them to
the manufacturer subject to the right of rejection
there is sufficient evidence of the requisite
degree of control and supervision for
establishing the relationship of master and
servant between the manufacturer and the home
worker. It must be remembered that the work of
rolling beedis is not of a sophisticated nature,
requiring control and supervision at the time
when the work is done. It is a simple operation
12
which, as practice has shown, has been
performed satisfactorily by thousands of
illiterate workers. It is a task which can be
performed by young and old, men and women,
with equal facility and it does not require a high
order of skill. In the circumstances, the right of
rejection can constitute in itself an effective
degree of supervision and control. We may point
out that there is evidence to show that the
rejection takes place in the presence of the home
worker. That factor, however, plays a merely
supportive role in determining the existence of
the relationship of the master and servant. The
petitioners point out that there is no element of
personal service in beedi rolling and that it is
open to a home worker to get the work done by
one or the other member of his family at home.
The element of personal service, it seems to us,
is of little significance when the test of control
and supervision lies in the right of rejection.”
(emphasis supplied)
6.7. The aforesaid judgments make it abundantly clear that
the women workers employed by the Respondent
Company are covered by the definition of “employee”
under Section 2(f) of the EPF Act.
6.8. The EPF Act is a beneficial social welfare legislation
which was enacted by the Legislature for the benefit of
5
the workmen. This Court in The Daily Partap v. The
Regional Provident Fund Commissioner, Punjab,
5 Regional Provident Fund Commissioner v. The Hooghly Mills Company Ltd. and Ors. , 2012
(1) SCALE 422.
13
Haryana, Himachal Pradesh and Union Territory,
6
Chandigarh , held that:
“9. … It has to be kept in view that the Act in
question, is a beneficial social welfare legislation
meant for the protection of weaker sections of
society, namely, workmen who had to eke out
their livelihood from the meagre wages they
receive after toiling hard for the same.”
Hence, the provisions under the EPF Act have to be
interpreted in a manner which is beneficial to the
workmen.
6.9. In the present case, the women workers were certainly
employed for wages in connection with the work of the
Respondent Company. The definition of “employee”
under Section 2(f) is an inclusive definition, and
includes workers who are engaged either directly or
indirectly in connection with the work of the
establishment, and are paid wages.
In the present case, the women workers were directly
engaged by the Management in connection with the
6 (1998) 8 SCC 90.
14
work of the Respondent Company, which was set up as
a readymade garments industry in Marathwada. The
women workers were paid wages on perpiece basis for
the services rendered. Merely because the women
workers were permitted to do the work off site, would
not take away their status as employees of the
Respondent Company.
7. The Respondent Company placed reliance on this Court’s
decision in C.E.S.C. Limited and Ors. v. Subhash Chandra
7
Bose and Ors. , wherein it was held that:
“14. … In the textual sense ‘supervision’ of the
principal employer or his agent is on ‘work’ at
the places envisaged and the word ‘work’ can
neither he construed so broadly to be the final
act of acceptance or rejection of work, nor so
narrowly so as to be supervision at all limes and
at each and every step of the work. A
harmonious construction alone would help carry
out the purpose of the Act, which would mean
moderating the two extremes. When the
employee is put to work under the eye and gaze
of the principal employer, or his agent, where he
can be watched secretly, accidentally, or
occasionally, while the work is in progress, so as
to scrutinise the quality thereof and to detect
faults therein, as also put to timely remedial
measures by directions given, finally leading to
the satisfactory completion and acceptance of
the work, that would in our view be supervision
for the purposes of Section 2(9) of the Act.”
7 (1992) 1 SCC 441.
15
The decision in C.E.S.C. Limited (supra) however, is not
applicable to the facts of the present case. In that case, this
Court interpreted the meaning of the term “supervision” as
used in the definition of “employee” Section 2(9) of the
Employees’ State Insurance Act, 1948. However, the term
“supervision” is nowhere used in the definition of “employee”
under Section 2(f) of the EPF Act. The decision in P.M. Patel
(supra) could not be used to interpret the word “supervision”
under the Employees’ State Insurance Act, 1948 because the
said word has not been used in Section 2(f) of the EPF Act.
8. In view of the aforesaid discussion, the judgment passed by
the Bombay High Court vide the Impugned Order dated
27.04.2012, being contrary to settled law, is set aside.
The Order dated 19.04.1993 passed by the Appellant No. 1
is restored. The Respondent Company is directed to deposit
the amount assessed by Appellant No. 1 towards Provident
Fund dues of the women workers within 1 month from the
date of this Judgment.
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The Civil Appeal is allowed in the aforesaid terms. All
pending Applications, if any, are accordingly disposed of.
Ordered accordingly.
.....................................J.
(ABHAY MANOHAR SAPRE)
.…...............………………J.
(INDU MALHOTRA)
New Delhi,
July 24, 2019
17