M/S Hawkins Cookers Limited vs Employees Provident Appellate Tribunal And Others

CWP No. 36151 of 2019 (O&M) - 1-
IN THE HIGH COURT OF PUNJAB & HARYANA AT
CHANDIGARH
CWP No. 36151 of 2019 (O&M)
Reserved on: 05.10.2026
Date of Decision: 03.11.2026
M/s Hawkins Cookers Limited ......Petitioner
Versus
Employees Provident Fund Appellate Tribunal and others .....Respondents
1 The date when the judgment is reserved 05.10.2026
2 The date when the judgment is pronounced 03.11.2026
3 The date when the judgment is uploaded on the website 04.11.2026
4 Whether only operative part of the judgment is
pronounced or whether the full judgment is pronounced
Full
5 The delay, if any, of the pronouncement of full
judgment, and reasons thereof.
N.A.
CORAM: HON'BLE MS. JUSTICE KIRTI SINGH
Argued by : Mr. Pawan Mutneja, Senior Advocate with
Ms. Suverna Mutneja, Advocate,
Ms. Kajal Bahra, Advocate and
Mr. Vishesh Bhatia, Advocate
for the petitioner.
Mr. Gaurav Tangri, Advocate
for respondents No. 2 and 3.


KIRTI SINGH , J.
1. The proceedings of this Court have been instituted under Article
226 of the Constitution of India, seeking quashing of the order dated
02.03.2016 (Annexure P-2) passed by the Regional Provident Fund
Commissioner, respondent No.3, determining provident fund liability against
the petitioner, and the order dated 19.11.2019 (Annexure P-1) passed by the
Employees’ Provident Fund Appellate Tribunal, whereby the petitioner’s
statutory appeal was dismissed.
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2. Briefly stated, as per the pleaded case, the petitioner, M/s
Hawkins Cookers Limited, is a company engaged in the manufacture of
pressure cookers and has a manufacturing plant at Phagwara Road,
Hoshiarpur. The establishment is covered under the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952 (for short, ‘the Act’) and
bears Code No. LD/JAL/5017. The petitioner asserts that it has regularly
deposited provident fund contributions in respect of its own employees.
3. The proceedings originated from an inspection/squad report
concerning non-production of certain provident fund records. According to
the petitioner, summons under Section 7A of the Act were issued on
17.06.2008 on the basis of a squad report dated 28.05.2008. An Enforcement
Officer was thereafter directed, on 08.10.2008, to inquire into the alleged
evasion of membership. The petitioner states that the Enforcement Officer
submitted a report on 19.12.2014, which was not accepted by the authorities.
4. In December 2014, a Commission comprising officers of the
Provident Fund Department was constituted to examine the records and the
nature of the relationship between the petitioner and the vendors engaged by
it. The Commission submitted its report dated 18.05.2015 (Annexure P-4),
covering the period October 2000 to April 2008. The report examined the
nature of the work undertaken by the vendors, the supply of material, the
processing and return of goods, quality checks and the available payment
and other records.
5. The petitioner filed objections dated 09.07.2015 (Annexure
P-5), inter alia, disputing the treatment of the vendors’ workers as its
employees, questioning the constitution and functioning of the Commission,
and asserting that the vendors were independent establishments having their
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own employees and arrangements. Certain corrections/clarifications were
thereafter made by the Department (Annexure P-6), followed by further
replies/submissions of the petitioner dated 14.09.2015 and 28.09.2015
(Annexures P-7 and P-8). The Regional Provident Fund Commissioner
ultimately passed the assessment order dated 02.03.2016 (Annexure P-2). A
recovery notice dated 28.03.2016 under Section 8F of the Act was also
issued to the petitioner’s bankers. The petitioner’s earlier writ petition, CWP
No.7052 of 2016, was not pursued to its conclusion after the parties were
relegated to the statutory appellate remedy. The Tribunal dismissed the
appeal on 19.11.2019, leading to the present petition.
Submissions on behalf of the petitioner
6. Learned senior counsel for the petitioner submits that the
impugned orders proceed on the erroneous premise that the workers engaged
by independent vendors were employees of the petitioner. The vendors,
according to the petitioner, were separate establishments undertaking job
work under commercial arrangements, maintaining their own premises,
machinery and workforce. The petitioner’s supply of raw material and its
inspection of finished goods, it is urged, were contractual quality-control
measures and did not establish an employment relationship or control over
the manner in which the vendors’ workers performed their work.
7. It is further contended that the authorities did not identify the
workers, determine the wages paid to them, or examine who recruited them,
paid their wages, exercised disciplinary control over them or could terminate
their services. The petitioner submits that the burden to establish the
statutory relationship lay upon the Department and that the mere fact that
goods manufactured or processed by vendors were ultimately used by the
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petitioner could not, by itself, bring every person employed by those vendors
within Section 2(f) of the Act.
8. Learned senior counsel also questions the legality of the inquiry
under Section 7A. It is argued that the Commission included the officers
who were presenting the Department’s case and that the statutory authority
thereafter relied upon the Commission’s report instead of independently
determining the controversy. The petitioner alleges that the report was not
properly tested, that its objections were not dealt with by a reasoned
determination, and that the opportunity of hearing was rendered ineffective
in the absence of the complete material, cross-examination and an
opportunity to lead evidence. Reliance is placed principally on Food
Corporation of India v. Provident Fund Commissioner, (1990) 1 SCC 68;
Workmen of Nilgiri Cooperative Marketing Society Ltd. v. State of Tamil
Nadu, (2004) 3 SCC 514; and Balwant Rai Saluja v. Air India Ltd., (2014)
9 SCC 407.
9. The petitioner further challenges the computation, particularly
the adoption of a notional labour component from the amounts paid to
vendors, without a demonstrated correlation with the actual number of
workers, their wages or the period for which they worked. It is urged that the
assessment is consequently arbitrary and cannot be sustained under Sections
6 and 7A of the Act.
Submissions on behalf of respondents No.2 and 3
10. Per contra, learned counsel for respondents No.2 and 3 supports
the orders. It is submitted that the inquiry was initiated after the petitioner
failed to produce the requisite records during inspection. The Commission
examined the relevant material and found that the vendors were engaged in
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work connected with the petitioner’s manufacturing activity. The
Department relies upon the supply of raw material by the petitioner, the
receipt of processed/finished goods, quality inspection at the vendors’
premises as well as at the petitioner’s premises, the right to reject defective
goods and the visits of the petitioner’s officials to the vendors’ premises.
11. It is further submitted that the definition of ‘employee’ under
Section 2(f) is inclusive and extends to persons employed by or through a
contractor in or in connection with the work of the establishment. Paragraph
30(3) of the Employees’ Provident Funds Scheme, 1952 places
responsibility upon the principal employer to pay contributions in respect of
such employees. Reliance is placed on The Officer-in-Charge, Sub-
Regional Provident Fund Office v. Godavari Garments Ltd., (2019) 8 SCC
149; P.M. Patel and Sons v. Union of India, (1986) 1 SCC 32; Ram Singh
v. Punjab State Cooperative Supply and Marketing Federation Ltd., 2007
(1) SCT 691; and Enfield India Ltd. v. Regional Provident Fund
Commissioner, 2000 (3) SCT 863.
12. Learned counsel for the respondents also submits that vendors
were summoned during the inquiry and that some of them appeared and
furnished affidavits/submissions. It is contended that the petitioner was
afforded opportunities to place its records and objections before the
authority. The Department maintains that the petitioner cannot rely upon the
absence of individual wage and attendance particulars when the relevant
records were required to be maintained and produced by the establishment
and the contractors.
Analysis and conclusion
13. I have heard learned counsel for the parties and have perused
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the record with their able assistance.
14. The controversy requires determination of three connected
questions: (i) whether the work undertaken through the vendors was in or in
connection with the petitioner-establishment within Section 2(f) of the Act;
(ii) whether the inquiry and determination under Section 7A satisfied the
statutory and procedural requirements; and (iii) whether the basis adopted
for computation is shown to be so arbitrary or unsupported as to warrant
interference.
15. Section 2(f) of the Act defines ‘employee’ as any person
employed for wages in any kind of work, manual or otherwise, in or in
connection with the work of an establishment, and who gets wages directly
or indirectly from the employer. The inclusive part specifically covers a
person employed by or through a contractor in or in connection with the
work of the establishment. Paragraph 30(3) of the Employees’ Provident
Funds Scheme, 1952, in turn, places responsibility upon the principal
employer to pay contributions in respect of employees directly employed by
it as well as those employed by or through a contractor. The bare language of
the relevant statutory provisions reads thus:
Section 2(f) of the Act: “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.”
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Paragraph 30(3) of Employees’ Provident Funds Scheme,
1952:
“It shall be the responsibility of the principal employer to
pay both the contributions payable by himself in respect
of the employees directly employed by him and also in
respect of the employees employed by or through a
contractor and also administrative charges.”
16. The statutory definition is wider than the conventional notion of
an employee working within the factory premises under immediate
supervision. Neither the place where work is performed nor the interposition
of a contractor is conclusive. Equally, the fact that a vendor supplies goods
or performs job work for an establishment does not automatically make
every person on the vendor’s rolls an employee of the purchaser. The
authority must examine the actual work, the manner in which it is organised,
its connection with the establishment’s operations and the terms on which
the workers are engaged.
17. No doubt, learned counsel for the respondents has placed
reliance upon The Officer-in-Charge, Sub-Regional Provident Fund Office
v. Godavari Garments Ltd., (2019) 8 SCC 149. In that case, the Supreme
Court considered women workers who stitched garments at their homes after
receiving raw material from the establishment, worked according to its
specifications and were paid on a piece-rate basis. The establishment
retained the right to reject defective garments. The Court held that work
performed away from the establishment’s premises could nevertheless be
work in connection with the establishment, observing that, “ 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
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directly or indirectly in connection with the work of an establishment.” The
Hon’ble Supreme Court therein discussed the following position of law,
before proceeding to direct the respondent company to deposit the amount
assessed by Appellant No. 1 towards Provident Fund dues of the women
workers:
“ xxx xxx xxx
6.2. In the present case, the women workers employed by the
Respondent Company were provided all the raw 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. vs. Chief Inspector of Shops and Establishments and
Ors. (1974) 3 SCC 498. The appellants therein were engaged in
the business of producing garments. They employed workers
who were provided with the cloth, and were instructed by the
appellants how to stitch it. The workers were paid on piece-rate
basis. If a worker failed to stitch a garment as per the
instructions, the appellants rejected the work, and asked the
worker to re-stitch 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.”
6.5. On the issue where payment is made by piecerate to the
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workers, would they be covered by the definition of
“employee”, this Court in Shining Tailors v.
IndustrialTribunal II, U.P. Lucknow and Ors. (1983) 4 SCC
464 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 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. vs.
Chief Inspector of Shops and Establishments and Anr.
(1973) IILL] 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 speaks for the element of
control and supervision. So also the right of removal of the
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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.”
6.6. In M/s P.M. Patel and Sons and Ors. v. Union of India
and Ors. (1986) 1 SCC 32, 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 rejected the contentions raised by the
appellants therein, and held that:
xxx xxx xxx
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 the
workmen. Regional Provident Fund Commissioner versus The
Hooghty Mills Company Ltd. And Ors. 2012(2) S.C.T. 145 :
2012(1) SCALE 422. This Court in The Daily Partap versus.
The Regional Provident Fund Commissioner, Punjab,
Haryana, Himachal Pradesh and Union Territory, Chandigarh,
1999(1) S.C.T. 2016 : (1988) 8 SCC 90 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
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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 work of the
Respondent Company, which was set up as a readymade
garments industry in Marathwada. The women workers were
paid wages on per-piece 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 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.
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.
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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.”
18. What flows from the ratio of Godavari Garments ’s case (supra)
is that the inquiry cannot be confined to the physical premises of the
establishment and that the substance of the engagement, rather than its label
or location, is material. It does not, however, lay down that supply of raw
material and a right to reject finished goods invariably establish an
employment relationship in every outsourcing arrangement. The Supreme
Court was dealing with a particular arrangement in which the workers
themselves performed the establishment’s specified production work and
were paid for that work. The factors identified in that judgment are relevant
indicators, but their weight must be assessed against the petitioner’s case
that the vendors independently organised and controlled their workforce.
19. Likewise, the respondents have drawn support from P.M. Patel
and Sons v. Union of India, (1986) 1 SCC 32. The said decision concerned
beedi workers who were supplied raw material and paid for rolling beedis.
The Supreme Court held that the work could be connected with the factory
even though it was performed at home. The Court observed: “ In the
circumstances, the right of rejection can constitute in itself an effective
degree of supervision and control.”
20. The petitioner seeks to distinguish these authorities on the
ground that the vendors here were independent units undertaking specialised
job work with their own premises, machinery and workforce, unlike home
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workers performing a simple piece-rate operation. It is also urged that
rejection of a defective lot resulted in goods being returned to the vendor for
rectification and did not involve directions to, or control over, individual
workers. The distinction is relevant . Godavari Garments ’s case (supra) and
P.M. Patel ’s case (supra) do not equate every commercial quality inspection
with supervision of labour. They do, however, make clear that absence of
physical supervision at each stage, or performance of work away from the
establishment, is not by itself decisive.
21. In examining the petitioner’s contention that the vendors were
independent establishments, reference may also be made to the decisions in
Workmen of Nilgiri Cooperative Marketing Society Ltd. v. State of Tamil
Nadu, (2004) 3 SCC 514 , and Balwant Rai Saluja v. Air India Ltd., (2014)
9 SCC 407 . These decisions emphasise that the existence of an employer-
employee relationship must be determined from the overall circumstances
and that no single factor, including control, can be applied mechanically.
Those decisions do not construe away the express inclusion of contractor-
engaged persons in Section 2(f) of the EPF Act. Their relevance is to caution
that the Department must establish the real statutory connection and cannot
rest its case merely on the fact that the petitioner purchased goods from the
vendors.
22. Reverting to the case in hand, a perusal of the material recorded
in the Commission’s report and noticed in the proceedings goes beyond the
bare fact of a buyer-seller relationship. The petitioner supplied raw material
to the vendors; the vendors undertook processing/manufacturing work on
that material; the finished or semi-finished goods were returned after quality
checks; defective goods were rejected or returned for reworking; and
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officials of the petitioner visited the vendors’ premises for quality inspection.
The report also refers to vouchers concerning accepted, rejected and
reworkable goods and to travel/TA-DA claims of the petitioner’s officials
relating to visits to vendors. These circumstances formed the evidentiary
basis for the authorities’ conclusion that the vendors’ work was connected
with the petitioner’s manufacturing process.
23. The petitioner’s explanation that these were ordinary quality-
control steps in a commercial contract and that the vendors retained control
over their own workers cannot be dismissed as irrelevant. A purchaser is
ordinarily entitled to insist that goods conform to agreed specifications. The
right to reject defective goods, standing alone, would not necessarily convert
the supplier’s employees into employees of the purchaser. Its significance
depends on the whole arrangement: whether vendors were supplying
independently manufactured goods, or undertaking a defined part of the
petitioner’s manufacturing activity using material supplied by it, subject to
quality inspection and return/reworking arrangements. The authorities
adopted the latter view on the cumulative circumstances recorded in the
report.
24. The Commission’s report records that some vendors worked
exclusively for the petitioner, while others worked partly for the petitioner
and other establishments; certain vendors had ceased operations; and
vendors having separate provident fund code numbers were excluded for
separate treatment. These distinctions are material. The conclusion cannot be
extended indiscriminately to every vendor or every worker. The liability
upheld by the impugned orders must be understood as relating to the vendor
engagements and period actually examined. The fact that some vendors
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worked for other establishments may weaken an inference of exclusive
dependence, but does not by itself exclude their workers from Section 2(f), if
the work performed by them was nevertheless connected with the
petitioner’s establishment.
25. Learned counsel for the respondents has also relied upon
Enfield India Ltd. v. Regional Provident Fund Commissioner, 2000 (3)
SCT 863. That case concerned a contractor undertaking assembly work for
the principal establishment, with material supplied by the principal
establishment and overall control over the assembly process and quality
inspection retained by it. The contractor was stated to work exclusively for
the principal establishment. The Madras High Court upheld liability on those
particular facts. The decision supports the proposition that a separate legal
identity of a contractor is not conclusive; it does not establish that every
independent job worker is necessarily an employee-supplying contractor.
The nature of the processing work, supply and return of material, quality
checks and extent of vendor exclusivity must be considered together. The
relevant paragraphs of the said judgment are reproduced as under:-
“ 8. Having seen the entire material available on record and,
in the facts and circumstances of the case, also from the claims
and counter-claims made by the rival parties, the only
grievance of the petitioner herein is that the respondent is
illegally demanding the petitioner should pay arrears of
contribution in respect of all eligible employees of the Thor
Power Systems which, according to them, is a separate
establishment distinct and separate from that of the petitioner.
Whereas it is the contention of the respondent that the
petitioner entered into an agreement with the Thor Power
Systems to do assembling work for Enfield and Enfield having
agreed to sub-contract the work to Thor Power Systems. The
material required will be supplied by Enfield, Enfield will have
the overall control on all the assembling process and inspection
for quality control. It is the categoric contention of the
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respondent, that after examining all these facts, the respondent
instructed the Enfield India Ltd. to extend provident fund
benefit to the employees engaged through contractors as the
petitioner is the principal employer. Thus, it is the case of the
respondent that the Thor Power Systems is a sole contractor of
Enfield India Ltd. and hence in terms of Section 2(f) read with
paragraph 26 of the Employees' Provident Funds Scheme, the
petitioner is liable for extending the provident fund benefits to
the employees engaged through Thor Power Systems a sole
contractor for the petitioner. It is significant to note that the
definition of employees include contractor employees also.
"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 and includes any person:
(i) employed by or through contractor in or in connection
with the work of an establishment;
(ii) engaged as an apprentice, not being an apprentice
engaged under the Apprentices Act, 1961(52 of 1961), or
under the Standing Order of the establishment.
9. In this case, it is clear that by virtue of the agreement
entered with the Thor Power Systems, the petitioner becomes
the employer for the workmen engaged in the contractor firm
and the petitioner himself admits that Thor Power Systems is
exclusively doing work for the petitioner. That being so, as
rightly contended by the respondent, there is legal obligation
on the part of the petitioner and the action of the respondent is
strictly in accordance with the law and it is sustainable.
Further, in this case, it is also significant to note that though
the establishment, Thor Power Systems, is having separate
entity and its employees are appointed by the contractor, the
workmen of the said establishment are exclusively doing work
for the petitioner and hence they are entitled to provident fund
benefits on par with employees of the petitioner since the
petitioner is the principal employer. Therefore, from all the
above, I am of the view that the respondent rightly held that the
employees of the contractor firm are employees of the
petitioner only as per the definition, since they were doing the
work of the petitioner. Therefore, it is a clear case where the
position of the employees engaged by the Thor Power Systems
are squarely falling within the ambit of Section 2(f) of the Act
and termed as employees of the petitioner-establishment. Thus,
it is the strong contention of the respondent that the order of the
respondent is strictly in accordance with the Act and it is
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maintainable. It is also contended by the respondent that the
petitioner has an alternative remedy under Section 26-B of the
Scheme of 1952 and without exhausting the same the petitioner
has approached this Court. In the facts and circumstances of
the case, I am of the clear view that there is every force in the
above contentions made by the respondent. ”
26. The respondents have further referred to Ram Singh v. Punjab
State Cooperative Supply and Marketing Federation Ltd., 2007 (1) SCT
691, which principally concerns the responsibility under paragraph 30 of the
Scheme to deposit contributions in respect of employees engaged directly or
through a contractor. That responsibility arises once the persons concerned
are found to be employees within Section 2(f). The decision does not, by
itself, determine whether the workers of the vendors in the present case
satisfy that definition. The anterior question of coverage must first be
answered on the evidence.
27. No doubt, learned senior counsel for the petitioner has relied
upon Food Corporation of India v. Provident Fund Commissioner, (1990)
1 SCC 68, to question the manner in which the inquiry under Section 7A
was conducted. The decision is relevant for determining the procedural
standard applicable to such an inquiry. The Supreme Court recognised that
the authority exercises quasi-judicial powers and must conduct an effective
inquiry, obtain relevant evidence and afford the establishment a fair
opportunity to meet the case. In that matter, failure to take steps to obtain
contractor particulars despite a specific request was material to the
conclusion that the inquiry had not been properly conducted. The decision is
distinguishable where the authority has called for records, examined
available material, obtained information from contractors and considered the
establishment’s objections. It nevertheless makes clear that a Commission’s
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report cannot replace the independent satisfaction of the officer authorised
under Section 7A.
28. The petitioner’s objection to the Commission’s role is that
officers presenting the Department’s case were included in the Commission,
thereby placing them in the position of investigator as well as presenter. The
respondents’ case is that the Commission was constituted to examine
documents and vendor dependency and that its report was thereafter
considered in the Section 7A proceedings. The mere fact that the
Commission comprised departmental officers does not, without examination
of its functions and the decision-making process, establish bias. Conversely,
the statutory authority could not lawfully treat the Commission’s
conclusions as binding. The record shows that the petitioner filed detailed
objections to the report, corrections/clarifications were made and further
replies were received. The petitioner has not demonstrated that respondent
No.3 abdicated the statutory decision-making function or that the
Commission itself made the final determination.
29. The petitioner asserts that vendors were not summoned and no
worker was identified. The respondents specifically plead that summons
were issued to vendors on 11.12.2008 and that some vendors attended on
07.01.2009, 18.02.2009, 18.03.2009 and 20.05.2009, furnishing affidavits
and submissions. It would, therefore, be inaccurate to proceed on the footing
that no vendor was ever called or that the inquiry was conducted without any
material from vendors. The petitioner’s real grievance is that the inquiry did
not identify each worker or determine each individual’s wages and period of
employment. That grievance bears upon the adequacy of the assessment and
its computation, but does not, without more, establish that the entire inquiry
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was a nullity.
30. The absence of individual worker particulars cannot be treated
as immaterial in every Section 7A inquiry. The authority must have a
rational basis to determine the persons or class of persons covered, the
relevant period and the wages on which contributions are payable. At the
same time, inability to identify every worker at a later stage does not
automatically defeat enforcement where the establishment and contractors
were required to maintain employment and wage records and those records
were not produced despite opportunity. The correct approach is neither to
dispense with proof nor to allow non-production of records to make statutory
enforcement impossible. The authority must make the best assessment
reasonably available on the material gathered and explain the basis of its
estimate.
31. The challenge to computation is consequently significant. The
Commission appears to have proceeded from payments made to vendors,
treating a portion thereof as labour component and the balance as other
costs/profit, and thereafter calculating contributions and administrative
charges. Such an estimate cannot be upheld merely because records were not
produced; nor can a percentage be treated as self-validating. Its acceptability
depends on whether the underlying payment data were reliable, whether
assumptions were disclosed, whether objections were considered and
whether the method bears a rational relationship to likely wages for the work
undertaken. The petitioner has questioned the percentage and absence of
individual wage details. However, it has not demonstrated through primary
records or an alternative computation that the amount determined is
arithmetically or demonstrably erroneous. On the material placed before this
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Court, the challenge does not establish such perversity as would warrant
interference. This conclusion is confined to the present record and does not
approve any universal percentage-based formula for assessments under the
Act.
32. The contention regarding vendors having separate provident
fund registrations also requires a limited answer. The Commission’s report
records that vendors having separate code numbers were excluded for
separate treatment. A separate code is relevant to determining the vendor’s
own coverage and avoiding duplication; it does not, by itself, determine
whether particular workmen engaged by that vendor were employed in
connection with the petitioner’s work. Equally, the Department cannot
recover the same contribution twice. The assessment, as upheld, must be
confined to the workers and period included on the basis of the inquiry,
subject to adjustment of any contribution already duly paid for the same
employees and period, if supported by the record.
33. The social-welfare character of the Act warrants a liberal
construction of the expression ‘employee’, but the beneficial object cannot
dispense with the requirements of Section 2(f) or the procedural safeguards
of Section 7A. The authorities must establish the connection between the
workers’ engagement and the establishment and determine liability on a
rational evidentiary basis. The decisions cited by the respondents explain the
width of coverage and the responsibility of the principal employer; those
cited by the petitioner emphasise the need for a fact-based inquiry and fair
determination. Properly understood, these authorities are not mutually
inconsistent.
34. On an overall assessment, the material recorded in the
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Commission’s report particularly the supply of raw material, nature of
processing work, return and quality inspection of goods, rejection/reworking
mechanism and visits of the petitioner’s officials provides a factual basis for
the conclusion that the work undertaken through the vendors was connected
with the petitioner’s manufacturing activity. The petitioner’s case that the
vendors were independent establishments and controlled their own
workforce has been considered, but those circumstances do not, on the facts
recorded, negate the statutory connection. The Tribunal’s conclusion is not
founded merely on the description of vendors as contractors or on the
petitioner’s status as purchaser; it rests on the cumulative features of the
arrangement.
35. In view of the foregoing discussion, the questions formulated
hereinabove are answered as follows: (i) the work undertaken through the
vendors, having regard to the nature of the processing activity, supply of raw
material, quality-control mechanism and the other circumstances noticed
herein, was sufficiently connected with the petitioner-establishment to attract
the provisions of Section 2(f) of the Act; (ii) the inquiry under Section 7A,
when considered as a whole, does not disclose such procedural infirmity,
denial of reasonable opportunity or abdication of the statutory function by
the competent authority as would vitiate the determination; and (iii) the
petitioner has not been able to show that the basis adopted for computation
suffers from such arbitrariness, perversity or absence of evidentiary
foundation as would warrant interference in exercise of the writ jurisdiction
of this Court. The questions are accordingly answered against the petitioner.
36. For the foregoing reasons, no ground for interference is made
out. The writ petition is accordingly dismissed. The impugned orders dated
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02.03.2016 (Annexure P-2) and 19.11.2019 (Annexure P-1) are upheld. The
petitioner is directed to deposit the amount assessed by the Regional
Provident Fund Commissioner, as much is pending, within a period of one
month from the date of receipt of certified copy of this order.
37. Pending miscellaneous application(s), if any, also stand
disposed of.
(KIRTI SINGH)
JUDGE
rd
November 03 , 2026
Gurpreet Singh
Whether speaking/reasoned : Yes/No
Whether reportable : Yes/No
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