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Employees Provident Fund Organization Represented by Assistant Provident Fund v/s M.S. Raven Beck Solutions (India) Ltd, Cochi

    WP(C). No. 17507 of 2016 (K)

    Decided On, 15 October 2020

    At, High Court of Kerala

    By, THE HONOURABLE MR. JUSTICE A.M. BADAR

    For the Petitioner: Dr. S. Gopakumaran Nair (Sr.), Advocate, S. Prasanth, SC. For the Respondents: R1, Paul Antony Maniamkot, K.K. Sathish, Advocates.



Judgment Text

1. By this petition, petitioner, the Employees Provident Fund Organization, through its, Assistant Provident Fund Commissioner (legal) is challenging the order dated 23.01.2009 (Ext.P4), passed by the Presiding Officer, Employees Provident Fund Appellate Tribunal under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for the sake of brevity, EPF Act). By this impugned order, the Appellate Tribunal has been pleased to quash and set aside, the order dated 06.12.2007 (Ext.P1), passed by the Assistant Provident Fund Commissioner (Enforcement), Kochi, whereby, the said Authority, in exercise of the powers under Section 7A of the EPF Act, has been pleased to determine an amount of Rs.51,65,660/- to be due from the 1st Respondent – Establishment, towards the statutory EPF contributions for the period from 03/2004 to 03/2006.

2. Heard the learned counsel appearing for the petitioner, at sufficient length of time. He drew my attention to the impugned order passed by the Appellate Tribunal, so also the order passed by the Assistant Provident Fund Commissioner (Ext.P4 and Ext.P1) and argued that the impugned order is totally illegal and contrary to the settled principles of law and as such, needs to be quashed and set aside. The learned counsel for the petitioner relied on the judgment of the Hon'ble Apex Court in the matter of Regional Provident Fund Commissioner (II), West Bengal and Others Vs. Vivekananda Vidyamandir and Others, reported in 2019 KHC 6257 and submitted that whatever is payable in all concerns and is earned by all permanent employees is included in basic wages for the purpose of assessing contribution payable to the Provident Fund under Section 6 of the EPF Act. It is urged that allowances such as house-rent allowance, Uniform allowances, washing allowance, traveling allowances and food allowances were as such liable to be included in basic wages for assessment and deduction towards provident fund contributions. By drawing my attention to the impugned order of the Appellate Tribunal, it is submitted that the learned Appellate Tribunal committed error of law, by allowing the Appeal, despite holding that intention of Legislature appears to be to include all emoluments, other than those which are specifically excluded.

3. By placing reliance on judgment of Hon'ble Patna High Court in the matter of State of Bihar Vs. Bipat Gope and Others reported in 1961 Criminal Law Journal 829 = Manu/BH/0064/1961, it is argued that after admission of the petition for final hearing, the question of delay, if any cannot be considered by the Court. The learned counsel for the petitioner further argued that the petitioner is authorised by the resolution passed by the Provident Fund Organization, authorizing the Assistant Provident Fund Commissioner (legal) to institute, file and conduct, all civil and criminal proceedings and therefore, the petition is maintainable.

4. As against this, the learned counsel for the respondent/employer – establishment, vehemently opposed the petition by contending that the petition suffers from inordinate delay and latches and therefore, the same is not maintainable. By drawing my attention to the provisions of Section 7L (4) of the EPF Act, the learned counsel argued that the writ petition is not maintainable and the remedy if any, is that of filing of Review Petition before the Appellate Tribunal. It is further urged that the petitioner has no locus standi to file and maintain the petition in view of the judgment of the Hon'ble Division Bench of the Culcutta High Court in the matter of the Regional Provident Fund Commissioner Vs. Employees Provident Fund Appellate Tribunal, reported in 2015 (1) KLT SN 28. It is further urged that the authority under the Provident Fund Commissioner was duty bound to grant reasonable opportunity to the employer to represent his case. As no such opportunity was granted, the Appellate Tribunal was right in allowing the Appeal filed by the employer.

5. I have considered the submissions so advanced and perused the materials placed before me. The order of the quasi judicial authority is impugned in this petition. It needs to be noted that the High Court under Article 227 can neither review nor re-appreciate the evidence upon which determination of the Tribunal purports to be based or to correct errors of fact. The High Court cannot substitute its own decisions if, decisions of Sub-Ordinate Courts or Tribunals is within limits of law. However, interference is called, when such decisions of the Tribunal results in grave miscarriage of justice or flagrant violation of law.

6. It hardly needs to mention that the Employees Provident Fund Act is a beneficial piece of Legislation. If two interpretations are possible, then by construing such statute, the Court should lean in favour of the interpretation which is beneficial to the subject under such welfare Legislation. Such statute needs construction to ensure that benefit thereof goes to the employees. Section 5 of the EPF Act deals with framing of a scheme by the Central Government for employees or for any class of employees as well as creation of a fund and scheme to be administered by the Central Board of Trustees constituted under Section 5A of the Act. The Central Board of Trustees are required to administer the fund vested in it in such a manner as may be specified in the scheme. Thus, Employees Provident Fund Organization has fiduciary duty towards the subject of the Act.

7. The employer under the EPF Act has a statutory obligation to deduct the specified percentage of contribution from employees salary and make matching contribution in terms of provisions of Section 6 of the said Act. The entire amount is thereafter required to be deposited in the fund within 15 days of such collection. Section 6 of the EPF Act speaks about contribution of specified percentage of basic wages, dearness allowance and retaining allowance. Section 2(b) of the EPF Act defines the term basic wages thus:

(b) “basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include—

(i) the cash value of any food concession;

(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;

(iii) any presents made by the employer;

8. Section 6 which deals with contributions payable by the employer to the fund reads thus:

“6. Contributions and matters which may be provided for in Schemes.— The contribution which shall be paid by the employer to the Fund shall be ten per cent of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor)], and the employees’ contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten per cent of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section]: [Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “ten per cent.”, at both the places where they occur, the words “twelve per cent” shall be substituted:]

Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupees, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee or quarter of a rupee. [Explanation 1].— For the purposes of this [section], dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee. Explanation 2.—For the purposes of this section, “retaining allowance” means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.

9. It is thus clear that the basic wages of an employee comprises of all emoluments which are earned by him while on duty or on paid leaves/holidays.

10. Adverting to the facts of the instant case, it is seen that, the respondent establishment is undisputedly covered under the EPF Act and the Enforcement Officer of the Provident Fund Organization found that the Provident Fund contribution on unrealistic monthly wages of the employees was being deposited with the Employees Provident Fund. It was prima facie found that the respondent establishment was only contributing a fraction of actual basic wages paid to its employees and a major chunk was being kept out for the purpose of contribution payable to the Provident Fund by classifying it into different kind of allowances. Accordingly, the competent officer under the EPF Act initiated the enquiry under Section 7A and summons came to be issued to the respondent establishment for determining the outstanding dues of Employees Provident Fund for the period from March 2004 to March 2006 on the allowances which were not subjected to any Provident Fund Contribution. The statement of such allowances which were not made subjected to any Provident Fund Contribution towards Employees Provident Fund came to be annexed to the summons.

11. In response to the summons for determination of amount due from the respondent establishment towards contribution to Provident Fund, the employer and authorised representatives of the respondent appeared before the Assistant Provident Fund Commissioner (Enforcement). Prolonged enquiry came to be conducted from time to time and even adjournments as prayed by the respondent employer came to be granted by the authority. The respondent/establishment had put up its stand before the Assistant Provident Fund Commissioner (Establishment) in following words.

“Due to the heavy competitive nature of security industry and various inherent problems faced by the organizations like High Labour Turnover, presence of large number of unorganized security agencies we are operative at a low margin. We are also facing a problem of bearing the compensation for any theft, loss or damages in the worksite. This is causing our company to face serious financial crisis. But even amidst these problems we are in the process of increasing the basic wages for all new recruits and existing staff. We request you to kindly consider the information provided and take a favourable decision which would not further weaken our already deteriorating financial position.”

12. After hearing the employer/authorised representative of the respondent establishment, the Assistant Provident Fund Commissioner (Establishment) came to the conclusion that the amount classified as basic wages in each month comes to only 35% of the gross wages and the various allowances put together far exceeds the basic wages. The said authority while passing the order under Section 7A of the EPF Act has given the following finding.

“From the above, it is crystal clear to my mind that the classification of the total wages paid to the employees in the different so called “Excluded Allowances” leaving only approximately 1/3rd of the amount to be classed as “Basic Wages” for each employee for the purpose of the EPF contribution is nothing but a subterfuge on the part of the employer to illegally reduce his statutory EPF liability by adopting a separate nomenclature for part of the wages paid to his employees while submitting the returns under the EPF Act.”

13. With these observations, it was held that various so called allowances classified by the respondent employer are nothing but basic wages as defined under section 2b of the EPF Act and the employer is liable to make the payment of Employees Provident Fund on these amounts. Accordingly, the Assistant Commissioner of Provident Fund (Enforcement) vide order dated 06.12.2007 (Ext.P1) determined the amount of Rs.51,65,660/- to be due and payable by the respondent – establishment towards statutory Employees Provident Fund contribution for the for the period from March 2004 to March 2006. It is not disputed by the parties before this Court that house rent allowance, uniform allowance, washing allowance, food allowance and traveling allowance, as such came to be added to the basic wages by the Assistant Provident Fund Commissioner (Establishment) while passing the order under Section 7A of the EPF Act for assessment and deduction of Statutory Employees Provident Fund Contribution and that is how the figure of 51,65,660/- came to be arrived at as the amount due from the respondent – establishment towards balance contribution to Provident Fund payable by it.

14. Feeling aggrieved by this order under Section 7A of the EPF Act, the respondent-establishment has preferred an appeal under Section 7I of the said Act. A perusal of grounds of appeal makes it clear that the respondent-establishment has urged before the Appellate Tribunal that uniform allowance, washing allowance, food allowance and traveling allowance etc is being paid by it to all its employees uniformly across the board. The respondent-establishment, in its appeal contended that it has no transport facility and therefore it pays transport allowance to all its employees. The security personnel needs uniform and therefore, uniform allowance is paid to all employees. In other words, it was not the contention of the respondent - establishment that allowances such as uniform allowance, washing allowance, food allowance and traveling allowance were being paid to only such employees who availed the opportunity of these allowances, linked to any incentives for getting more output.

15. The Appellate Tribunal heard both sides. The Appellate Tribunal relied on the judgment of the Hon'ble Apex Court in the matter of Bridge and Roof Co. (India) Ltd. V. Union of India reported in AIR 1963 SC 1 474, so also other judgments and came to the following conclusion in paragraph 11 and 12 of the impugned judgment.

“The intention of the Legislature under the Act is that the contribution to the fund should be made on basic wages, dearness allowance and retaining allowance as defined under Section 2(b) & Section 6 of the Act. The plain intention of the Legislature appears to be to include all emoluments other than those, which are specifically excluded. I do not find any warrant to interpret Section 2(b) of the Act, to include the allowances such as house rent allowance, uniform allowance washing allowance, food allowance, traveling allowance and over time allowances under the head of the definition of term “Basic Wages” in the present appeal.

In view of the above discussions, the impugned order suffers from infirmity and is quashed. The appeal is allowed. Appeal file be consigned to record room. The copy of the order be sent to both parties”.

16. At this juncture it is apposite to quote the relevant portion from the judgment of the Hon'ble Apex Court in the matter of Vivekananda Vidyamandir (supra) wherein reliance was placed on judgment in Bridge and Roof Co. (India) Ltd. It reads thus:-

9. “Basic wage, under the Act, has been defined as all emoluments paid in cash to an employee in accordance with the terms of his contract of employment. But it carves out certain exceptions which would not fall within the definition of basic wage and which includes dearness allowance apart from other allowances mentioned therein. But this exclusion of dearness allowances finds inclusion in Section 6. The test adopted to determine if any payment was to be excluded from basic wage is that the payment under the scheme must have direct access and linkage to the payment of such special allowance as not being common to all. The crucial test is one of universality. The employer, under the Act, has a statutory obligation to deduct the specified percentage of the contribution from the employee's salary and make matching contribution. The entire amount is then required to be deposited in the fund within 15 days from the date of such collection. The aforesaid provisions fell for detailed consideration by this Court in Bridge and Roof (supra) when it was observed as follows:

7. The main question therefore that falls for decision is as to which of these two rival contentions is in consonance with Section 2(b). There is no doubt that “basic wages” as defined therein means all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash. If there were no exceptions to this definition, there would have been no difficulty in holding that production bonus whatever be its nature would be included within these terms. The difficulty, however, arises because the definition also provides that certain things will not be included in the term "basic wages", and these are contained in three clauses. The first Clause mentions the cash value of any food concession while the third Clause mentions that presents made by the employer. The fact that the exceptions contain even presents made by the employer shows that though the definition mentions all emoluments which are earned in accordance with the terms of the contract of employment, care was taken to exclude presents which would ordinarily not be earned in accordance with the terms of the contract of employment. Similarly, though the definition includes "all emoluments" which are paid or payable in cash, the exception excludes the cash value of any food concession, which in any case was not payable in cash. The exceptions therefore do not seem to follow any logical pattern which would be in consonance with the main definition.

8. Then we come to Clause (ii). It excludes dearness allowance, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment. This exception suggests that even though the main part of the definition includes all emoluments which are earned in accordance with the terms of the contract of employment, certain payments which are in fact the price of labour and earned in accordance with the terms of the contract of employment are excluded from the main part of the definition of "basic wages". It is undeniable that the exceptions contained in Clause (ii) refer to payments which are earned by an employee in accordance with the terms of his contract of employment. It was admitted by counsel on both sides before us that it was difficult to find any one basis for the exceptions contained in the three clauses. It is clear however from Clause (ii) that from the definition of the word "basic wages" certain earnings were excluded, though they must be earned by employees in accordance with the terms of the contract of employment. Having excluded "dearness allowance" from the definition of "basic wages", Section 6 then provides for inclusion of dearness allowance for purposes of contribution. But that is clearly the result of the specific provision in Section 6 which lays down that contribution shall be 6- 1/4 per centum of the basic wages, dearness allowance and retaining allowance (if any). We must therefore try to discover some basis for the exclusion in Clause (ii) as also the inclusion of dearness allowance and retaining allowance (for any) in Section 6. It seems that the basis of inclusion in Section 6 and exclusion in Clause (ii) is that whatever is payable in all concerns and is earned by all permanent employees is included for the purpose, of contribution under Section 6, but whatever is not payable by all concerns-or may not be earned by all employees of a concern is excluded for the purpose of contribution. Dearness allowance (for example is payable in all concerns either as an addition to basic wages or as a part of consolidated wages where a concern does not have separate dearness allowance and basic wages). Similarly, retaining allowance is payable to all permanent employees in all seasonal factories like sugar factories and is therefore included in Section 6; but house-rent allowance is not paid in many concerns and sometimes in the same concern it is paid to some employees but not to others, for the theory is that house-rent is included in the payment of basic wages plus dearness allowance or consolidated wages. Therefore, house-rent allowance which may not be payable to all employees of a concern and which is certainly not paid by all concern is taken out of the definition of “basic wages”, even though the basis of payment of house-rent allowance where it is paid is the contract of employment. Similarly, overtime allowance though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment; but because it may not be earned by all employees of a concern it is excluded from “basic wages”. Similarly, commission or any other similar and other allowances is excluded from the definition of “basic wages” for commission and other allowances are not necessarily to be found in all concerns; nor are they necessarily earned by all employees of the same concern, though where they exist they are earned in accordance with the terms of the contract of employment. It seems therefore that the basis for the exclusion in clause (ii) of the exceptions in Section 2(b) is that all that is not earned in all concerns or by all employees of concern is excluded from basic wages. To this the exclusion of dearness allowance in clause (ii) is an exception. But that exception has been corrected by including dearness allowance in Section 6 for the purpose of contribution. Dearness allowance which is an exception in the definition of “basic wages”, is included for the purpose of contribution by Section 6 and the real exceptions therefore in Clause (ii) are the other exceptions besides dearness allowance, which has been included through Section 6.

9. Any variable earning which may vary from individual to individual according to their efficiency and diligence will stand excluded from the term “basic wages” was considered in Muir Mills Co. Ltd., Kanpur V. Its Workmen Manu/SC/0244/1960: AIR 1960 SC 985 observing:

10. Thus understood “basic wage” never includes the additional emoluments which some workmen may earn, on the basis of a system of bonuses related to the production. The quantum of earning in such bonuses varies from individual to individual according to their efficiency and diligence; it will vary sometimes from season to season with the variations of working conditions in the factory or other place where the work is done; it will vary also with variations in the rate of supplies of raw material or in the assistance obtainable from machinery. This very element of variation, excludes this part of workmen's emoluments from the connotation of “basic wages”...”

16. It is thus clear that where the wage is universally, necessarily or ordinarily paid to all across the board, such emoluments are Basic Wages. However, where the payment is available and specially paid to those who avail of the opportunity is not Basic Wages. Any payment made by the employer as a special incentive is not forming the part of Basic Wage. However, it needs to be kept in mind that house rent allowance is expressly excluded from the purview of the term “Basic Wages” in view of provisions of Sub Section 2(b) of the EPF Act. The dearness allowance, though excluded from Basic Wages under Section 2(b), it is expressly included for the purpose of making contribution by virtue of Section 6 of the EPF Act.

17. In the case in hand, I have quoted the stand of the respondent – employer before the Assistant Provident Fund Commissioner (Enforcement) while determining the amount payable towards the contribution of Provident Fund in exercise of powers under Section 7A of the EPF Act. Similarly contents of the grounds urged by the respondent – employer in its Appeal before the Tribunal are also stated by me in the following paragraph. It is not the stand of the respondent-employer that uniform allowance, washing allowance, food allowance and traveling allowance is being paid by it to its employees as a special incentive or that these allowance were variable and linked to any incentive for getting more output from such employees. It is not the stand of the respondent-establishment that these allowances were not paid across the board to all employees. No material was placed before the Assistant Commissioner of Provident Fund (establishment) by the respondent-establishment to show that allowances such as uniform allowance, washing allowance, food allowance and traveling allowance were being paid to such employees who availed the opportunity and not to all and sundry. On the contrary, in the memo of appeal, it was the stand of the respondent-employer that these allowances are uniformly paid to all its employees. This makes it clear that uniform allowance, washing allowance, food allowance and traveling allowance forms the integral part of basic wages and as such, the amount paid by way of these allowances to the employees by the respondent-establishment were liable to be included in basic wages for the purpose of assessment and deduction towards contribution to the Provident Fund. Splitting of the pay of its employees by the respondent – establishment by classifying it as payable for uniform allowance, washing allowance, food allowance and traveling allowance certainly amounts to subterfuge intended to avoid payment of Provident Fund Contribution by the respondent-establishment. However, at the same time, the only error of law which can be found in the order under Section 7A of the EPF Act (Ext.P1) is that of inclusion of HRA in basic wages for assessing and claiming deduction on that ground. Rest of the allowances viz, uniform allowance, washing allowance, food allowance and traveling allowance form the part of Basic Wages and were certainly liable to be included in Basic Wages for the purpose of deduction of contribution towards Provident Fund. The Appellate Tribunal has certainly committed error of law in excluding these allowances for the purpose of deduction of Provident Fund Contribution. The impugned order of the Appellate Tribunal to that extent cannot be sustained and is liable to be interfered with.

18. So far as question of delay in filing the petition is concerned, it needs to mention that the instant petition is already admitted for final hearing by this Court on 18.05.2016. Once the petition is admitted for final hearing, the question of delay cannot be gone into. The learned counsel for the petitioner has rightly relied on judgment of the Hon'ble Patna High Court in the matter of Bipat Gope and Others (supra). Relevant portion from paragraph 15 of that judgment can be quoted with advantage.

“It is not necessary that there should be an order condoning the delay. The mere admission of an application filed beyond 60 days indicates that the delay, if any, must have been condoned by the Bench which admitted it. Moreover, once the Criminal Revision have been admitted, it has to be decided on merits, and it cannot be thrown out simply on the ground that it was filed beyond 60 days. The above view is amply supported by decisions of this Court.

In Lalo Mahto V. Emperor MANU/BH/0157/1941, Varma, J. held that, when the application has been admitted, the question of limitation is not of much importance in a cr

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iminal revision about which no limitation has been fixed by statute. In Bibi Zainab V. Anwar Khan MANU/BH/0181/1945, a similar view has been taken by Pande, J., who has held that, once a petition has been admitted by the Court, it has got to be considered on its merit, and the plea of limitation does not apply, particularly when there is no period prescribed by the statute for such application.” 19. Thus, as the petition is already admitted for final hearing by this Court in the year 2016, it cannot be dismissed on the technical ground of delay in filing the petition, particularly when the relief is sought for and on behalf of the employees by the Provident Fund Organization, which is the Trustee of vindicating the rights of the subjects of the welfare statute. 20. In the matter of the Regional Provident Fund Commissioner V. Employee's Provident Funds Appellate Tribunal (Supra), relied by the learned counsel for the respondent-establishment, it is held by the Hon'ble Division Bench of Culcutta High Court that the Provident Fund Commissioner, being Quasi Judicial Authority, cannot challenge the order passed by the Appellate Authority reversing the order of the Quasi Judicial Authority, because the said Quasi Judicial Authority is not a party to the lis. However, in the case in hand, the Appellate Order is challenged by the Officer concerned, who is authorized for this purpose by the Provident Fund Organization and as such, it cannot be said that the petition as framed and filed is not maintainable. Similarly, no merits can be found in the submission of the learned counsel for the respondent that the writ petition is not maintainable in view of provisions of Section 7L of the EPF Act which gives finality to the order made by the Appellate Tribunal. The fact that the order of the Tribunal disposing the Appeal cannot be questioned in any Court of law, makes the instant Writ Petition maintainable. No other alternate statutory remedy is available for challenging the Appellate Order. It was faintly argued that there was no reasonable opportunity of representation to the respondent/establishment in an enquiry under Section 7A of the EPF Act. There is nothing on record to substantiate such contentions. 21. In the result, the petition deserves to be partly allowed with the following order: 1. The impugned Order, Ext.P4, dated 23.01.2009 passed by the Employees Provident Fund Appellate Tribunal, New- Delhi, allowing the Appeal is quashed and set aside. 2. The order passed by the Assistant Provident Fund Commissioner (Enforcement) on 06.12.2007, Ext.P1 is confirmed, in so far as it relates to uniform allowance, washing allowance, food allowance and traveling allowance. 3. The direction in the order at Ext.P1 passed by the Assistant Provident Fund Commissioner (Enforcement) for inclusion of house rent allowance in the Basic Wages for the purpose of assessment and deduction of contribution to Provident Fund is quashed and set aside by maintaining the rest of the order. With these observations and directions, the above WP(C) stands finally disposed of.
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