(i) APPLICABILITY OF ACT TO NEW EMPLOYER
Whether the Employees' Provident Fund and Miscellaneous, Provisions Act be applicable to an establishment, which has since been closed down but started by a new employer?
Not necessary. In one case, a person took on lease a hospital that was dosed down two years prior to the lease and started a new, of course, in the same name and style. The earlier hospital was not covered by the Act and there was no allegation that it continued with change in management. It has been held that the new owner will be entitled to infancy protection from the date of starting new hospital
Reference
Dr. Jyoce Mammen vs. RPFC 1988 Lab. IC 1111 (Ker HC)
(ii) APPLICABLITY OF E.P.F. TO EDUCATIONAL INSTITUTIONS
Is Provident Fund Act applicable to the educational institutions? If so since when?
Yes. The provisions of the E.P.F. and M.P. Act apply to, the educational institutions w.e.f. 1st March, 1982. The Management of D.A.V. College and some other institutions had challenged the notification on 1st March, 1982 about the applicability of the Act to the educational institutions but the Supreme Court dismissed the petitions in 1988.
Reference
(iii) ADVANTAGE OF FORMING A TRUST
What are the advantages to the employer and employees when the employer chooses to form a trust for the purpose and applicability of Employees Provident Fund Act?
(a) He has to pay inspection charges wages instead of administrative charges. Of course he has to bear all the expenses of the Trust including its operational staff. Thus the Trust with larger number of employees and higher wages are benefited.
(b) The visits of the Inspector are less frequent.
(c) The employer can bargain with the employees in giving better service conditions.
(d) In case of belated payment, incidence of damages under section 14-B of E.P.F. Act is reduced.
2. The employees are wholly benefited in the following ways:
(a)They can have higher rate of P.F.
(b) Speedy settlement of P.F. account and expeditious sanction of advances.
(c) Provision of refundable loans can also be made in rules, which is not admissible under the EPF Scheme, 1976.
(d) They have power to bargain with the employer who has the entire control over the Provident Fund
(e) Their rights as per the E.P.F. Scheme, 1952 are ensured by the P.F. department.
(iv) BASIC WAGES FOR E.P.F.
Can the employer and the employees agree to exclude a particular sum from the purview of basic wages to attract E.P.F. contribution?
Yes. The term 'basic wages' is defined in section 2(b) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 meaning '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 emolument'. It clearly states 'in accordance' with the terms of the 'contract of employment.' Therefore, if in accordance with the terms of the contract of employment, the parties agree that a particular sum should be excluded, it cannot be held that it should be treated as 'basic wages’. In one case, terms of settlement entered into between the employer and the workman, a flat ad hoc allowance of Rs. 15 per month was extended to each workman. It was also provided that such allowance shall 'not be reckoned for purposes of provident fund, bonus, gratuity and E.S.I. etc. Therefore, such ad hoc allowance cannot be treated as falling within the term 'basic wages' for the purposes of the Act.
Reference
E.I.D. Parry (India ) Ltd.vs. Regional Commissioner Employees Provident Fund, 1985 (66) FJR .205 (Madras
(v) BENEFIT TO INDIVIDUALS
Whether the Act will be applicable to an establishment which comes into existence when different individuals decide 10 constitute a firm?
In one case, three brothers were doing individual transport business. They decided to become partners to carry on the same business collectively. The Provident Fund authorities called the partners La pay provident fund contributions holding the partnership business as continuation of the old individual business of the three brothers. I t has been held that the partnership firm was a new legal entity hence entitled to exemption during infancy period as provided by section 16(1 )(b) of the Employees Provident Fund and Miscellaneous Provisions Act.
Reference
Jagannath Sahu vs. RP FC, 1988 L.I.C 858 (Ori.HC).
(vi) CASUAL EMPLOYEES AND E.P.F.
Whether casual employees will be considered as employees in order 10 count 20 or more than 20 employees 10 attract the applicability of Employees Provident Fund Act to an establishment?
According to, the Scheme of the Act, an employee. In order to, avail the benefit of the scheme of the Act, must be a regular employee 'of the establishment. The test of regular employment would not be on the nature of business carried on by the establishment and its commercial norms. Unless and until the employees are on the regular employment of the establishment and are willing to' make their own monthly contribution, it is impossible to conceive that the employer alone 'can be called upon to make its contribution for those employees who are casual and not in the regular employment.1 In one case, the Allahabad High Court has held that employment of an employee for short duration when the regular employee has gone on leave or fallen sick or incapacitated would not amount to employment as contemplated by section 1 (3)(b) of the Act.2
References
1.Laxmi Restaurant and another vs. Regional Provident Fund" Commissioner, Delhi S. Acharya , the State Appellant vs. S.K. Diljan. 1973 Lab. IC 839 (NOC 175); Provident Fund Inspector. Guntur vs. T.S. Hariharan 1971 Lab. IC 551; AIR 1971 SC 1519; Hindustan Orange & Cold Storage Co. 'Ltd. Vs Profulla Chandra Roza, AIR 1967 Bom. 126; 1976 Cri. LJ 605. Tip Top Dry Cleaners & Dyers vs. Union of India and others, 1974(45) FJR41 (P&H HC) Cotton Corporation of India
2.M/s Kweens Bar & Restaurant, Meerut
(vii) IN CASE OF CLOSURE OFTHE FACTORY
Whether provident fund will be extended to a factory which has closed down its manufacturing activities but has retained some of the employees to guard the property?
Where the factory was validly closed down in accordance with legal provisions and after giving due notices, the Act will not apply. However, in one case the Owner of the factory retained four employees to keep a watch on the property. The Provident Fund Authorities contended that as a result of such retention, the liability of the factory owner for the provident fund continued. The Division Bench of the Allahabad High Court negatived the contentions of the Provident Fund Authorities in holding that section 2 (g) defines 'factory' as a premises in any part of which a manufacturing process is being carried on or is ordinarily so carried. It is thus apparent that where, as here manufacturing process is permanently stopped and the factory has been closed down for good and it cannot be validly contended, that the statute will continue to be applicable to the establishment. Even after the closure of the factory the employers might like to engage some employees to look after the assets and properties of the establishment. But thereby the statute cannot become applicable La the establishment.
Reference
Jai Krishna Agarwal and another vs. The Regional Provident Fund Commissioner; U.P. Kanpur & Others, 1987 Lab. IC 10 (All. HC),
(viii) E.P.F. AND EMPLOYEES ENGAGED BY THE CONTRACTOR
Are the employees engaged/ employed through the contractor coverable under the Employees Provident Fund and Miscellaneous Provisions Act?
By the amendments to the scheme in 1958 and 1960, the persons employed by or through a contractor in or in connection with an establishment to which the Act applied were brought within the purview of the scheme and principal employer was made responsible for compliance with the provisions of the Act and the scheme in _respect of such employees. The amendments to the scheme were struck down as unconstitutional by the Supreme Court which held insofar as no provision had been made in the scheme for the recovery by the employer of the contributions to be made by him on behalf of con tractor's employees, the amendments operated harshly and unfairly on person, who employed contract labour, and it resulted in discrimination between those who were employed as direct labour. The defect pointed out by the Supreme Court has now been removed by the Amending Act 28 of 1963. Accordingly, contractor's employees have also become eligible for the provident fund benefits w.e.f. 31.11.1963.
References
Orissa Cement Ltd. us. Union of India ,AIR 1962 SC page 1402; 1962-I LLJ 400.
Gopalan (K) vs. U.O.I. 1973 Lab. IC 287; 40 FJR 546 (Delhi
Goel Textiles industries & another vs. U.O.I. and another. 62 FLR 436 (All. High court DB).
(ix) EPF CONTRIBUTIONS AS ARREARS OF WAGES
Whether arrears of wage, paid to the employees by virtue of an award will attract the payment of Employees Provident Fund's Contributions?
Yes. In one case the Supreme Court has held that the EPF contributions will be payable on the arrears of wages given to the employees on the basis 'of an award. The facts of the case were that the pay scales of the employees were revised with retrospective effect by an award of Arbitrator and therefore the employees were given arrears of wages w.e.f. April 1, 1980 whereas the Award was given in the year 1985. The Division Bench of Rajasthan High Court has held that provident fund contributions were not payable on the arrears paid to the employees arising out of the award. 'While setting aside the judgment of the Division Bench of the High Court, the Supreme Court ruled that the expression "basic wages for the time being payable to each of the employees" under section 6 of the Act meant the "basic wages" at the relevant time. When the existing pay scales arc revised with effect from back date then the revised wages posterior to that dale are the 'back wages' for the time being payable.
Reference
Prantiya Vidyut Mandal Mazdoor Federation etc. etc. vs. Rajasthan State
x) CRITERION FOR EXEMPTION
Whether exemption under Provident Fund Act for infancy period will be available to a factory which restarts after being remained dosed for a considerable period?
Not in every case. The Provident Fund Act being a beneficial statute and section 16 of the Act being a clause granting exemption to the employers from liability to make contribution. a strict construction is warranted. Where a period of three years has elapsed from the date of establishment of the factory, the Act would become applicable provided other conditions are satisfied. In a case, where stoppage of production in a factory was temporarily brought about due to the order of the High Court in winding up the proceeding in respect of the company owning the factory for sale of assets. It was the same old factory which started production after its sale of assets of company and a substantial number of workmen and staff working under the former management continued to be employed by the purchaser company, it has been held that mere investment of additional capital or effecting its repairs to the existing machinery before it was re-started, the diversification of lines of production or change of ownership would not amount to the establishment of a new factory attracting the exemption available under section 16 of the E.P.F. and Miscellaneous Provisions Act.
Reference
Shivaji Mills Ltd. vs. Regional Director P.F., AIR 1985 sc 323; 1985 Lab. IC 658; 1985 (5) FI.R 123; 1985-1 LLJ 238.
(xi) CRITERIA FOR INDEPENDENT ESTABLISHMENT
When can an establishment be said to be independent of the other?
It depends upon the facts of each case. In one case, the restaurant section located in the same building wherein lodge has also been established by the petitioner which was leased out to a third party on which the petitioner has no control whatsoever excepting to collect the amount It has been held that the restaurant and' lodge cannot be one establishment to attract the applicability of the Act. They are two different and independent establishments. At the 'same time, it is very difficult for the Court to extend the application of the Act which is not at all in part material with the Insurance Act.
Reference
K.Y. Ratnam vs. Government of India
(xii) OPPORTUNITY TO THE DEFAULTER
Is it obligatory on the part of the Regional Provident Fund Commissioner to give an opportunity to the defaulting employer while levying the damages?
Yes. The power to levy damages has been conferred on the Regional Provident Fund Commissioner under section 14-B of the E.P .F. Act which is clearly a quasi judicial in nature and it must be exercised after notice to the defaulter and after giving him reasonable opportunity of being heard and putting forward his case. In another case, High Court has held that imposition of damages is of penal in nature and as such it is necessary that the employer is given that the employer is given reasonable. Opportunity to show cause before levy of damages is determined. It has also been held that it imperative that employee, an enquiry be conducted.2
Reference
H.R. Gandhi vs. State of Haryana
Commissioner of Regional Provident Tamil Nadu and Pondicherry States Madras vs. P.L. Srinivasan and another 1993 (1) CLR 493(Madras
(xiii) DETERMINATIONS OF AN EMPLOYEE
What is the criterion to determine that a particular person is an employee and is liable to be covered under the Employees Provident Fund and Miscellaneous Provisions Act?
Any person employed to do certain work altogether uncertained with the work of establishment, cannot be considered as an employee of the establishment. A night watchman who looked after several shops in the bazaar and also the establishment in question and received small remuneration from each of them cannot be treated as an employee of the establishment. However, an accountant writing accounts on contract basis with option to work at his own residence has been held an 'employee' thus coverable under the Act. In another case the person engaged in putting up staff quarters and constructions of factory were not deemed to be 'employees' as defined under the Act. 1 In one case, the petitioner engaged in manufacture of eatables and selling them at the counter has been engaging needy women to manufacture the items and were paid on piece rate basis. It has been held that such women though enrolled as associate members were employees and thus the provisions of the Act applied to the establishment and the workmen as engaged on piece rate basis were liable to be covered under theAct.2 In another case, three sons of the proprietor who were in the employment and were being paid wages, it has been held by Punjab and Haryana High Court, that they will be deemed as employees' and liable to be covered under the Act.3
References
Mysore State Coop Printing Works vs. Regional P.F. Commissioner 1976 UN 371 (Kar.HC) Satish Plastic vs. Regional P.F. Commissioner, 1978, 2 LLN 197; FLR 1982 (44) 207; Workmen of Hindustan Tele printers Ltd. vs. Regional P.F. Commissioner, 1978 Lab. IC (NOC) 27; (1977) 2 Mad, LJ 272; (1977) 2 Lab.LN 386; (1977) 35 Fac.LR 311; 52 FJR 164. .
Shree Kutchi Visha Oshwal Mahila Mandal & others, 1992LLR584 (Bom.HC).
Goverdhan Purohit vs. R.P.F. Commissioner and others 1993 LLR 575 (Punjab and Haryana HC).
(xiv) DETERMINATION OF INFANCY PERIOD
How the infancy period is to be determined for exemption of the applicability of Employees Provident Fund Act?
Section 16 of the Employees Provident Fund Act provides that if an employer is employing 20 or more but less than 50 employees, the infancy period will be available for five years (before amendment of Act No. 33 of 1988). However, the starting point is to be taken on considering merit of a particular case. When a Doctor who has started a clinic in a room in his residential house in 1970 and worked alone in the clinic then that was an establishment within entry 42 attracting applicability of the Act but when he started a hospital then that was covered byentry55 in 1974. When the dispute arose it was held that the hospital which was started in 1974 could not be said to be a continuation of clinic started in 1970. Hence the hospital in which more than 20 persons were employed as staff would be entitled to infancy concession under section 16(1) (b) from 1974 and not from 1970.1 'Where a firm entered into an agreement with the Government of India's undertaking for fabrication and supply of garments for export and recruited employees to carry on its activities, it has been held that the firm will be entitled to the infancy benefit.2
References
Dr. K.B.Jacob vs. the Regional Commissioner, Employees' Provident Fund, Kerala & Ors., 1987 Lab. IC 1139 (Ker HC); 1986 Ker. L.T. 954; (1986) 69 FJR 137; 1986(2) LLN 543; 1986 Cur. L.R. 475.
M/s Elegant Garments vs. Regional Provident Fund Commissioner and others, 1992 LLR 313.
(xv) FAILURE TO DEPOSIT EMPLOYEES P.F. CONTRIBUTION
What can be the consequences if an employer fails to deposit employee's contribution with P.F.' authorities?
An employer who has deducted the contribution and has not deposited then he can be prosecuted for the offence which entails punishment of sentence of not less than three months. The Court can, for any adequate and special reasons to be recorded, impose a sentence of imprisonment for lesser term. In a case, where the court awarded only a fine of Rs. 75 to the accused, the High Court, in revision, enhanced the punishment to three months irrespective of the plea that the accused has been old and infirm.
References
Union of India Delhi
(xvi) FINANCIAL DIFFICULTIES-NO EXCUSE FOR NON-PAYMENT OF DUES.
Can an employer take a plea that the default in not making the payment of E.P.F. contribution has been due to financial difficulties?
No. Such a plea is not available to an employer in not depositing E.P.F. contribution within the prescribed period. The object of section 14-B of the E.P.F. and M.P. Act is to ensure that employers are deterred from making defaults in complying with their statutory obligations in depositing contribution. This section authorizes the Regional Provident Fund Commissioner to impose exemplary and punitive damages to ensure that there are no defaults by the employers. When there is a default by an employer in making the payment of E.P.F. contribution, he will have to explain with reference to each and every default to the effect that he acted honestly and reasonably and a general statement that the company was passing through financial crisis or was sick industry would not be a valid plea.
Reference
Jagan Nath Prasad jhalani & Ors. Vs. Regional Provident Fund Commissioner, Haryana & Ors., 1987 (77) FJR 204.
(xvii) FUNCTIONAL INTEGRALITY
Will two establishments with common directors/partners be treated as one establishment by clubbing on the principle of Functional integrality?
In such cases facts are very important. Where there is no evidence that there is anything common between the first and second petitioners except that some of the partners of a firm are directors of the other company. Both the firm and company are carrying on different kinds of business. It has been held that it may be that some of the partners of the first petitioners are the Directors of the second petitioner, but that by itself would not be enough to draw a conclusion that both are sister concerns. It was also held that when no evidence was brought on record to show that the workmen of both the units were the same inter-changeable and had the same muster roll. Therefore, in the absence of any such evidence it was difficult to conclude that the two establishments had functional integrality and were for all purposes oneestablishment.1 In another case, the Delhi High Court has held that merely because two of the erstwhile partners have started a new business in the same premises under a new name is not sufficient t to conclude that the new establishment is a continuation of the old business unless there is semblance of any connection between the two.2
References
Haroon & Co. another vs. RPFC, 1988 56 FLR 437 (Bom. HC).
Bajaj FoodProducts VS. Central Board of Trustees & others, 1990 LLR 37 (Delhi High Court).
(xviii) E.P.F, TO EMPLOYEES WORKING AT HOME
Whether the persons working at home for a covered establishment will be entitled to get the benefits under Employees Provident Fund Act ?
Section 2 (f) of the Employees Provident Fund and Miscellaneous Provisions Act defines an 'employee' to mean 'any person who is employed for wages in any kind of work, manual or otherwise 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. The narrow construction sought to be placed 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 total process of the manufacture cannot be accepted. The home workers are thus, 'employees' within the meaning of clause (f) of section 2 of the Act. In a recent case before the Supreme Court pertaining to the question as to whether the relationship of employer and employee existed between the manufacturer of beedis and the workmen rolling beedis at their home, the Supreme Court has held that an establishment by the terms of its definition is wide enough to include dwelling house of a home worker. The Division Bench of Patna High Court has held that the home workers for rolling of beedis are employees and liable to be covered under the Act.' The Karnakata High Court has also held that the Act will be applicable to the home workers as covered by the Beedi Cigar Workers (Conditions of Employment) Act'.
References
P.M. Patel & others Vs. Union of India and Ors., 1985 (51) FLR534; 1986 LLR 12.
S.K. Nasiruddin Bidi Merchants (P) Ltd., vs. Regional Provident Fund Commissioner, 1992 (2) LLN 710 (Patna
Bagi Beedi Factory vs. The Appellate Authority & Ors., 1998 LLR 23 (Kar. H.C).
(xix) EMPLOYEES TO GET FULL SHARE
Do the employees covered under the Act get full or part of the payment of employers' share while settling their account?'
Earlier the employees were getting part of employer's share if they left the job before completion of specified period of service. Now a decision has been taken on 30th December, 1989 by the Board of Trustees under the Chairmanship of the Labour Minister to the effect that the employees will be entitled to the full payment of employers' contribution along with interest in addition to their own share.
(xx) INCENTIVE PRODUCTION BONUS
Whether incentive production bonus will be treated as basic wages under E.P.F. Act?
Incentive/production bonus payable under a settlement to employees is not basic wages under E.P.F. Act.
Reference
Greysham & Co. vs. Regional Provident Fund Commissioner, New Delhi
(xxi) INFANCY BENEFIT ONCE ONLY
Will the benefit of infancy period be available under the Employees' Provident and Miscellaneous Provisions Act when the establishment is taken over by new employer?
The benefit of the infancy period under section 16 of the Employees' Provident Fund and Miscellaneous Provision Act once availed by the original company cannot be extended again to the petitioner-company. To do so, will militate against the prime purpose of the Act. A prosperous establishment of 'A' which has already availed of the benefits of the infancy period, though carrying on the same business albeit under different name and ownership and those benefits were already availed by different name and ownership. Later the same establishment is taken over by third person and he also claims the benefit of the infancy period. And so on ad infinitum. Such surely is not the object of section 16 of the Act.
Reference
Industrial Factors Ltd. vs. Prasad, Regional Provident Fund Commissioner, Maharashtra and Goa and others, 1989 LLR 172.
(xxii) INFANCY PROTECTION TO PURCHASER
Whether the benefit of infancy period be available to an employer who purchases property for running business.
In one case, the petitioner purchased landed property and building but no employee of seller was' taken in the employment. It has been held that it was not a continuation of the old business since there was no link between the petitioner's business and the business run by the earlier owners of the building. Accordingly, the purchaser would be entitled to infancy protection as contemplated by section 16 of the Act.1 A similar view has been taken by the Karnataka High Court.
References
Sealord Hotel (P) Ltd. vs. RPFC Kerala, (1988) 57 FLR 607 (Ker HC).
Gamon India
(xxiii) ACT AND INDEPENDENT UNITS
Whether the Employees' Provident Fund Act be applicable to all the units of Company? What will be the position if a particular unit of the company or the firm is independent of others?
A firm or a company may finance and manage different types of business units completely independent of one another and in such a case the units’ cannot be said to be departments or branches of the firm. In one case, the number of workers in each unit was less than 20; it was held that E.P.F. Act would not apply. In another case before Bombay High Court, it has been held that the factors, such as situation of the offices of the four firms in one premises, user of a common telephone number, post box number and employing the same person to write the accounts. on which reliance has been placed by the Regional Provident Fund Commissioner for purpose of clubbing together of the four firms and treating them one are not relevant since there is clear distinction between different departments or branches of one establishment.2 Earlier also in yet another case the Bombay High Court has held that two establishments owned by the same set of people will not deprive the new establishment from infancy benefit
References
Navi Bros. vs. Regional Provident Fund Commissioner Orissa and others, 1975(35) FLR 81 (Orissa He). Gujchem Distilleries India Ltd., Ahmedabad vs. Regional Provident Fund Commissioner, 1985 LIC 1714 (Guj. HC).
Sunder Transport &. another vs. Regional Provident Fund Commissioner, 1993 LLR 165 (Bom. HC).
Allana Sons (P) Ltd. Vs. R.M. Gandhi Regional Provident Commissioner of Maharashtra &. Goa , 1991 LLR 448 (Bom. High Court).
(xxiv) LIABILITY OF PRINCIPAL EMPLOYER
Whether the principal employer will be liable for the payment of contribution in regard to the employees engaged by a contractor?
The workers employed through a contractor are the 'employees' under the E.P.F. Act and the principal employer is responsible for contribution of provident fund in regard to such employees. The employees engaged by the contractor in connection with the work of the principal employer will be employees as defined under the E.P.F. and Miscellaneous Provisions Act.
References
Malwa Vanaspati and Chemical Co. Ltd. vs. Regional Provident Fund Commissioner, Indore
G.V.V. Swamy vs. Regional Provident Fund Commissioner and another, 1987 Lab. IC 719; 1987 (I) LLN 94; 1986 Andh. LT 653.
(xxv) MEMBERSHIP OF AN EMPLOYEE DRAWING MORE THAN Rs. 5000 PER MONTH
Whether an employee drawing salary more than Rs. 5000 working in a covered establishment will be cover-able under the Employees' Provident Fund and Miscellaneous Provisions Act?
In this connection the relevant para of the Employees Provident Fund Scheme, 1952 is reproduced below wherein 'excluded employee' means-
(i) an employee who having been a member of the Fund, withdrew the full amount of his accumulation in the Fund under clause (a) or (c) or sub-paragraph (1) of Paragraph 69;
(ii) An employee whose pay at the time when he is otherwise entitled to become a member of the fund exceeds five thousand rupees per month.
In the para cited above the employees getting more Ulan Rs.5000 per month arc excluded employees and in para 26 of the scheme they have been specifically excluded from the benefit of the Employees' Provident Fund Scheme, 1952. In this connection para 26-A is also very relevant which reads as under:
26-A Retention of membership(1) A member of the Fund shall continue to be member until he withdraws under Paragraph 69 the amount standing-to his credit in the Fund or is covered by a notification of exemption under section 17 of the Act or an order or exemption under Paragraph 27 or Paragraph 27-A.
Explanation-In the case of claim for refund by a member under sub-paragraph (2) of Paragraph 69, the membership of the Fund shall be deemed to have been terminated from the date the payment is authorized to him by the authority specified in this behalf by Commissioner irrespective of the date of claim.
(2) Every member employed as an employee other than an excluded employee in a factory or other establishment to which the scheme applies, shall contribute to the Fund, and the contribution shall also be payable to the Fund in respect of him by the employer. Such contribution shall be in accordance with the rate specified in Paragraph 29.
Provided that subject to the provisions contained in subparagraph (6) of Paragraph 26 and in Paragraph 27, or sub- paragraph (I) of Paragraph 27-A, where the monthly pay of such member exceeds two thousand five hundred rupees, the contribution payable by him and in respect of him by the employer, shall be limited to the amounts payable on a monthly pay of two thousand five hundred rupees including dearness allowance, retaining allowance (if any) and cash value of food concession.
(xxvi) NEWLY SET UP ESTABLISHMENT
What are the implications of the words 'newly set up’? What will be the effect about the applicability of the Employees' Provident Fund Act, if there is a change in ownership of the management?
The phrase 'newly set up' connotes the period of infancy of the establishment. If it is a new establishment coming into operation for the first time, it would be entitled to claim the benefit of section 16(1) (b) of the Act. The period of infancy has to be calculated from the date of the setting up of the business initially. It will not relate back to the dale when the establishment had twenty or more persons on its rolls or from the date of the change of the management and ownership of the establishment or its incorporation under the provisions of the Companies Act. The period of infancy must relate to the real infancy of the Company.
References
Sanjay Automobiles vs. Regional Provident Fund Commissioner, 1981 Lab. IC 355 (All. HC).
P.F. Inspector vs. NSS Co-operative Society, AIR 1971 SC 82 ; 1971 Lab. IC 18; 40FJR 310; 196911 LLJ 693; 21 FLR5.
V.Transport (Pvt.) Ltd. vs. Regional Provident Fund Commissioner, AIR 1965 Mad.
Salmi and Co. vs. Union of India , AIR 1964 Mad.
State of Punjab
R.Ramakrishna Rao vs. State of Kerala
(xxvii) NON- AVAILABILITY OF INFANCY BENEFIT
Under what circumstances the infancy benefit under Employees' Provident Fund and Miscellaneous Provisions Act can be denied to a new establishment?
When the newly set up unit is not independent of the covered establishment the infancy benefit under E.P.F. Act will not be available. For instance in the case of NAFED where employees working in the two units were controlled by its Managing Director as provided by the service rules of the two units, the account of the two units though separately maintained, were ultimately consolidated with the NAFED accounts. All the units were carrying on trade under the same sales tax registration. The application for the grant of sales-tax registration stated that the cold storage plant and the food processing units were branches of NAFED. The service rules of the two units referred to as a Managing Director who was the Managing Director of NAFED. The question was whether the cold storage unit and food processing unit were independent units of NAFED and whether the employees of the two units could be covered under the Act? It has been held that the food processing unit and the cold storage unit were part of the NAFED establishment; hence the infancy benefit was not available. Where the petitioner engaged in the metal products started another activity producing bearings and bushes in a nearly plot on the existing license and registration, it has been held that the benefit of infancy will not be available.2
References
National Agricultural Co-operative Marketing Federation of India
Regional Provident Fund Commissioner, New Delhi and another, 1987 Lab. IC 529 (Delhi
Glitager (I) Ltd. vs. Union of India
(xxviii) NON-FILING OF RETURNS-NOT A CONTINUOUS OFFENCE
Whether non-filing of returns under the Employees' Provident Fund and Miscellaneous Provisions Act is a continuing offence?
Non-filing of returns is not a continuous offence.' In one case, it has been held that such an offence is committed once and For all.
References
C.B. Bhandari vs. P .F. Inspector, Bangalore
(xxix) NOMINATION UNDER E.P.F. ACT
Is nomination under Employees' Provident Fund and Miscellaneous Provisions Act, essential? If so what is the procedure?
Yes. Every member is required to make a nomination to receive the amount standing to his credit in the Fund in the event of his death. If a member has a family he has to nominate one or more persons belonging to his family only. If he has no family, he can nominate any person or persons of his choice. However, if he subsequently acquires a family, such nomination becomes invalid and he will have to make a fresh nomination of one or more persons’ belonging to his family.
(xxx) PROVIDENT FUND ON NOTICE PAY
Whether provident fund contribution is to be deducted and deposited on the notice pay paid to the employee?
The expression 'emoluments' which are earned by the employee while on duty, occurring in section 2(b) of the Act represents the amount actually earned by an employee during the period of his employment while he is actually on duly. The payment made in lieu of notice could not in any sense be regarded as expressing 'emoluments earned while on duty' and would constitute 'basic wages' within the meaning of definition given in section 2(b) of the Employees' Provident Fund and Miscellaneous Provisions Act.
Reference
(xxxi) ACT ABOUT PART-TIME EMPLOYEE
Whether a part-time employee engaged in the work incidentally connected with the work of establishment will be treated as an employee for the purposes of applicability of Employees' Provident Fund and Miscellaneous Provisions Act, 1952 ?
Where the management engaged a sweeper who worked twice or thrice a week, a night watchman who kept watch on other shops in the locality also and a gardener who came for work ten days in a month, will be deemed as 'employees' in order to attract the applicability of E.P.F. Act. An employee in order to come within definition of the term 'employee' need not necessarily be directly connected with the main industry. However, the Rajasthan High Court has held that a part-time employee engaged in a work incidently connected with work of establishment is an 'employee' under the Act.
References
Ahmedabad Mfg. and Calico Printing Co. Ltd. vs. Ramthel Ramanand. AIR 1972 SC 1958; 1972lab.IC 864.
Railway Employees Co-operative Banking Society Ltd. Vs. Union of India
(xxxii) PAYMENT OF CONTRIBUTIONS IN THE ABSENCE OF PAYMENT OF WAGES
Is an employer liable to make the payment of provident fund contribution when the wages to the employees are not paid ?
It is a well establishment principle that the initial obligation to pay Employees' Provident Fund contributions is on the employer irrespective of the fact whether wages are paid or not to the employees. Even in cases of a lock-out, strikes, etc. failure to make contributions resulting in default will have to be visited by damages under section: l4-B of the Employees' Provident Fund and Pension Act, 1952. However, the authority can consider the mitigation of damages as regard to attendant circumstances resulting in delay. 1 Keeping in view the material on record including strike and sit in dharna etc. by the worker during the relevant period, the Bombay High Court quashed the order of the E.P.F. authorities in levying damages for late deposit of contributions.2
References
Lab. LN
360; ILR (1982) I Ker. 698; (1982) Lab.LJ 440
Vegetables Vitamin Co. Ltd. vs. Regional Provident Fund Commissioner, Maharashtra Goa & Others 1995 LLR 244 (Bombay
(xxxiii) PIECE-RATED EMPLOYEES AND THE ACT
Are piece rated employees liable to be covered under the Act?
Yes. Here is a case of a Charitable Trust founded for the uplift of women. The trust supplied raw materials to individual women who come to the Trust and they prepared eatables to be sold by the Trust. The women were paid on a piece-rate basis. The question arose as to whether the Trust was covered by the Employees' P.F. and Miscellaneous Provisions Act. It was held that the individual women came to the premises of the-establishment manufacture eatables out of the raw materials supplied to them by the Trust, and paid on a piece-rate basis, were nothing but workers' and the authorities were more than justified in covering, the establishment under the provisions of the Act. It was further held that the device of obliging the women to make an application to become associate members before they were allowed to work on wages at piece-rate could change their status as ‘employees’. On the basis of admitted facts and circumstances, there was hardly any doubt that the relationship between the so-called associate members and the Mandal was that of employee and the employer and the authorities took a proper decision to bring them under the provisions of the Act.
Reference
Shree Kutchi Yisha Oshwal Mahila Mandal vs. Union of India
xxxiv) POWERS OF PROVIDENT FUND COMMISSIONER UNDER SECTION 7-A
Can a Provident Fund Commissioner determine as to how much money is due against an employer? Also whether the order of the Regional Provident Fund Commissioner can be challenged in the High Court?
Power of the Regional Provident Fund Commissioner under section 7-A of the act appears to be very wide. Where a liability is disputed, determination of the liability is a condition precedent, for serving a demand on the employer, When the liability is disputed on the ground that the establishment is not covered under the Act, the Provident Fund Commissioner' has to make an inquiry and determine if the Act is applicable to the establishment under the circumstances of that case. He may conduct such enquiry as may be deemed necessary. Under sub-section (2), the powers of the officer conducting an enquiry are defined. Under sub-section (3) of section 7-A a reasonable opportunity is to be given to the employer for his representation in that enquiry. The competent authority is not precluded under section 7-A of the Act from making its own estimates of the amount payable by an employer before issuing the notice in terms of sub-section (3)1. The Supreme Court has also held in one case that the Regional Provident Fund Commissioner has the same powers while exercising jurisdiction under section 7-A of the Act which are vested in a civil court in trying a suit.2 In another case, the Rajasthan High Court has held that it will not enter into an enquiry into factual aspects of controversy regarding actual number of employees under its extraordinary jurisdiction under Article 226 of the Constitution. While dismissing the writ petition their Lordship held that the petitioner's establishment is employing more than 20 employees and liable to be covered under the Act.3
References
Younus Mohammed vs. RP.F. Commissioner, 1987 Lab. IC 1089 (M.P.HC), Swamy L.V. vs, Regional Provident Fund Commissioner Hyderabad and others 1987(I) LLN 94 (AP.HC).
Food Corporation of India
Metra Oil Mills Co. vs. Regional Provident Hind Commissioner, jaipur 1992 LLR 850 (Raj. HC).
(xxxv) PROSECUTION UNDER E.P.F. ACT
Who can be prosecuted for violation of the provisions of Employees' Provident Fund and Miscellaneous Provisions Act?
A person named in Form 5-A of E.P.F. Scheme can be prosecuted for offence committed under E.P.F. Act or Scheme. The Supreme Court has held that the Managing Director and other Directors of a Company whose names appear in the declaration in Form 5-A will be liable for prosecution since the liability for payment of EPF contributions is not only restricted upon the owners but on those also who are in charge and responsible for the conduct of bus iness.2
References
Regional Provident.Fund Inspector vs. C K. Kejriwal, 1985(51) FLR 641 (Delhi
Srikanta Datta Narasimahraja Prosecution since Wodiyar Vs. Enforcement Officer, Mysore
xxxvi) EXEMPTION TO RE-INCARNATED FIRM
Whether the Employees' Provident Fund Act will apply to a new firm started by one or the same partners? Will it be deemed a new establishment?
There is no provision in the Employees' Provident Fund Act and the Employees' Pension Act, 1952, which lays down that an establishment covered under the Act and scheme there under can never be destructed or dissolved or the assets of such establishment, if utilized in another establishment, would make the latter a part or the continuation of the former. In one case the original partnership was dissolved by a deed and its assets were divided and allotted to the partners. Subsequently, another business was commenced in the same name and at the same place as that of the original partnership. It has been held that even if some of the employees of the earlier establishment have been employed in the subsequent establishment, it will not mean that the two establishments are one and the same or that the latter is a continuation of their earlier.1 In yet another case, the wife of the erstwhile partner of a closed restaurant obtained new lease from the municipality and obtained loan from the bank not on the basis of goodwill of the restaurant, it has been held that it will be treated as a new establishment and thus entitled to exemption under section 16(1) (b) of the Act.2 A covered establishment known as Mysore Chemical & Fertilizers Ltd. was wound up in 1972. All the workers were discharged and paid their dues. M/s Gamon India
References
Pratap Chand Sukhoni & another vs. Regional Provident Fund Commissioner, W.Bengal and others, 1981 I LLN 170.
Smt. Rukmini K. Shetti VS. RPFC & another, 1987(71) FJR 193.
Gamon India Ltd. vs. Regional P.F, Commissioner, 1991 LLR 124 (Karnataka High Court).
(xxxvii) RECOVERY OF CONTRIBUTIONS WITHOUT COVERAGE -NOT VALID
Can the Regional Provident Fund Commissioner proceed with the recovery of provident fund contributions from an employee before he determines as whether an establishment is liable to be covered under the Act?
No. It is imperative that the Regional Provident Fund Commissioner should first determine by an order that the establishment is covered under the Act and the scheme. Thereafter he must hold further enquiry to, determine the amount due from the employer after" affording an opportunity to him of being heard. In one case the recovery order was passed without an order of determination under section7-A of the Act. It was held mal such an order was liable to be vitiated. In another case, the Regional Provident Fund Commissioner called the management of an educational institution to deposit the contributions without verifying the fact that the same has been earlier deposited. The, order of the Commissioner was challenged in the High Court while quashing the order of the Regional Provident Fund Commissioner, their Lordship held that the 'Commissioner had failed to conduct the enquiry as stipulated under section 7A of the Act.
References:
1. Oriental Agencies, Jaipur vs. RPFC 1988(2) LLN 836 (Raj. HC).
2. K.P.A.K.Mahavidyalaya vs. Regional Provident Fund Commissioner & others 1992(2) CLR 783 (P&H HC)"
xxxviii) RETIRED EMPLOYEES-WHETHER ELIGIBLE FOR MEMBERSHIP
Whether a retired employee will be eligible for membership under the Employees' Provident Fund and Miscellaneous Provisions Act?
There are two types of retired employees so far as Employees' Provident Fund and Miscellaneous Provisions Act, 1952 is concerned. One is retirement from the establishment including GOVT. Undertaking covered under the Employees 'Provident Fund and Miscellaneous provisions act, 1952' and other which are not covered" under aforesaid Act including the Govt. departments/undertakings. In the former case, the' retired employee having retired from the covered establishment'" having settled his Provident Fund Account from the Provident Fund Department/Trust will not be eligible for Provident Fund membership on his re-appointment. The two material conditions are one having retired after attaining the age of 55 years or more. The second is that he has settled his P.F. Account of either of the two conditions are not fulfilled. The employee will be eligible for P.F. membership e.g. if account not settled from the first day and if settled after 60 days working. In the later case, the employee will be treated as fresh entrant and will be eligible for P.F. membership after having worked for 60 days in a period of three months or having put in a continuous service of three months. In this case there is no age limit.
(xxxix) P.F. CONTRIBUTION ON SPEClAL AllOWANCE Is P. F. contribution payable on special allowance?
The moot point is to be decided is whether the special allowance paid by the employer as a result of an agreement entered into between the employer and the employees can be said to form part of dearness allowance for the purpose of calculating the contribution payable by the employer under the provisions of the Act. The definition of basic wages in section 2(b) excludes a number of allowances grouped in sub-clause (ii) of the section. However, under section 6J dearness allowance and remaining allowances are taken ~!o consideration for calculating the contribution. In Case, the special allowance was paid as a result of agreement and the parties had not agreed to treat it as part of basic wages or dearness allowance and then it could not be included for computation of contribution by the employer.
References
Regional Commissioner, EPF, Tamil Nadu and Pondicherry vs. Management, of Southern Alloy Foundaries (P) Ltd. 1982-I LLJ 28, Bridge of Roof Co. (India
(xI) TIME UMIT TO RECOVER DAMAGES
Is there any time limit for recovery of damages from an employer who has defaulted in making timely payments of contributions?
Section 14-B dealing with levy of damages does not prescribed any period of limitation for recovery of damages or initiating action for recovery against a defaulter. It has been held that it aims to realize such an amount of provident fund dues for which deductions have been made from the wages of the workers also. If an employer deducts these contributions from wages and sits tight over them, he as a trustee is liable to account for the same at any time. It is not a defense for him to say that he will cease to be accountable after a given fixed period. Legislature has advised not prescribed any period of limitation for issuing show-cause notice against such defaulting trustees/employers. The Act is a beneficial piece of legislation meant for the welfare of weaker section of society namely the employees. Such employees have no 'control over the acts and omissions of authorities exercising their power under the Act.
Reference
Ghandhidham Spinning and Mfg. Ltd. vs. Regional Provident Fund Commissioner and another, 1987 Lab. IC 659 (Guj.HC); 1987 Guj.LH 1130.
(xll) WITHOLDING OF P.F. BY A TRUST
Whether a company having its own trust for Provident Fund can withhold recommendation of provident fund withdrawal application of an employee who fails to vacate accommodation provided to him by the company?
No. Section 10 of the Employees' Provident Fund and Miscellaneous Provisions Act is very clear on the pain t. The payment of provident fund cannot be tagged with any other liabilities of the employee. Since it is immuned from all the liabilities, there is no justification in withholding the recommendation for provident fund withdrawal by the company. Even otherwise, there is-no recommendation -but only attestation of the identity of the member of the company. Failure to attest the withdrawal form by the employee will also amount to violation of the rules granting exemption from E.P.F. and M.P. Act for formation of a trust.
(xlii) EPF CONTRIBUTIONS ON ENCASHMENT OF LEAVE
Will the amount paid to employees towards encashment of leave attract the payment of EPF contributions?
Yes, the amount payable on account of encashment of leave will form part of the basic wages and, therefore, it will be liable for provident fund deductions.
Reference:
Hindustan Leaver Employees' Union vs. Regional Provident Fund Commissioner &Anr.1995 LLR416 (Bom. High Court).