Magic Wash Industrie... v. Assistant Provident ...

Batta, J.:— Petitioner 1 is registered as a Small Scale Industrial Unit with the Directorate of Industries and Mines, Government of Goa. The manufacturing process of the petitioner commenced from 26 May 1986. Petitioner 1 was entitled to infancy period under S. 16(1) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter called the Act), for five years in terms of S. 16(1)(b) as applicable at the relevant time. Section 16 was amended by the Employees' Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988 (hereinafter referred to as the Amendment Act) and in terms of S. 16(d) as amended, the infancy period has been reduced to three years. According to the petitioners even in spite of the said amended Act they are entitled to infancy period benefit of five years. However, by letter, dated 26 February 1992, the office of the Provident Fund Commissioner informed petitioner 1 that it has been brought within the purview of the Act with effect from June 1989, that is to say, after the expiry of three years infancy period. By the said letter the petitioners were required to implement the provisions of the Employees Provident Fund Scheme with effect from 1 June 1989, Family Pension Scheme with effect from 1 February 1992 and Deposit Linked Insurance Scheme with effect from 1 June 1989, if not already done. The said letter further directed the petitioners to deposit the contribution of the eligible employees for all the past months, namely from 1 June 1989 to 31 January 1992, into their respective accounts within 30 days from the date of receipt of the letter. Thereafter respondent 1 issued show-cause notice, dated 7 July 1992, directing petitioner 1 to show cause why the amounts of provident fund, family pension and deposit linked insurance fund with administrative charges due from petitioner 1 should not be recovered as arrears of land revenue under S. 8 of the said Act. In fact, petitioner 1 vide letters, dated 9, April 1992, 13 August 1992, 8 February 1993 and 10 August 1993, requested respondent 1 to allow it to pay the amounts in instalments. This, according to the petitioners was done under a mistake of law which the petitioners otherwise were not liable to pay. According to the petitioners, the infancy period expired on 31 May 1992 and from then onwards, the petitioners have been making the payments as required under the Act. Respondent 1 passed order, dated 21 September 1993, holding that the amount of Rs. 87,173.25 was due from petitioner 1 towards provident fund, insurance fund and administrative charges for the period from June to December 1991. The petitioners stated that they have already paid all dues from June 1991, onwards and they are not liable to pay the dues claimed by respondent 1 from June 1989 to May 1991.

2. The petitioners have challenged the said impugned order, dated 21 September 1993, on various grounds, including that the infancy period applicable to the petitioners is five years and the same cannot be said to have been curtailed vide the amended provision S. 16(1)(d) of the Act which is applicable to only to newly set up establishments. It is also contended by the petitioners that the benefit granted under unamended S. 16(1)(b) has not been taken away or abolished by the amended S. 16(1)(d) and the vested rights which had accrued under the unamended S. 16(1)(b) are not affected unless the same are expressly taken away by the amended provision.

3. On the other hand, the case of the respondents is that the amended provisions of S. 16(1)(d) are applicable not only to the newly set up establishments, but also to those which were in existence and, as such, the amended provision restricts the infancy period even in respect of the existing establishments to three years. It is also pointed out that during inquiry under S. 7A of the Act, the petitioners never disputed the applicability of the Act, but the matter was contested on merits.

4. The short question which is required to be determined in this petition is whether the amended provision S. 16(1)(d) curtails the infancy period of the already existing establishments which enjoyed five years infancy period under the unamended provision S. 16(1)(d) of the Act.

5. Learned senior counsel, Sri M.S Usgaokar, urged before us substantially the grounds taken in the petition and his contention is that the expression, “newly set up,” which has been introduced for the first time in the amended provision S. 16(1)(d), has to be harmoniously construed with the latter part thereunder, namely “is, or has been set up.” This expression “newly set up,” according to him, is significant and in view of the same the rulings of the Apex Court which have interpreted the unamended provision S. 16(1)(b) wherein the expression “newly set up” did not exist, would not be helpful in interpreting the amended provision S. 16(1)(a). In this connection he has placed before us a number of judgments of the Apex Court, namely in the case of R. Ramkrishna Rao v. State of Kerala [A.I.R 1968 S.C 1367], reported in State of Punjab v. Satpal [(1969) 3 SCC 910 : A.I.R 1970 S.C 655] and Provident Fund Inspector, Trivendrum v. Secretary, N.S.S Co-operative Society, Changannacherry [(1970) 1 SCC 50 : A.I.R 1971 S.C 82]. On the question of interpretation of statutes and the taking away of vested rights, he has drawn our attention to the judgments of the Apex Court in Jayantilal Amratlal v. Union of India [(1972) 4 SCC 174 : A.I.R 1971 S.C 1193] and Govinddas v. Income Tax Officer [(1976) 1 SCC 906 : A.I.R 1977 S.C 552]. He therefore submits that the vested rights or the concession which had been granted under the unamended provision S. 16(1)(b) of the Act has not been taken away by the Legislature and no such intention of taking away such rights or concessions can be deduced from the amended provision S. 16(1) of the Act.

6. On the other hand, the learned Central Government Standing Counsel, Sri G.V Tamba, after placing reliance on the judgment of the Allahabad High Court in the case of Vikas Industrial Gases, Ltd. v. Regional Provident Fund Commissioner [1992 L.& I.C 1654], has urged that a similar question had come up before the Division Bench of the Allahabad High Court, wherein it is held that after the coming into force of the amended provision S. 16(1)(d), the infancy period even in respect of already existing establishments, shall be only three years and the Act applies to such establishments. He therefore submit that respondent 1 had rightly made the provisions of the amended S. 16(1)(d) applicable to the petitioners and the petition is liable to be rejected.

7. In order to appreciate the controversy we shall first enumerate the relevant provisions under the Act, which existed from time-to-time. Section 16 of the Act as it stood when the said Act was passed is as under:

“16. Act not to apply to factories belonging to Government or local authority and also to infant factories. — This Act shall not apply to—

(a) any factory belonging to the Government or a local authority; and

(b) any other factory, established whether before or after the commencement of this Act unless three years have elapsed from its establishment.”

Section 16 was amended by the Employees' Provident Funds (Amendment) Act, 1958 and Sub-sec. (1) of S. 16 of the Principal Act was substituted, as under:

“(1) This Act shall not apply to any establishment until the expiry of three years from the date on which the establishment is, or has been, set up.

Explanation.— For the removal of doubts it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location.”

Section 16(1) was once again amended by the Employees' Provident Funds (Amendments) Act, 1960 and Sub-sec. (1) of S. 16 was substituted as under:

“(1) This Act shall not apply:

(a) to any establishment registered under the Co-operative Societies Act, 1912, or under any other law for the time being in force in any State relating to co-operative societies, employing less than fifty persons and working without the aid of power; or

(b) to any other establishment employing fifty or more persons or twenty or more, but, less than fifty, persons until the expiry of three years in the case of the former and five years in the case of the latter, from the date on which the establishment is, or has been, set up.

Explanation.— For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location.”

Section 16 was further amended by the Employees' Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988 and Cl. (b) of Sub-sec. (1) of S. 16 was substituted by Cls. (b), (c) and (d) and the said amendment to S. 16 is as under:

“(b) to any other establishment belonging to or under the control of the Central Government or the State Government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits; or

(c) to any other establishment set up under any Central, Provincial or State Act and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that Act governing such benefits; or

(d) to any other establishment newly set up, until the expiry of a period of three years from the date on which such establishment is, or has been, set up;

(ii) in Sub-sec. (2), after the word ‘exempt,’ the words, ‘whether prospectively or retrospectively,’ shall be inserted.”

(emphasis supplied.)”

8. The infancy period under the said Act as originally passed was three years from the date of establishment irrespective of whether the establishment was set up before or after the commencement of the Act. The Employees' Provident Funds (Amendment) Act, 1958, provided that the infancy period shall be three years from the date on which the establishment is, or has been, set up. This infancy period was changed under the Employees' Provident Funds (Amendment) Act, 1960, by which the infancy period in respect of establishments employing fifty or more persons was maintained as three years, but in case of establishments which employed twenty or more persons, but less than fifty, the infancy period was increased to five years. Petitioner 1 claims the infancy period under this provision and its contention is that this infancy period benefit has not been curtailed by the Employees' Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988, in respect of existing establishment which were enjoying the said benefit under the unamended provision. By he Employees' Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988, the infancy period has been reduced to three years even in cases where establishments employ twenty to fifty persons.

9. A comparison of various amendments enumerated above would show that in the amendments, the last thirteen words are same, i.e from the date on which the establishment is, or has been, set up.” However, it is pertinent to note that in 1988 Amendment expression “newly set up,” has been added after the words, “to any other establishment.” The judgments of the Apex Court to which our attention has been drawn have interpreted the unamended S. 16(1)(b), wherein the expression, “newly set up” did not figure. In the case of R. Ramakrishna Rao v. State of Kerala (vide supra), the facts are:

The appellant was running Ananda Bhavan Boarding and Lodging from 6 December 1949. The appellant started another establishment by name Hotel Brinda on 15 January 1959. He had a third establishment under the name Ananda Bhavan which was started on 15 September 1948, but was sold by him in April 1962. The Provident Fund Inspector filed a complaint against the appellant on 16 December 1962, alleging contravention of Paras. 36(2)(a) and 36(2)(b) and 38 of the Employees' Provident Fund Scheme, 1952. The appellant therein was convicted under Paras. 76(c) and 76(e) of the Employees' Provident Fund Scheme, 1952, read with S. 14 of the Employees' Provident Funds Act, 1952, for having failed to submit returns, statements and other documents required by the Scheme in respect of three quarters, namely July to September 1961, October to December 1961 and January to March 1962. The appellants were fined Rs. 25 on each count and revision against the said order was dismissed by the High Court. The appellant approached the Apex Court by filing special leave petition. The appellant claimed exemption for five years on the ground that Hotel Brinda, Palghat, had been started on 15 January 1959 and he was entitled to exemption for five years under the Act. His further defence was that the three establishments, one of which he had sold, formed different units and twenty persons were not employed in any one of those places and even if all establishments were taken together as a single establishment, the figure of twenty employees was only after Hotel Brinda, Palghat, was started in January 1959. These contentions of the appellant were rejected by the Apex Court and it was observed as under:

“The language of S. 16(1)(b) is very precise. The last thirteen words of the clause from the date on which the establishment is or has been set up,’ show both cases where the establishment is old. The word ‘is’ shows that a new establishment is meant and the words ‘has been’ show that the establishment existed before the number is reached. If it was intended to apply the clause to new establishments the words ‘is set up’ would have been sufficient. The construction sought to be placed would render the words ‘has been’ otiose. Further the scheme of Para. 26 quoted earlier relates to a period of service and this qualifying period may be in the past as well as in future. The intention behind S. 16 read with Para. 26 quite clearly shows that the period is intended to give a breathing time to new establishments. That reason does not hold when the establishment is already old and well founded. The use of the participle is therefore immaterial. Whether a present perfect tense or a participle be used the meaning is the same. Clause (b) of S. 1(3) which uses the participle and Cl. (a) of the same section which employs the present perfect tense both merely describe the establishments and convey no different meanings. The conclusion of the High Court was thus right. The appeals fail and will be dismissed.”

(emphasis supplied.)

In this case when Hotel Brinda was opened in 1959, the infancy period was three years under the 1958 Amendment. However, by the 1960 Amendment, infancy period was increased to five years in case of establishments employing more than 50 workers and as such the appellant claimed five years infancy period with effect from 15 January 1959. The claim was rejected by the Apex Court on the ground that the intention behind S. 16 read with Para. 26 indicated that breathing time was meant for new establishments and the same could not be extended when the establishment is old and well-founded.

10. The case before us is reverse. Petitioner 1.establishment commenced from 26 May 1986 and the infancy period applicable is five years under the 1960 Amendment. Moreover, in 1988 Amendment the infancy period is reduced to three years. The question, therefore, before us is whether the 1988 Amendment shall have the effect of curtailing infancy period of five years to three years.

11. The Apex Court in State of Punjab v. Satpal [(1969) 3 SCC 910 : A.I.R 1970 S.C 655], had reiterated the law laid down by the Apex Court in its previous judgment in Ramakrishna Rao case (vide supra), and the following observations of the Apex Court may be quoted:

“The period of infancy mentioned in S. 16(1)(b) of the Employees' Provident Funds Act, 1952, should be calculated from the first day of the establishment of the factory and not from the moment of time when the figure of employment of 20 or more workmen is first reached. The word ‘is’ in the sub-section clearly indicates a newly started business and the words ‘has been’ a business which has been in existence before.”

12. Thus, in these judgments, the Apex Court had dealt with the unamended provision S. 16(1)(b) of the Act, wherein the expression, “newly set up,” did not exist. In our opinion, the most significant change which was made by the Amendment Act, 1988, is the introduction of the words, “newly set up” and the unamended provisions of S. 16(1)(d) have to be interpreted taking the said significant change into consideration. It may be pointed out that the Apex Court had in the judgments which we have already quoted, categorically stated that the word, “is” in the unamended Sub-sec. (1)(b) of S. 16 of the Act clearly indicated a newly started business and the words, “has been,” a business which had been in existence before. Even in spite of this interpretation of the Apex Court the Legislature deemed it fit to introduce the words, “newly set up” in the amended provision S. 16(1)(d). Accordingly, the expression, “newly set up” has to be harmoniously construed with the expression, “or has been set up,” occurring in the latter part of the amended provision S. 16(1)(d). At this stage, we would like to refer to the judgments of the Apex Court upon which reliance has been placed, relating to the interpretation of statutes.

13. In Jayantilal Amratlal v. Union of India [(1972) 4 SCC 174 : A.I.R 1971 S.C 1193], it has been laid down as under:

“In order to see whether the rights and liabilities under the repealed law have been put to an end by the new enactment, the proper approach is not to enquire if the new enactment has by its new provisions kept alive the rights and liabilities under the repealed law but whether it has taken away those rights and liabilites. The absence of a saving clause in a new enactment preserving the rights and liabilities under the repealed law is neither material nor decisive of the question.”

14. The Apex Court in Govindas v. Income Tax Officer [(1976) 1 SCC 906 : A.I.R 1977 S.C 552] (vide supra), has laid down that:

“Now it is well settled rule of interpretation hallowed by time and sanctified by judicial decisions that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English Courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be, given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.”

There is no doubt that the vested rights or benefits under the legislation could be retrospectively taken away by legislation, but then the statute taking away such rights or benefits must expressly reflect its intention to that effect. The infancy period prior to the amended provision S. 16(1)(d) was five years in the case of establishments employing 20 to 50 workers and in the event this infancy benefit was to be withdrawn, it was necessary that the intention of the Legislature should have been clearly reflected in the amended provision itself that the rights and benefits which had already accrued stood withdrawn. The amended Cl. 16(1)(d) came on the statute book on 2 June 1988, when it was assented by the President of India but the amended S. 16 was put into operation only with effect from 1 August 1988, in terms of S. 1(2) of the Amendment Act, 1988, which empowered the Central Government to appoint different dates for the coming into force of different provisions of the Act. Thus, though the amended S. 16(1)(d) came on the statute book on 2 June 1988, but it was brought into force on 1 August 1988, in the intervening period, the establishments would be set up, that is to say before the coming into force of S. 16(1)(a) and these establishments would come within the expression, “or has been set up” used in S. 16(1)(d), since these establishments would be treated as newly set up for the purpose of the Act. Secondly, S. 1(3) of the Act provides that subject to the provisions contained in S. 16, it applies:

(a) to every establishment which is a factory engaged in any industry specified in Sch. I and in which twenty or more person are employed; and

(b) to any other establishment employing twenty or more person or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf.

This means that the Central Government is empowered to specify other establishments to which the provisions of the Act shall extend subject to the provisions of the Act shall extend subject to the provisions contained in S. 16 of the Act. The notification of such establishments, may come after the amended provision S. 16(1)(d) to whom the benefits may be extended and such establishments would also fall within the latter part of the expression, “or has been set up” used in S. 16(1)(d) of the Act. Section 16(1)(d), in our opinion, essentially applies to establishment newly set up after the coming into effect of the said provision on the statute book, though the enforcement of the same was effective from a later date. This is the only way in which a harmonious construction can be put to S. 16(1)(d) in view of the significant change made in the amended provision by adding “newly set up.” The learned Judges of the Allahabad High Court have not attached significance to the crucial words, “newly set up” and the emphasis laid down was on the words, “is or has been set up.” As we have already pointed out, this expression had occurred throughout in the provisions and the significant change which was made by the Amendment Act in S. 16(1)(d) is the expression “newly set up,” which has to be given its due meaning by harmonizing the same with the words, “has been set up,” used in the latter part of S. 16(1)(d). We find it difficult in the circumstances, to conclude that the intention of the Legislature was to take away the benefit of infancy period which had already accrued to the existing establishments and this benefit has not been expressly taken away or by implication by the amended provision S. 16(1)(d). In the circumstances, we are of the opinion that the infancy period benefit of the petitioner for a period of five years with effect from 26 May 1986, is not taken away by the amended provision S. 16(1)(d) of the Act, and the petitioner could continue to enjoy the said infancy benefit for a period of five years till May 1991. Therefore, the demand made by respondent 1 for the period up to May 1991, has to be quashed. The petitioners are complying with the provisions of the Act with effect from June 1991.

15. For the aforesaid reasons the demand made by respondent 1 vide Exhibit E, dated 23 September 1993, is quashed in so far as it relates to the period from June, 1989 to May 1991. The writ petition succeeds to that extent and the rule is made absolute in the aforesaid terms with no order as to costs.