AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
  • Employees' Provident Funds Act, 1952 (hereinafter called the Act),
  • Employees' Provident Funds Act, 1952
  • section 2(j)
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
Acts
  • Employees' Provident Funds Act, 1952 (hereinafter called the Act),
  • Employees' Provident Funds Act, 1952
  • section 2(j)
Smart Summary

Structured Summary of the Court's Opinion

Factual and Procedural Background

This judgment disposes of Civil Writ No. 297 of 1964 and five connected petitions (Civil Writs Nos. 304 of 1964, 305 of 1964, 306 of 1964, 375 of 1964 and 460 of 1964) in which a common question of law is involved.

Facts (as set out in the first petition): The petitioner is a partnership concern manufacturing machine tools and registered under the Factories Act since 1958. By a letter dated 14th June 1962 the Regional Provident Fund Commissioner (the Commissioner), appointed under the Employees' Provident Funds Act, 1952 (the Act), called for information by means of a proforma to examine whether the petitioner fell within the purview of the Act in view of a Government of India notification dated 7th March 1962 extending the Act to every trading and commercial establishment employing 20 or more persons. The petitioner supplied the requested information by communication dated 18th June 1962 and stated in the proforma (Annexure “B/1”) that the number of all categories of employees employed as on 30th April 1962 was 15.

The Commissioner, by a later communication (date in the text shown as "18th May ???"), informed the petitioner that enquiries indicated the concern was engaged in an industry specified in Schedule I of the Act, that it employed 20 persons as on 31st December 1930 (text as given) and had completed five years of establishment as provided under section 16(b) of the Act. The Commissioner therefore stated the establishment was covered by the Act and the scheme with effect from 1st January 1961.

The Commissioner allowed, "as a special case," that for the pre-discovery period (stated in the letter as 1st January 1961 to 31st May 1963) the petitioner should deposit only the employer's share of provident fund contributions and administration charges @ 3% on both employees' and employers' shares; employees' share arrears were to be left to workers to pay if they so desired. The Commissioner further directed that the Employees' Provident Fund Scheme, 1962 should be applied in full from 1st June 1962 in the factory/establishment. The petitioner was warned about consequences including criminal prosecution, damages and other charges if contributions and administration charges were not deposited within a certain time.

On 27th May 1963 the petitioner wrote to the Commissioner contending that under the law it was not liable to pay contributions retrospectively and referred to certain Madras and Calcutta Court judgments. On 8th August 1963 the Commissioner replied relying upon a Punjab High Court authority that the employer was liable to report compliance from the date the Act became applicable. The petitioner also made a representation to the Government of India and was informed that the case was not covered by section 19-A of the Act.

Legal Issues Presented

  1. Whether the Regional Provident Fund Commissioner had jurisdiction to demand provident fund contributions for the "pre-discovery period" (i.e., the period prior to the date when the Employees' Provident Fund Scheme was enforced in its entirety by the Commissioner).
  2. Whether the Commissioner could, as a special concession, require the employer to deposit only the employer's share (and administration charges) for the pre-discovery period while leaving the employee's share to be paid by employees.
  3. Whether the scheme and the Act operate retrospectively such that employers are obliged to make contributions from the date the scheme came into force, and whether that obligation includes contributions in respect of employees who had left service before discovery.
  4. Whether employees who left service during the pre-discovery period, but who on the facts may have fulfilled the qualifying service conditions (e.g., one year's continuous service or 240 days in 12 months), could be treated as members entitled to benefits and thus have contributions payable in respect of them.

Arguments of the Parties

Appellant / Petitioner (represented by Mr. Dalip Chand Gupta)

  • Contended that respondent No. 1 (the Commissioner) had no jurisdiction to demand contributions for the pre-discovery period, i.e., before the scheme was enforced in full by the Commissioner.
  • Argued that the Commissioner's direction (in at least one case described as Kapurbhimber Union's case) to deposit employer's share for the pre-discovery period was impossible of performance because a number of employees relevant to that period had left service.
  • Relied upon judgments of the Madras and Calcutta Courts (referred to in the opinion) which, according to counsel, support the proposition that the scheme should not be applied retrospectively and that employees should not be compelled to pay contributions when, for example, they had already left and taken accumulations.
  • Maintained that employees who left during the pre-discovery period could not be regarded as members of the fund because the formalities under Chapter VI (declarations, contribution cards and returns) were not complied with; therefore contributions in respect of such employees were not payable.

Respondent / Regional Provident Fund Commissioner and Supporting Authorities

  • The Commissioner treated the establishment as covered from 1st January 1961 and directed contributions accordingly, while allowing as a special case that only the employer's share and administration charges be deposited for the pre-discovery period (1st January 1961 to 31st May 1963), leaving employees' share to the workers to pay if they wished.
  • In correspondence the Commissioner relied on a Punjab High Court decision holding that the employer of a factory was liable to report compliance from the date the Act became applicable to the factory.
  • The Commissioner asserted a duty on employers to ensure that employees who fulfilled the qualifying conditions in paragraph 26 of the scheme were made members even during the pre-discovery period; disputes about whether an employee actually qualified are to be decided by the Commissioner under paragraph 26-B after hearing both parties.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Prem Narain Aggarwal v. Union of India (Letters Patent Appeal No. 2-D of 1956), decided 13th February 1957 Held that liability to contribute to the fund commenced from 1st November 1952; under Chapter V of the scheme employer and eligible employees had to make contributions from that date; employer initially paid both shares, with employees' share realisable from their wages. The Court followed this previous Bench decision and treated it as authoritative support for the proposition that employers are under an obligation to contribute from the date the scheme came into force.
Haji Nadir Ali Khan v. The Union of India, A.I.R. 1958 Punj. 177 Upheld an order calling on employers in 1955 to deposit contributions due from 1st November 1952 in respect of employees who had completed one year's service by that date; affirmed the obligation to contribute from the scheme's commencement. The Court noted that my Lord Falshaw J. in that case upheld the Commissioner's order and that the Bench decision was followed; this reinforced the Court's view to follow the line that the obligation is from the date the scheme came into force.
Aluminum Corporation of India, Ltd. v. Regional Provident Fund Commissioner, A.I.R. 1958 Cal. 570 The Calcutta Judge expressed that neither section 6 of the Act nor paragraph 29 of the scheme permits an option for employees to pay or not to pay contributions, and held that applying the scheme retrospectively in certain circumstances would be contrary to the purposes of the Act. The Court considered this reasoning but concluded that the Calcutta decision could not be taken as authority to prevent the Commissioner calling upon employers to deposit contributions for the pre-discovery period in the present cases; the Court distinguished the factual posture (e.g., presence of a prior in-house scheme) relied on by that Judge.
K.R. Subbaier v. The Regional Provident Fund Commissioner, A.I.R. 1863 Mad. 112 (as cited) The Madras Single Judge (Jagadisan J.) held that provisions are operative only from the time authorities hold a unit within ambit and make a consequential demand; a demand for a back period is inconsistent with manifestly prospective enactments. The Court noted this decision but did not accept it as sufficient reason to depart from earlier Bench authority; it treated it as one of the contrary decisions but preferred to follow the Bench decision in Prem Narain Aggarwal.
Shri Andal and Company v. The Regional Provident Fund Commissioner, W.P. No. 205 of 1962, decided 26th June 1964 A Madras Single Judge (Srinivasan J.) dissented from K.R. Subbaier and observed that reading the Act and scheme as a whole shows the scheme comes into force at once and affects every industry from the date the scheme was framed; paragraph 26 makes membership compulsory where conditions are satisfied. The Court cited this decision as supportive of the view that the scheme comes into force immediately and that obligations arise from the scheme's commencement; it formed part of the body of authority the Court considered in reaching its conclusion.
N.K. Industries (Private) Ltd. v. Regional Provident Fund Commissioner, A.I.R. 1958 All. 474 Jagdish Sahai J. referred to section 5 and paragraphs 29, 30 and 32, holding an employer had a duty to contribute both shares and that the absence of a demand for about three years did not amount to waiver. The Court cited this authority for the proposition that duty to contribute exists and that delay or absence of earlier demand does not amount to waiver; it supported the Court's inclination to follow the Bench line.

Court's Reasoning and Analysis

The Court framed the dispute as one raising whether the Commissioner had jurisdiction and whether the order requiring deposit of contributions for the pre-discovery period was lawful. The analysis proceeded by reference to the scheme and to earlier judicial authorities.

The Court observed that a previous Bench decision in Prem Narain Aggarwal had held liability to contribute commenced from the date the scheme came into force (1st November 1952 in that context) and that Chapter V required employer and eligible employees to make contributions from that date, with the employer initially paying both shares. The Court noted Haji Nadir Ali Khan as another authority upholding the Commissioner's power to call for contributions from the date the scheme applied.

The Court considered contrary decisions from the Calcutta and Madras Courts (Aluminum Corporation; K.R. Subbaier) which expressed reservations about retrospective application and the imposition of obligations for periods before "discovery" or enforcement by authorities. The Court examined the factual bases of those decisions (for example, where a company had an earlier in-house provident fund scheme and employees had left after taking accumulations) and concluded that those cases did not compel departure from the Bench line.

Turning to the scheme's specific provisions, the Court reviewed paragraph 26 (employees entitled and required to join the fund if they satisfy qualifying service criteria), paragraph 26-B (decision on entitlement to membership to be final by the Regional Commissioner after hearing employer and employee), and the provisions in Chapter V and Chapter VI (paragraphs 29–35) dealing with contributions, recovery of employee's contribution by deduction from wages, declarations and contribution cards.

The Court reasoned that in view of the Commissioner's finding that the establishments were covered from the relevant date, it was the duty of employers to require those employees who fulfilled paragraph 26's conditions to become members even during the pre-discovery period. Consequently, employees who, on the material facts, had fulfilled the qualifying conditions could not be deprived of benefits merely because they left service before the date of the Commissioner's formal discovery or enforcement.

Where employers contested that certain persons actually fulfilled the qualifying conditions, the Court recognized that this factual question must be determined by the Commissioner under paragraph 26-B after hearing both employer and employee. The limited legal question before the Court was whether the Commissioner's order calling upon employers to make contributions for the pre-discovery period was illegal or beyond jurisdiction; the Court concluded that it was not.

Holding and Implications

Holding: All the petitions were dismissed. The appeal was dismissed (the Chief Justice Falshaw agreed). The Court ordered that, in the circumstances, there would be no order as to costs.

Implications and consequences:

  • Direct effect on the parties: The Commissioner's orders calling on the employers to deposit contributions for the pre-discovery period (subject to the special concession described by the Commissioner) stand; the petitions seeking to set those demands aside were rejected.
  • On disputed factual questions about whether particular employees satisfied qualifying conditions (e.g., one year's continuous service or 240 days in 12 months), the Court made clear that those matters are for the Commissioner to decide under paragraph 26-B after hearing both employer and employee.
  • No new expansive legal principle was announced by the Court beyond adherence to prior Bench authority (Prem Narain Aggarwal and related decisions). The Court expressly declined to adopt the contrary view reflected in some single-judge decisions of other High Courts and followed the earlier Bench decision as authoritative for the proposition that obligations to contribute arise from the date the scheme came into force.
  • The Court did not impose an order as to costs.

Note: This summary is based exclusively on the text of the provided opinion and does not add or infer facts beyond those expressly stated therein.

    Messrs Kapur Bhimber Union v. The Regional Provident Fund Commissioner, Punjab, And Another

    Grover, J.:— This judgment shall dispose of Civil Writ No. 297 of 1964 and five connected petitions (Civil Writs Nos. 304 of 1964, 305 of 1964, 306 of 1964, 375 of 1964 and 460 of 1964) in which a common question of law is involved.

    2. It is necessary to state the facts in the first petition only. The petitioner is a partnership concern carrying on business of manufacturing machine tools and is registered under the Factories Act since 1958. By a letter dated 14th June, 1962, the Regional Provident Fund Commissioner (to be referred to as the Commissioner) appointed under the Employees' Provident Funds Act, 1952 (hereinafter called the Act), called for some information in a proforma which was annexed to the letter with a view to examine whether the petitioner concern fell within the purview of the Act because by means of a Government of India notification dated 7th March 1962, the Act and the scheme framed thereunder had been made applicable to every trading and commercial establishment, employing 20 or more persons. This information was furnished along with communication dated 18th June, 1962. It was stated in the proforma (copy Annexure “B/1”) that the number of all categories of employees employed as on 30th April 1962 was 15. On 18th May ??? the Commissioner wrote to the petitioner saying that according to the enquiries made by the Department the petitioner concern was engaged in industry as specified in schedule I of the Act, as amended and it employed 20 parsons as on 31st December 1930 and had also completed 5 years of establishment as provided under section 16(b) of the Act. As such it was covered by the provisions of the Act and the scheme framed thereunder with effect from 1st January 1961. He further proceeded to say—

    “Keeping, however in view the fact that your factory establishment has been discovered for coverage under Employees' Provident Funds Act, 1952 at a later stage, you are allowed, as a special case, to deposit only the employer's share of Provident Fund contributions and adm. charges @ 3% on both employees' and employers' shares of contributions for the pre-discovery period i.e 1st January, 1961 to 31st May, 1963. As far as arrears of contributions of employees' share for the said period are concerned, these may be left to the workers concerned to pay the same if they so desire. The Employees' Provident Fund Scheme, 1962 should, however, be applied in full from 1st June, 1962 in your factory/establishment.”

    The attention of the petitioner was also invited to the consequences of the nature of criminal prosecution and levying of damages etc. and other charges which would follow in case the Provident Fund contributions and administration charges were not deposited within a certain time. It is clear from Annexure “D” that the Commissioner informed the petitioner about the Code number allotted to it and that it had been covered under the Act with effect from 1st January 1961. On 27th May 1963 the petitioner wrote to the Commissioner saying that under the law it was not liable to pay contributions to the fund retrospectively for the pre-discovery period and referred to certain judgments of the Madras and the Calcutta Courts on the point. On 8th August 1963 the Commissioner sent a reply saying that since the Punjab High Court had held that the employer of a factory was liable to report compliance from the date from which the Act became applicable to the factory, the petitioner had been rightly directed to deposit the Provident Fund dues and submit the relevant returns from 1st January 1961 to date. The petitioner approached the Government of India by means of a representation but he was informed that his case was not covered by sect on 19-A of the Act.

    3. Mr. Dalip Chand Gupta, who represents the petitioner in five of the petitions, contends that respondent No. 1 had no jurisdiction to demand contributions for what is called the pre-discovery period i.e the period prior to the date when the Employees' Provident Funds Scheme, 1952 to be referred to as the scheme came to be enforced by the Commissioner in its entirety. For instance, in Kapurbhimber Union's case, the facts of which have been set out, the scheme was sought to be applied in full effect from 1st June 1963 although for the period 1st January 1961 to ??? May 1963 a demand was made to deposit the contribution in the fund of the employer's share only on the ground that the aforesaid concern was covered by the Act with effect from 1st January 1981. It is pointed out that a number of employees for the relevant period had left service and thus the direction given by the Commissioner is impossible of performance. In the return filed in that case, this position is controverted and it is stated that according to the enquiries made, as many as 21 employees left the service of the employer on different dates but they had qualified for membership to the fund i.e they had served the concern for more than 240 days before the date of coverage, namely, 1st January 1961. A list of these employees along with the dates from which they qualified and the dates till which they were entitled to recover the amount as also the present addresses as supplied by the petitioner has been attached as Annexure “R/3” to the return.

    4. It would have been necessary to refer to all the relevant provisions of the Act and the scheme if the matter had been res integra but in a previous Bench decision of this Court in Prem Narain Aggarwal v. Union of India . L.P.A No. 2-D of 1956., (Letters Patent Appeal No. 2-D of 1956) decided on 13th February 1957, it was held that the liability to contribute to the fund commenced from 1st November, 1952. Under Chapter V of the scheme (paragraphs 29 to 33), the employer and the eligible employees had to make contribution to the fund from the 1st November 1952. This contribution had to be made initially by the employer on his own behalf as also on behalf of the employees the share of the employees being realisable from out of their wages. In that case also the Commissioner had called upon the employers to deposit only their share from November 1952 and the order was sustained on the ground that the employers were under an obligation to contribute to the fund with effect from the date the scheme came into force under the Act. The Bench affirmed the view expressed by my Lord Falshaw J. (as he then was) against whose judgment the appeal had been brought under clause 10 of the Letters Patent which was disposed of by it. In a later case also in Haji Nadir Ali Khan v. The Union of India . A.I.R 1958 Punj. 177., my Lord Falshaw J. upheld the order made by the Commissioner calling upon the employers in 1955 to deposit the contribution due as from 1st November 1952 in respect of the employees who had completed one year's service with the employers by that date. Naturally the Bench decision was followed.

    5. Mr. Gupta says that in Aluminum Corporation of India, Ltd. v. Regional Provident Fund Commissioner . A.I.R 1958 Cal. 570., P.B Mukharji J. has expressed the view that neither section 6 of the Act nor paragraph 29 of the scheme permits an option to employees to pay or not to pay their contribution. Those provisions insist that the employees contribution shall be equal to the employer's contribution. An order, therefore, exempting the employees to pay their contribution is inconsistent with the provisions of the Act and it would be entirely against the purpose and objects of the Act to apply a scheme retrospectively. In that case the company which had been called upon to make the contribution under the Act had formulated its own provident fund scheme which had been in operation since 1944. The learned Calcutta Judge felt that it would be contrary to the purposes of the Act to apply a scheme retrospectively to a company for a period within which time some of the employees had already left and presumably left by taking their provident fund accumulations. The Government, by asking the employer to replenish and refund even those moneys, was doing something illegal. The position, therefore, in that case was different and although the trend of the reasoning of the learned Judge appears to support the argument of Mr. Gupta, the Calcutta decision cannot be taken to be an authority for the view that the Commissioner could not call upon the employers in the present cases to deposit contribution with regard to the period called the pre-discovery period. The Calcutta decision was followed by a learned Single Judge of the Madras Court in K.R Subbaier v. The Regional Provident Fund Commissioner . A.I.R 1863 Mad. 112.. According to Jagadisan J., the gist of the provisions of the Act relating to payment of contribution towards provident fund by the employer is such as to make them operative only from the point of time when the authorities hold that a particular unit is within the ambit of the Act and make a consequential demand in terms of the Act and the scheme. A demand for a back period is not merely illogical and oppressive but plainly inconsistent with the terms of the enactments which are manifestly prospective in their operation. The learned Judge in that case appears to have been influenced to a certain extent by the fact that the Commissioner had made a demand for contribution and for management expenses for a period of 5 years. Another learned Single Judge, Srinivsan J., of that Court in Shri Andal and Company v. The Regional Provident Fund Commissioner . W.P No. 205 of 1962., (Writ Petition No. 205 of 1962) decided on 26th June 1964, dissented from the view of Jagadisan J. and observed:—

    “Reading the Act and the scheme as a whole, it is clear that the scheme comes into force at once and affects every industry at least from the date on which the scheme was framed. Paragraph 26 of the scheme provides that every employee other than an excluded employee shall be entitled and required to become a member of the fund from the beginning of the month following that in which this paragraph comes into force in such factory or other establishment. The further requirement is that by that date the employee should have completed *** one year's continuous service. The statute therefore makes its compulsory upon the employee to become a member of the fund, and read along with the other provisions which lay an obligation upon the employer to make the relevant contribution, the underlying intent is that the scheme comes into force immediately.”

    He was unable to agree that there existed any provision which postponed the application of the Act and the scheme to the stage of demand being made by the authorities concerned. In N.K Industries (Private) Ltd. v. Regional Provident Fund Commissioner . A.I.R 1958 All. 474., Jagdish Sahai J., after referring to section 5 of the Act and paragraphs 29, 30 and 32 of the scheme, said that there was a duty cast on the employer to contribute both the shares, i.e, his share as also that of the employee and merely because no demand for contribution was made for about 3 years, the demand could not be deemed to have been waived by the Commissioner. Thus, there is hardly any other authoritative pronouncement in which a view contrary to the one expressed by the Bench of this Court in Prem Narain Aggarwal's case, (L.P.A 2-D of 1956) has been taken. We have not been, therefore, persuaded that there is any strong reason for not following the previous decision.

    6. Mr. Gupta has finally contended that at least so far as those employees who had left the service were concerned, the Commissioner was not justified in calling upon the employers to make contribution to the fund in respect of them. He has called attention to the definition of the word “contribution” in section 2(c) of the Act which means a contribution payable in respect of a member under a scheme. A member is defined by section 2(j) to mean a member of the fund. Chapter IV of the scheme deals with membership of the fund. Paragraph 26 relates to classes of employees entitled and required to join the fund. Paragraph 26-B says that if any question arises whether an employee is entitled or required to become or continue as a member or as regards the date from which he is so entitled or required to become a member, the decision thereon of the Regional Commissioner or, where a State Commissioner is appointed, of the State Commissioner shall be final. It is, however, provided that no decision shall be given unless both the employer and the employee have been heard. Chapter V deals with contributions. Paragraph 30 provides that the employers shall in the first instance pay bath the contribution payable by himself and also on behalf of the member employed by him. According to paragraph 32, the amount of a member's contribution paid by the employer shall, notwithstanding the provisions of the scheme etc. be recoverable by means of deduction from the wages of the member. Chapter VI relates to declaration, contribution cards and returns. Paragraph 33 provides for a declaration by persons already employed at the time of the institution of the fund. Paragraph 34 relates to the declaration by persons taking up employment after the fund has been established. Paragraph 35 provides for preparation of contribution cards. Mr. Gupta's submission is that of those employees who have left service of the employers during the pre-discovery period could not be regarded to be members of the fund as all the formalities required by the aforesaid provisions contained in Chapter VI were never complied with. It is noteworthy that paragraph 26 lays down that every employee shall be entitled and required to become a member of the fund from the beginning of the month following that in which the scheme comes into force if on the date of such coming into force he has completed one year's continuous service or has actually worked for not less than 240 days during a period of 12 months or less in that factory or other establishment or in any other factory or other establishment to which the Act applies under the same employer or partly in one and partly in the other. In view of what has been found by the Commissioner, it was the duty of the employers in all these cases to require those employees who fulfilled the conditions mentioned in paragraph 26 to become members of the fund even during the pre-discovery period. For the sake of illustration in the case of Kapurbhimber Union, those employees whose names according to the return are given in Annexure “R/3” were entitled to be made members of the fund and even though they may have left service prior to 1st June, 1963, it does not follow that they could be deprived of the benefits which they could deprive from the membership of the fund merely because during the period 1st June, 1961 to 31st May, 1963. Mr. Gupta says that the employers are not prepared to accept that all these persons, who left service and who according to the return fulfilled the qualifications laid down in paragraph 26, did, in fact, fulfil those qualifications but this is a matter which will have, to be decided by the Commissioner in accordance with paragraph 26-B after giving a hearing to both the employer and the employee when that stage is reached. For the present all that is to be decided is whether the order made by the Commissioner calling upon the employers to make contribution of their share towards the Provident fund for the pre-discovery period is illegal or without jurisdiction. For the reasons which have already been stated, it is not possible to accede to the contentions of Mr. Gupta.

    7. In the result, all the petitions fail and are dismissed, but in the circumstances there will be no order ss to costs.

    Falshaw, C.J:— I agree.

    Appeal dismissed.

    Use AI to get other relevant cases.

    Comments

    Messrs Kapur Bhimber Union v. The Regional Provident Fund Commissioner, Punjab, And Another
    (Sep 30, 1964)