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PETITIONER: REGIONAL PROVIDENT FUND COMMISSIONER, ANDHRA PRADESH

       Vs.

RESPONDENT: SHRI T. S. HARIHARAN

DATE OF JUDGMENT01/04/1971

BENCH: DUA, I.D. BENCH: DUA, I.D. SHELAT, J.M. BHARGAVA, VISHISHTHA

CITATION:  1971 AIR 1519            1971 SCR  305  1971 SCC  (2)  68  CITATOR INFO :  D          1987 SC 447  (12)

ACT: Employee’s  Provident  Fund  Act, 1957, s.  1(3)(a)  &  (b)- Employment of more than 20 persons-Casual labour whether  to be  included  for determining  number  of  employees-Minimum period of employment whether can be laid down.

HEADNOTE: The respondent ran a hotel.  Due to failure of water  supply he  had to employ some persons to bring water from the  tank for a short period. .The Provident Fund Commissioner  sought to enforce the provisions of the Employees’ Provident  Funds Act, 1957, and the Provident Fund Scheme, 1952, against him. The  respondent thereupon filed a writ petition in the  High Court.   It  was held by the High Court that  employment  of more than twenty persons for a short period did not bring an establishment within the proviso of s. 1(3) (a) & (b) of the Act.  II It was also held, that only those employees  should be  taken into consideration who were in employment for  the full period of one year.  While, thus laying down the  legal position the High Court left it to the authorities Under the Act  to  apply  the  law to. the  facts  of  each  case  and dismissed  the  respondents petition.   The  Provident  Fund Commissioner  appealed to this Court for further  clarifica- tion. HELD:Considering  the  language of s.  1(3)(b)  in  the light of the provisionsof s: 16 and s. 1(5) as *OIL as the general scheme and object of the Act itwould  appear,  that employment of a few persons on account of some:   emergency or  for a every short period necessitated by  some  abnormal contingency which is not, a regular feature of the business’ of the establishment and which does not reflect its business prosperity or its financial capacity or stability from which it can reasonably be concluded that the establishment can in the  normal way bear the burden of the contribution  towards the  provident fund under the Act, would not be  covered  by the  definition.  The word ’employment’ must  therefore.  be construed as employment in the regular course of business of the  establishment,  such  employment  obviously  would  not include  employment of a few persons for a short  period  on

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account  of some passing necessity or some  temporary  emer- gency beyond the control of the company.  The High Court was right in holding so.  But it went wrong, in holding that the section contemplated the required number of persons to  Work in  the  establishment continuously for one  year.   It  was difficult  to  impute  to the Legislature  an  intention  to exclude  from the application of, them Act an  establishment which  regularly  employs  for  its  general  business   the required number, of persons for a major part of the year say for.  360 days every year ’ the employment of  the  required number  does  not  extent merely because to  full  one  year Therefore  the question must be determined in each  case  on its own peculiar facts. [313C-G]

JUDGMENT: CIVIL APPELLATE JURISDICTION:    civil Appeal No. 1128 of 1967. 20-1 S.C. India/71 306 Appeal  from  the judgment and order dated  September     1, 1964  of  the  Andhra Pradesh High Court  in  Writ  Petition No.907 of 1963. L. M. Singhvi and S.P.        Nayar, for the appellant The respondent did not appear. The Judgment of the Court was delivered by Dua, J.-The appellant in this appeal by certificate  granted by  the  Andhra Pradesh High’ Court oft  February  25,  1965 under  Art. 133 (1) (b) of the Constitution is the  Regional Provident  Fund  Commissioner,  Andhra  Pradesh.   A   large number, of writ petitions. by various parties were filed  in the  High Court praying for writs in the nature of  mandamus directing the. appellant to-forbear from enforcing or taking other  proceeding   under the provisions of  the  Employees’ Provident Funds Act, 1957 (hereinafter called the Act)  and, provident Fund      Scheme,’ 1952.  With ’the exception  of perhaps one writ petition, all the rest, including W. P. 907 of 1963 presented by T. S. Hariharn, Proprietor, New  Cochin Cafe,  Ongole,  respondent in; this  Court  were  dismissed. Certificates under Article. 133 (i) (b) of the  Constitution were secured by the appellant in almost all the cases but. the  present is the only appeal which now survives, all  the rest having been dismissed for non-prosecution. The  writ,  petition of the respondent was  dismissed  which means  that the final order made by the High, Court  was  in favour  of the appellant.  The only grievance raised by  the appellant’s  learned  counsel in this court  was  that   the High- Court bad in the course of its judgment expressed  the view that Clause (a),and (b)of sub-section (3) of Section  I of  the  Act  do  not cover casual  labour  and  since  this expression  of  opinion  which he considers  to  be  legally erroneous would be binding on the appellant in administering the Act, it was necessary to have the correct legal position enunciated  by  this Court.  According  to  the  appellant’s learned  counsel the following passages in the  judgment  of the High Court clearly bring out the arguments both for  and against the legal position canvassed by him:--               "We  have next reconsider whether clauses  (a)               and  (b)  of Section 1(3) are wide  enough  to               cover casual labour.the work               of  an  establishment  even for  a  day  or  a               fraction thereof.  This argument is sought  to               be reinforced; by the unreported judgment of a               Division  Bench  of  the Madras  High   It  is

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             maintained  by the learned Government  Pleader               that‘ requirement as to the numerical strength               is satisfied is twenty persons are engaged  in               connection with 307 308 The  other  passage  occurs  a little  lower  down  in  that judgment               "Section  19-A  also seems to  strengthen  our               view.   A  doubt as to the number  of  persons               employed in an establishment could arise  only               if  the  employment of twenty persons  in  the               establishment   were  a  normal  feature.    A               legitimate  doubt cannot, be said to arise  if               the condition as to the number is satisfied if               twenty persons work in the establishment  even               for  a day or two. It is not necessary for  us               to  labour this point any further as  we  feel               that   the   provisions   of   the   Act   are               inapplicable  to establishments which  do  not               employ twenty or more persons,to work  therein               for  a  period of one year.  It  follows  that               ’casual  labour’- falls outside the  scope  of               section 1(3).  The fact that the casual labour               is  engaged by. or, through a contractor  does               not make any different for the decision of the               question,  the  only criterion  being  whether               they were casual laborers or not.               On  this  discussion,  it  follows  that   the               establishments  whose employees do  not,  come               upto twenty,, excluding casual laborers do not               fall  within the purview ’of Section 1(3)  and               so  the,  provisions of the Scheme  cannot  be               applied   to  them.   The  respondents   will.               therefore, examine this question in the  light               of  these decide whether the Scheme should  be               applied these establishments excluding  casual               labour." The  appellant’s  learned counsel had at one  stage  of  his arguments stated that his client was anxious merely to steer clear  of the observations made by the High Court that  "the provisions  of  the Act are inapplicable  to  establishments which do not employ 20 or more persons to work therein for a period of one year." But while citing certain decided  cases he  did  appear  to canvas for  the  wide  proposition  that employment  of a person for however short a period would  be employment  for  the purpose of determining  the  number  of persons,employed  as contemplated by Section 1 (3)  (a)  and (b)  of  the Act.  He relied on the Bench  decision  of  the Madras  High Court reported Messrs  East.-,India  Industries (Madras)  v. Regional P. F: Commissioner(1)  (this  decision was also cited in the High Court as an unreported  judgment) and pressed us to uphold the reasoning adopted therein. The  question  requiring our determination is a  very  short one.   As  there  is  no representation  on  behalf  of  the respondent in this Court and, therefore, we do not have  the benefit  of  the respondent’s point of ’view we  propose  to confine ourselves strictly to the (1)  [1964] 1 L. L. J. 441 309 limited question of the scope of clauses (a) and (b) of sub- section  (3) of Section I and this judgment is not  intended to  be  considered  as  expressing  any  opinion  on   other controversial  aspects.   Before  considering  the  relevant provisions  of the Act it may be pointed out that  according

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to  the  respondent’s writ petition presented  in  the  High Court  in  August, 1963, the New Cochin Cafe (treated  as  a hotel)  was started in Ongole town on November 20, 1956  and the  respondent usually employed only 18 or 19 persons.   In 1961  there was total failure of rains,in the Ongole  region and  that  town was particularly hard hit.   The  respondent had,  to employ two or three persons on contract basis.  for supplying  water to the hotel.  Those persons  were  engaged from  June  to  September,  1961.   The  appellant  has  not questioned  the  correctness  of these  assertions  for  the purpose  of  this appeal.  Let us now examine  the  relevant provisions of the Act. The  Act was brought on ’the statute book for providing  for the  institution  of  provident fund for  the  employees  in factories  and other ’establishments.  The basic purpose  of providing  for  provident  funds  appears  to  be  to   make provision for the future of the industrial worker after  his retirement or for his dependants in case of his early death. To  achieve  this  ultimate object the Act  is  designed  to cultivate  among  the workers a spirit of  saving  something regularly,  and also to encourage stabilisation of a  steady labour force in the industrial centres.  This Act has  since its initial enactment been amended several  times to  extend its  scope for the benefit of industrial workers.   We  are, however,  concerned  with the Act as it stood in  1962  when notice  was sent by the appellant to the respondent  stating that  the provisions of the Act had been made applicable  to his establishment.  Sections 1 (3) (a) and (b), 4 and 5  may now be reproduced               "Section 1               (3)   Subject  to the provisions contained  in               section 16, it applies.               (a)   to   every  establishment  which  is   a               factory  engaged in any industry specified  in               Schedule 1 and in which twenty or mom  persons               are employed, and               (b)   to  any  other  establishment  employing               twenty  or  more  persons  or  class  of  such               establishments  which the  Central  Government               may, by notification in the Official  Gazette,               specify in this behalf               Provided  that  the  Central  Government  may,               after giving not less than two months’  notice               of its intention so to do, by notification  in               the Official Gazette, apply the provisions  of               this Act to any               310               establishment employing such number of persons               less  than  fifty as may be specified  in  the               notification.               Sub-Section 4               "Notwithstanding  anything contained  in  sub-               section  (3) of this section or  subsection(1)               of section  16,  where  it  appears  to  the               Central    Government   ,   whether   on    an               application;  made  to it in  this  behalf  or               otherwise, that the employer and the  majority               of employees in relation to any  establishment               have  agreed that the provisions of  this  Act               should be made applicable to the establishment               it   may  by  notification  in  the   Official               Gazette,  apply the provisions of this Act  to               that establishment."               Sub-Section 5               "An  establishment to which this  Act  applies

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             shall  continue  to be governed  by  this  Act               notwithstanding  that  the number  of  persons               employed  therein  at  any  time  falls  below               twenty               Provided  that where, for a continuous  period               of  not  less  than one  year  the  number  of               persons  employed therein has been less  than,               fifteen  the  employer  in  relation  to  such               establishment may cease to give effect to  the               provisions of- this Act and any scheme  framed               thereunder, with effect from the beginning  of               the  month  following the expiry of  the  said               period  of one year, but he shall, within  one               month,   of  the  date,  of  such   cessation,               intimate,  by.  registered  post,  the.   fact               thereof to such authority, as may be specified               by appropriate Government in this behalf." The original Act was applicable to establishments which were factories  engaged  in  the  six  industries  specified   in Schedule  1  but  as  a result  of  persistent  demands  for extension  of  provident  fund benefits  to  all  industrial workers, the Act was amended’ in 1956 by Act 94   of 1950 so as  to  enable  its extension ,to  other  establishments  as well.  .,Earlier, it may be pointed out, it was  amended  in 1953.     It  is  unnecessary  to give the  details  of  the various amendments. We now turn to the relevant definition clauses contained  in Section  2.  These definitions are subject to the  context providing otherwise.  In Clause (f) "employee is, defined to mean  any  person who is employed for wages in any  kind  of work manual or otherwise in or in connection with the  work. of  an  establishment  and who gets his  wages  directly  or indirectly  from  the  employer  and  includes  any   person employed  by,  or through a contractor in or  in  connection with the work of the establishment.  Clause 311 (h)  defines  "Fund" to mean the provident fund  established under a Scheme.’ "Member" is defined in Clause (j) to mean a member of the Fund and "Scheme" is defined in Clause (1)  to mean a scheme framed under the Act.  Section 5 provides  for the framing of a scheme called the Employees’ Provident Fund Scheme   by  the  Central  Government.   Section   6   makes provi sion  for-  contribution  by  the  employer  and   the employee  to  the Fund.  Section 14 provides  penalties  for evasion of payments under the Act or the Scheme.  Section 16 Which   excludes   from  the  applicability of   the   Act establishments  belonging to Government or  local  authority and also infant factories, reads               "16.  Act  not  to  apply  to   establishments               belonging to Government or local authority and               also to infant industries               This Act shall not apply--               (a)   to  any establishment  registered  under               the Cooperative Societies Act,, 1912, or under               any  other law for the time being in force  in               any  State relating to  cooperative  societies               employing less than fifty persons and  Working               without the aid of powers; 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.

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             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.               (2)If  the  Central Government is  of  opinion               that having regard to, the financial  position               of   any  class  of  establishment  or   other               circumstances of the case, it is necessary  or               expedient  so to do, it may, by   notification               in  the Official Gazette, and subject to  such               conditions   as  may  be  specified   in   the               notification,  exempt  that  class  of  estab-               lishments  from the operation of this Act  for               such  period  as  may  be  specified  in   the               notification." Section  17 invests in the appropriate Government  power  to exempt certain establishments from the operation of all  or any of the provisions of any scheme.  Section 19-A vests  in the  Central  Government  power to  remove  difficulties  by making   necessary  provision  or  giving   directions   not inconsistent :with the provisions of 312 the  Act.   The order of the Central Government  made  under Section 19-A for removing doubts and difficulties is clothed with finality. The narrow question which directly arises for our conside- ration is whether Clause (b) of sub-section (3) of Section 1 when  it  speaks of the establishment employing 20  or  more persons means that the person so employed may be employed by the establishment for any purpose whatsoever and for however short  a  duration or that the employment must be  for  some minimum period in the establishment.  The language used  in the  clause  does not give any clear indication.,  We  have, therefore,  to  construe  this  word in  the  light  of  the legislative, scheme, the object and purpose of enacting this clause and the ultimate effect of adopting one or the  other construction.   The  relevant sections of the  statute  have already been reproduced. Section  16 which has already been get out in extenso  seems to  us to throw considerable light on the point raised.,  it may  be  recalled  that  this  section  excludes  from   the applicability  of  the Act establishments belonging  to  the Government    and   to   local   authorities   and    infant establishments.  It is, therefore, obvious that this Act  is intended to apply only where ;in establishment has  attained sufficient  financial stability and is prosperous enough  to be able to afford regular contribution provided by the  Act. Contribution  by  the employer is an essential part  of  the statutory scheme for effectuating the object of inducing the workmen  to  save something regularly.   The  establishment, therefore,  must possess stable financial capacity  to  bear the  burden  of regular contribution to the Fund  under  the Act.   In this connection it may be recalled that by  virtue of  Section  1  (5) an establishment to  which  the  Act  is applied continues to be governed by the Act  notwithstanding that the number of persons employed by it ’at any time falls below the required number.  This liability to be governed by the  Act ceases only if the terms of the Proviso to  Section 1(5)  are  complied  with.  The financial  capacity  of  the establishment to bear the burden must, therefore, have, some semblance  of  a reasonably long term stability.   In  other words, the employment of requisite number of persons must be dictated   by   the  normal  regular  requirement   of   the establishment   reflecting   its  financial   capacity   and stability.  It, therefore, follows from this that the number

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of  persons  to be considered to have been  employed  by  an establishment  for  the  purpose  of  this  Act  has  to  be determined  by taking into account the general  requirements of the establishment for its regular work which should  also have a commercial noxus with its general financial  capacity and stability.  This seems to us to be the correct  approach under the statutory scheme.                             313 To  accede  to the appellant’s argument would lead  to  some Startling consequences.  By way of illustration, if for  the purpose of extinguishing accidental fire an establishment is compelled  to employ a few persons for about a  couple  of hours,  even  then, however weak and  unstable  its  general financial  capacity, the establishment would be  covered  by the Act and would have to contribute towards the  ’provident fund  for the benefit of its regular ,employees, of  course, excluding  those  whose services were utilised for  a  short while  for extinguishing the fire.  In this illustration  we are  assuming that the employees would have no objection  to being  governed  by the Act.  This, in  our  opinion,  could never   have   been  the  intention  of   the   legislature. Similarly, we find it difficult to impute to the legislature an  intention to exclude from the application of the Act  an establishment  which  regularly  employs  for  its   general business the required number of persons for a major part  of the  year, say, for 360 days every year, merely because  the ;employment  of the required number does not extend to  full one  year.   Both the extreme views, the  one  canvassed  on behalf  of  the appellant and the other  postulated  in  the observation  of the High Court that the required  number  of persons must continuously work in the establishment for  one year,  do not conform to the ,scheme and object of  the  Act and are, therefore, unacceptable. Considering  the language of Section 1 (3) (b) in the  light of the  foregoing  discussion  it  appears  to  us   that employment of a few persons on account of some emergency  or for  a  very  short period  necessitated  by  some  abnormal contingency  which is not a regular feature of the  business of  the  establishment  and  which  does not  reflect  its business prosperity or its financial capacity and  stability from   which  it  can  reasonably  be  concluded  that   the establishment  can  in  the normal way bear  the  burden  of contribution to-wards the provident fund under the Act would not  be covered by this definition.  The  word  "employment" must,  therefore, be construed as employment in the  regular course  of business of the ,establishment;  such  employment obviously would not include employment of a few persons  for a short period on account of some passing necessity or  some temporary emergency beyond the control of the company.  This must  necessarily require determination of the  question  in each case on its own peculiar facts.  The approach pointed out  by  us  must  be kept  in  view  when  determining  the ,question of employment in a given case. The  appellant’s learned counsel argued that in the  present case ,the respondent has to employ a few persons every  year regularly from June to September for supplying water to the hotel because ,of failure of rains.  This, according to him, would be a regular ,employment and the High Court was  wrong in  holding  to the contrary.  There is no finding  of  the High Court to this effect and 314 indeed no attempt was made before also to substantiate  this bald  assertion  We are, therefore, unable  to  accept  this contention  on, the present., record.  The general  approach of  the  High  Court  to the problem  raised  in  this  case

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seems.to  us  to be, broadly speaking, correct;  so  is  its final  conclusion. ,The only observation of the-High  ’Court which  required  consideration is that  the  sub-section  in question  contemplates the required number of per-. sons  to work  in  the establishment continuously for one  year.   On this  point  we have clarified the legal position.   As  the High Court has dismissed the writ petition after  clarifying the  points  of  law raised leaving it  to  the  appropriate authority   to   finally  decide  the   controversy   on   a consideration  of all the facts and circumstances we do  not propose to say anything more in this appeal which has,  been heard   ex parte. , With the aforesaid clarification of  the legal.  position  we. dismiss this appeal.  As there  is  no representation. on behalf of the respondent there will be no order as to costs. G.C.                          Appeal dismissed.- 315