http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: JIYAJEERAO COTTON MILLS LTD.

       Vs.

RESPONDENT: DEV KUMAR HOLANI AND OTHERS

DATE OF JUDGMENT:       22/07/1998

BENCH: G.T. NANAVATI, S.P. KURDUKAR

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T NANAVATI.J.      Leave granted.      Heard learned counsel for the parties.      Jiyajeerao Cotton  Mills Ltd.,  respondent no.10  is an establishment covered  by the Employees Provident founds and Miscellaneous Provisions  Act, 1952 (hereinafter referred to as the  Act). It constituted ’Jiyajee Cotton Mills Employees Provident  Fund  Institution’,  the  appellant  herein,  and framed its  Rules and Regulations in 1952. Respondent No. 10 applied  to   the  Government   of  India,  that  being  the appropriate Government  at the  relevant time,  for grant of exemption under  Section 17(1)(a) of the Act. The Government of being  satisfied that  the employees were in enjoyment of Provident Fund  benefits which  were on  the whole  not less favourable than  the benefits provided under the Act and the Scheme granted exemption w.e.f. 1.11.1952, by a Notification dated 1.1.63  published on  12.1.63. Respondents Nos. 1 to 9 who were  the employees  of the appellant and members of the Provident Fund  were discharged  from service and paid their provident fund amounts. The Central Government by its letter dated 29.1.83  forwarded  to  the  appropriate  Governments, revised conditions  for  granting  exemption  under  Section 17(1). One  of the revised conditions was that any amendment to the  Employees  Provident  Fund  Scheme  which  was  more beneficial to  the employees  than the existing rules of the establishment shall become applicable to them automatically. In view  of this  revised  condition  the  said  respondents claimed the  difference between the interest which was given to them  at the  rate declared  by the Board to Trustees and the rate  of interest declared by the Central Government for the years  1984-85 to  1988-89. As  the  appellant  did  not accept their  demand they  filed a claim petition before the Central  Provident  funds  commissioner  who  referred  that petition before  the Central Provident Fund Commissioner who referred  that  petition  to  the  Regional  Provident  Fund Commissioner. As  their claim  was not  dealt  with  by  the Regional Provident  Fund commissioner  for some  time,  they filed Writ  Petition M.P.  No. 901 of 1989 in the High Court of Madhya Pradesh. The High Court by its order dated 26.7.89

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

directed the Regional Provident fund Commissioner to dispose of the said respondent’s claim within six months.      The  matter   was  thereafter  heard  by  the  Regional Provident Fund  commissioner who  held - with respect to the revised conditions  of exemption  that "It is worthwhile, to mention that  the said  revised conditions of exemption that "It  is   worthwhile,  to  mention  that  the  said  revised conditions of  exemption as  notified by  the Govt. of India cannot be  given effect  in respect  of particular  exempted establishment until  and unless  the same is notified in the Official Gazette by the appropriate Govt.      After referring  to Rule  16(f) and  Rule 18(i)  of the exempted  Provident   fund  Scheme   of  the  appellant  and Respondent No.  10, the Regional Provident Fund Commissioner held that  the appellant being an exempted establishment the account of  each of  the employees  was to  be credited with interest at the rate decided by the Board of Trustees and as the exempted  scheme was not amended by the State Government they were  not entitled to the enhanced rate of interest. He also held  that  even  with  lesser  rate  of  interest  the exempted scheme  as a whole was not less favourable than the Statutory  Scheme.   He,  therefore,   dismissed  the  claim petition of the respondents.      The employees  challenged this  order by  preferring  a writ petition under Article 227 of the Constitution of India to the  High Court  of Madhya Pradesh. The High Court was of the view  that the approach of the Commissioner was perverse and the  respondents were  unnecessarily made  to  run  from pillar to  post for payment of their legal dues. It referred to para  60 of  the Statutory  Scheme and held that interest was required to be credited to the account of each member at such rate  as was  determined by  the Central Government. It further held  that in  view of  this clear provision made in the Scheme,  not paying interest at the higher rate amounted to contravention  of the  Act and the Scheme. The High Court was also  of the view that the moment the Central Government declared higher  rate of  interest, the rule in the exempted scheme enabling  the appellant  to pay  interest at a lesser rate made  it less favourable to the employees. It also held that  in  view  of  the  revised  conditions  for  grant  of exemption, the  appellant was duty bound to comply with that term regarding  payment of  interest at enhanced rate as and when  it   was  notified   by  the  Central  Government.  It accordingly allowed  the petition and directed the appellant and respondent no.10 to pay the difference as claimed by the employees.      The appellant  is challenging  the said order passed by the High  Court on  the ground  that it  is illegal.  It was submitted by  the learned counsel for the appellant that the establishment  of   respondent   no.10   was   an   exempted establishment and  as it  has framed its own Provident Funds Scheme with  rules and  regulation, the  provisions  of  the Statutory Scheme are not applicable to it. He also submitted that the  scheme framed by it being not less favourable than the statutory  scheme, the  High Court  was not justified in directing payment of interest at the higher rate declared by the Central  Government. He  also submitted that the revised terms and  conditions for  grant of exemption recommended by the  Central   Government  did   not  become   automatically applicable to  the appellant  and they  could have been made applicable only  after an  amendment was  made by  the State Government in the appellant’s exempted scheme to that effect and was notified in the official gazette.      The undisputed  facts are  that the establishment of JC Mills limited  was granted  exemption under Section 17(1)(a)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

as the  Provident Funds Scheme made by it was found not less favourable than  the statutory  scheme.  The  appellant  had framed its  own rules and regulations and under the exempted scheme the  Board of  Trustees was  empowered to declare the rate of  interest every  year for  crediting the same to the Provident Funds  account of  each member.  It is also not in dispute that  the Government  of India revised the terms and conditions for grant of exemption under Section 17(1)(a) and circulated the  same to  all the State Governments and Union Territory  Administrations  by  its  letter  dated  29.8.83. According to  the revised  condition No.4 any amendment made in the  Statutory Scheme  which was  more beneficial  to the employees than  the existing rules of the establishment, was to  become   applicable  to   the   exempted   establishment automatically. It was on the basis of this revised condition that the  High Court  held that the appellant was duty bound to comply  with the  said term  and  grant  interest  at  an enhanced rate notified by the Central Government, payment of interest at  lesser  rate  made  the  exempted  scheme  less favourable to the employees.      As the  establishment of  respondent no.10  was granted exemption under  Section 17(1)(a)  the  statutory  Provident Funds Scheme  did not  apply to  it.  The  High  Court  was, therefore,  clearly   wrong  in  applying  para  60  of  the statutory Scheme  to the  appellant and  in holding that not paying interest  at the rate in terms of para 60 amounted to contravention of  the provisions  of the Act and the Scheme. The High  Court also misread the letter dated 29.8.83 issued by the  Govt.  of  India  and  misconstrued  Cordition  No.4 contained in  the model  notification sent  along with  that letter. Before  we refer to the said letter it may be stated that the  High Court  also failed  to  consider  that  after 24.11.64 the State Government was the appropriate Government in respect  of the establishment of respondent no.10 for the purpose of  Section 17. By the said letter dated 29.8.83 the Government of  India informed  all the State Governments and the Union  Territory Administrations  that the sub-committee of Central Board of Trustees had reviewed the working of the exempted establishments  and has  recommenced tightening  of the existing  terms and  conditions for  grant of  exemption under Section  17(1)(a) so  as the ensure better compliance. it was  also stated therein that "A set of revised terms and conditions of  exemption have  accordingly been  revised.  A copy of  the model  notification incorporating  the  revised terms and  conditions is  enclosed. The  State Government of Andhra Pradesh etc. are requested to apply the revised terms and conditions to all fresh cases of exemption under Section 17(1)(a)." Along  with the  said letter  a copy of the model notification was  also sent.  What the  High Court failed to notice was  that the revised terms and conditions were to be made applicable  to fresh  cases of  exemption. The  Central Government had  not made  any statutory  amendment nor given statutory  directions  but  had  only  requested  all  State Governments and  Union Territory  Administrations  to  grant exemption under  Section 17(1)(a)  subject to the conditions specified in  the schedule  to the  model notification.  The revised terms  and conditions  did not  and could  not  have become applicable  automatically, and  in order to make them applicable they  were required  to be  incorporated  by  the appropriate  Government   in   the   notification   granting exemption under  Section 17(1)(a).  As regards  the exempted establishments it  was rightly  pointed out  by the Regional Provident Fund  commissioner  that  unless  the  appropriate Government  issued  a  notification  amending  the  exempted scheme and  published the  same  in  the  Official  Gazette,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

condition no.4  did not  apply to  them. Admittedly, to such notification amending  the exempted  scheme  framed  by  the appellant and  respondent no.10  was  issued  by  the  State Government. Therefore,  the appellant  and respondent  no.10 were not  legally bound to credit the account of each of the respondent-employees with  higher rate  of interest  for the years 1984-85  to 1988-89,  only because for those years the Central Government  had declared  interest at  higher rates. The  High   Court  really  misconstrued  the  correct  legal position and unjustifiably criticised the Regional Provident Fund  commissioner   by  observing  that  his  approach  was perverse. The  view taken  by the  Regional  Provident  Fund Commissioner was  quite correct and the High Court was wrong in taking a different view.      We, therefore,  allow this  appeal, set aside the order passed by the High Court and restore the order passed by the Regional Provident  Fund commissioner.  In view of the facts and circumstances  of the case there shall be no order as to costs.