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CASE NO.: Appeal (civil) 4285  of  1998

PETITIONER: M/S S.K. NASIRUDDIN BEEDI MERCHANT LIMITED

       Vs.

RESPONDENT: CENTRAL PROVIDENT FUND COMMISSIONER & ANR.

DATE OF JUDGMENT:       30/01/2001

BENCH: S. Rajendra Babu & S.N. Variava.

JUDGMENT:

RAJENDRA BABU, J. :

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   The appellant before us is a manufacturer of beedis.  He challenged  an  order made by the respondents under  Section 7-A  of  the  Employees  Provident  Fund  and  Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act]. The  appellant  had not deducted from the wages of the  home workers  employed  through  contractors for  manufacture  of beedis  because  of  pendency  of  litigation  in  order  to contribute towards the provident fund on the ground that the Act  would  not  be applicable in cases of  such  employees. Earlier  on  the receipt of a notice under the Act from  the respondents  the appellant challenged the notice in the High Court  in C.W.J.C.  No.  4089 of 1988 on the ground that the Act has no application in respect of home workers engaged in rolling  the beedis engaged through independent contractors. An  interim  stay had been granted by the court  during  the pendency  of  the proceeding.  By an order made on July  27, 1989  the  said writ petition was dismissed by holding  that the  provisions of the Act are applicable in respect of home workers  engaged  in rolling the beedis of the  petitioners establishment   through  contractors.    This  decision  was questioned  before this Court in Special Leave Petition  No. 10538  of  1989.   In  the  meanwhile,  the  Provident  Fund Commissioner  determined  the amount due from the  appellant and  called  upon it to deposit a sum of  Rs.   66,84,930.50 being  employers  and employees contribution  towards  the provident  fund  from July 1977 to August 1986.  By  another order  made  on December 18, 1989 the appellant  was  called upon  to  pay a sum of Rs.  28,72,383.85  within  stipulated time.   These  demands  were  also challenged  in  two  writ petitions, C.W.J.C.  No.  1114 of 1990 and C.W.J.C.  1115 of 1990.   This  Court  by  an order made on  August  22,  1989 disposed  of S.L.P.(C) No.  10538 of 1989 observing that the question  involved in the matter could be heard and  decided in  the proceedings pending before the High Court.  The  two writ  petitions,  namely,  C.W.J.C.  No.  1114 of  1990  and C.W.J.C.   1115  of 1990 came to be dismissed on August  19, 1992.   A  sum of Rs.  46,90,051/- out of a total demand  of

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Rs.   95,57,314.35  was  realised  by  the  Provident   Fund Commissioner.   When  the  order made by the High  Court  in C.W.J.C.   No.  1114 of 1990 and C.W.J.C.  1115 of 1990  was questioned  in Special Leave Petitions (C) Nos.  15312-13 of 1992  filed in this Court, the same were dismissed on May 3, 1993 by stating as follows :

   The  SLPs are dismissed.  It is open for the petitioner to  collect the names of the Bidi workers who work for  them through  their contractors and furnish the names of all  the workers  to the Provident Fund Commissioner.  The  Provident Fund  Commissioner  thereafter will verify these  names  and calculate  the  liability of the petitioner on the basis  of such  verification.  If any excess amount is found due  from the petitioner, the Provident Fund Commissioner will recover such  amount from the petitioner, on the other hand, if  any amount  is  found due to the petitioner, the Provident  Fund Commissioner  will  refund  the  same.   The  petitioner  to furnish  names  of the workers, as above within  six  months from today.

   Thereafter  the  appellant furnished the particulars  of home  workers stated to be engaged by the contractors to the best  of information available with the appellant for  final determination  of its liability under Section 7-A of the Act as noticed by this Court.  A claim was made by the appellant for  waiver from payment of employees contribution for  the period  from October 1985 to May 3, 1993 on the ground  that he  had  not  been able to collect the same.  But  the  said claim   was  disallowed.   The   Regional   Provident   Fund Commissioner  issued  a  certificate  for  recovery  of  the outstanding  liability  of  Rs.   46,17,538.20  through  the Recovery  Officer, Bihar.  This action of the respondent was called in question before the High Court.  Three contentions were raised before the High Court, vis-Ã -vis :

   (i)  In  the  circumstances  arising in  this  case  the appellant  cannot be asked to pay retrospectively  employees contribution  to  the provident fund without deducting  that from  their  wages as it is not possible to comply with  the provisions  of  Para  32  of  the  Statutory  Scheme.   This situation arose on account of uncertainty of their liability until  the  same was settled by an order made under  Section 7-A  of  the Act on June 2, 1994 by the  Regional  Provident Fund Commissioner;

   (ii)   There   is  a  bona   fide  dispute  as  to   the applicability of the Act and payment by the employer towards the  employees  contribution to the fund would  arise  only after  making  deductions  from  their wages  and  that  the employer cannot be made liable to pay that contribution from an  anterior  date  to  the  final  determination  of  their liability under Section 7-A of the Act, and

   (iii)   The  demands  in   question  are  arbitrary  and unreasonable  in violation of Article 14 of the Constitution in view of the admitted position that the appellant had bona fide  not deducted the employees contribution from the wages of the employees due to various uncertainties arising out of litigation before the courts.

   The  contesting  respondents  before   the  High   Court submitted  that  after the law was settled in P.M.  Patel  & Sons  v.  Union of India, AIR 1987 SC 447, there was  hardly

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any  scope for litigation regarding applicability of the Act in respect of home workers employed by the appellant through contractors.   When  the  liability became  clear  a  formal notice  as  to coverage under the Act had been sent  to  the appellant   in  January  1977  to   the  effect   that   the notification issued by the Central Government applied to the appellant  with  effect from July 1976 to December 1977  and the  Code Number is BR/7 A- Cell/1365/88/3445 in respect  of the  establishment of the appellant.  Thus it was  contended that  the  formal notice had already been issued as  to  the coverage  and, therefore, it is not open to the appellant to contest  their  liability arising under the Act  by  stating that  it is the date of determination that will attract  the provisions  of  the  Act and not the  date  of  notification extending  the  application  of the Act to the  industry  in which the appellant is engaged.  The learned Single Judge of the High Court concluded as follows :

   In  the instant case, I have found that the  petitioner raised  dispute as regards the applicability of the Act bona fide  and  that  until  collection  of  particulars  of  the home-workers  engaged  by  the  contractors  and  furnishing thereof  in compliance with the order dated 3.5.1993, passed by  the  Honble Supreme Court, the petitioner did not  have the   particulars  of  the   home-workers  engaged  by   the contractors.   The petitioner also did not get deduction  of those  employees  contributions  from their  wages  by  the contractors  for the period from October, 1985 to  3.5.1993, as the petitioner bona fide took the view that the employers of  these  home-workers  were the contractors  and  not  the petitioner.   As such, it cannot be said that the petitioner deliberately  or  negligently did not make deduction of  the employees  contribution from the wages of the  home-workers for the period from October, 1985 to 3.5.1993.  No doubt, as per the provision of paragraph 30 of the Employees Provident Funds  Scheme, 1952 (hereinafter mentioned as The Scheme), the  employer is required to pay both contributions  payable by  the employer as well as the employees and the employees contributions,  equal  to the contribution of the  employer, are  to  be  deducted from their wages.  Now,  in  case  the petitioner  is  required to pay the employees  contribution for  the  period from October, 1985 to 3.5.1993, in view  of the  provisions  of paragraphs 31 and 32 of the Scheme,  the petitioner  will  not  be  able to  make  deduction  of  the employees  contribution from the wages of the home- workers for the said period.

   In  this background, the learned Single Judge is of  the view  that  it  is  inequitable and  unfair  to  saddle  the petitioner   with  the  liability  to  pay  the   employees contribution for the period from October 1985 to May 3, 1993 which the appellant could not and did not deduct through its contractors   on  bona  fide   ground.   In  reaching   this conclusion,  the  learned  Judge placed  reliance  upon  the decision  of  Calcutta High Court in Mantu Biri Factory  (P) Ltd.  v.  Regional Provident Fund Commissioner, Civil Appeal 6 of 1993 decided on March 8, 1994.  The matter was taken up in  appeal  before the Division Bench of the High  Court  in Letters  Patent Appeal No.  403 of 1996.  The Division Bench did  not agree with any of the contentions raised on  behalf of  the  appellant and held that the appellant is liable  to make  payments.  Thus the High Court allowed the appeal  and set aside the order made by the learned Single Judge.

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   In  this  appeal the contentions urged before  the  High Court  are  reiterated before us and in support of the  same strong  reliance is placed on the decision of this Court  in District  Exhibitors  Association Muzaffarnagar &  Ors.   v. Union of India & Ors., 1991 (2) SCR 477.

   The  contention  raised  by the appellant is  two  fold. Firstly,  that  the Act is not applicable in respect of  the beedi rollers engaged through contractors and, secondly, the contention  put forth is that even if the Act is applicable, the  same  cannot  be enforced for the  period  in  question inasmuch   as  on  account  of  various  circumstances   the appellant  has  not  been  able  to  deduct  the  employees contribution  towards  the provident fund from  their  wages and,  therefore,  in terms of para 32 of the  Scheme  framed under  the Act the appellant will not be able to recover the same and the liability under the Act is only to make payment after  deduction of the contribution towards provident  fund from the wages of the employees and not otherwise.

   So  far  as  the first contention is concerned,  law  is clear  and  this  Court in the two  decisions  in  Mangalore Ganesh Beedi Works v.  Union of India, AIR 1974 SC 1832, and P.M.   Patel  &  Sons  (supra) held that the  Act  would  be applicable  even in respect of home workers engaged  through contractors and cannot be cavilled any more.

   So  far  as  the  second contention  is  concerned,  the argument  of the learned counsel proceeds on the basis  that the  liability  was  not  clear  in  view  of  the   various circumstances  and,  therefore, deduction could not be  made from  the wages of the employees and that circumstance leads to  anomalous  position  making  the  employer  to  pay  the employees  contribution towards provident fund without  the facility  of  deduction from their wages.  We do  not  think that  this  argument is well founded.  The applicability  of the  Act  to  any class of employees is  not  determined  or decided  by any proceeding under Section 7-A of the Act  but under the provisions of the Act itself.  When the Act became applicable  to  the  employees in  question,  the  liability arises.   What is done under Section 7-A of the Act is  only determination or quantification of the same.  Therefore, the contention  put forth on behalf of the appellant that  their liability  was attracted only from the date of determination of the matter under Section 7-A of the Act does not stand to reason.  Indeed, the coverage was indicated to the appellant as  early as in January 1977, as already noticed by us.   In fact,  the  Government  issued  a  clarification  that   the employees  share of contribution from pre-discovery  period which  has  not  been deducted from the wages  of  employees shall  not  be recovered and that pre-discovery period  is explained in the following terms :

   (i)  Pre-discovery  period  :  This  will  include  the period  commencing on the date from which the Act is legally applicable to factory or establishment and the date on which a  formal notice for coverage under the Act is served on the employer  by the employer by the provident fund authorities. In  all  such  cases, the employees share  of  contribution shall  be payable from the first of the month following  the issue of the notice for coverage under the Act.

   (ii)  Period covered by general stay order given by  the Supreme   Court   on  the    application   challenging   the

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notification  extending  the  provisions of the  Act  to  an industry/class  of establishments :  This will include  the period  from the date of extension of the Act to the date of final  judgment  of  the  Court.  In  all  such  cases,  the employees  share of contribution shall be payable from  the first of the month following the judgment.

   the  general Inasmuch as the appellant is protected  for the  period of coverage by stay order given by this Court on the  applicability  of the Act to the industry  in  question till  the  date of the final judgment otherwise steps  would have  been taken in terms of the formal notice issued to the appellant  in  1977 itself.  Thus in respect of period  from June  1977  to  September  1985  there  was  waiver  of  the liability  by  reason  of the clarification  issued  by  the Government  under para 78 of the Scheme.  On the disposal of the  matter by this Court in September 1985 the liability to deposit  the  employees  contribution  became  very  clear. Though  in law respondents were entitled to recover even for the  period from June 1977 in view of the directions  issued by  the  Government but that was not demanded.   For  period upto  September  1985 and for subsequent period there is  no manner  of  doubt  and the dispute raised by  the  appellant cannot  be  stated  to  be  bona   fide  at  all.   In   the circumstances, we fail to understand as to how the appellant can rely upon his own laches in not deducting the wages from 1985  onwards to enable him to make employees  contribution to the fund.

   The  learned  counsel relied upon the decision  of  this Court  in  District Exhibitors Association  Muzaffarnagar  & Ors.   (supra) to contend that inasmuch as paragraphs 30 and 32  of  the Scheme are not capable of  implementation  which provided  for the employer in the first instant paying  both the  contributions  by  him  and he employees  and  Para  32 enabled  the employer to recover the employees  contribution that  has been paid by him under Para 30 could make it clear that  the liability is limited;  that no such deduction  can be  made  from  any wage other than that which  is  paid  in respect  of the period of which the contribution is payable; that  from  that it is obvious that the employer has to  pay the  contribution of the employees share but he has a right to  recover that payment by deducting the same from the wage due  and payable to the employees;  that no deduction can be made from the wages payable for any period but only from the wages for the period in respect of which the contribution is payable;  that no deduction can be made from any other wages payable  to the employees, that is, the payment of employees contribution by the employer with the corresponding right to deduct  the  same from the wages of the employees  could  be only  for  the current period during which the employer  has also to pay his contribution.

   This  enunciation of law was made in the context of  the Scheme having been made applicable with retrospective effect to  the  employees  concerned therein.  Therefore,  in  that context  this  Court  examined the scope of the  Scheme  and decided  the matter.  But that benefit cannot be availed  of by the appellant in the present case inasmuch as it was open to  the appellant to avail of the benefit of para 32 of  the Scheme  in the year 1985 itself when their liability  became clear  by the declaration of law made by this Court in  P.M. Patel  & Sons case [supra].  Therefore, the appellant cannot take  advantage  of  this  decision.  The  decision  of  the Calcutta  High Court in Mantu Biri Factory (P) Ltd.  [supra]

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is  also in line with the decision of this Court in District Exhibitors  Association  Muzaffarnagar & Ors.  case  [supra] and,  therefore,  we  are of the opinion  that  neither  the decision  of  this Court in District Exhibitors  Association Muzaffarnagar  &  Ors.   case (supra) nor of  Calcutta  High Court  in Mantu Biri Factory (P) Ltd.  [supra] can be of any assistance to the appellant.

   In  the  circumstances, we think that the view taken  by the  Division Bench of the High Court appears to be correct. Accordingly, the appeal is dismissed.  No costs.