24 July 2019
Supreme Court
Download

THE OFFICER IN CHARGE, SUB REGIONAL PROVIDENT FUND OFFICE AND ANR. Vs M/S GODAVARI GARMENTS LIMITED

Bench: HON'BLE MR. JUSTICE ABHAY MANOHAR SAPRE, HON'BLE MS. JUSTICE INDU MALHOTRA
Judgment by: HON'BLE MS. JUSTICE INDU MALHOTRA
Case number: C.A. No.-005821-005821 / 2019
Diary number: 9224 / 2015
Advocates: BRAJESH KUMAR Vs NISHANT RAMAKANTRAO KATNESHWARKAR


1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5821 OF 2019

(Arising out of SLP (Civil) No. 22243 of 2015)

The Officer In­Charge, Sub­Regional  …Appellants

Provident Fund Office & Anr.

versus

M/s Godavari Garments Limited               …Respondent

J U D G M E N T

INDU MALHOTRA, J.

Delay condoned.

Leave granted.  

1. The present Civil Appeal has been filed to challenge the Order

dated 27.04.2012 passed in W.P. No. 1615 of 1993 by the

Bombay High Court, Aurangabad Bench.

1

2

2. The background facts in which the present Civil Appeal has

been filed are briefly stated as under:

2.1. The Respondent Company is a subsidiary of the

Marathwada Development Corporation, which is an

undertaking of the Government of Maharashtra. It was

covered under the provisions of the Employees’

Provident Fund and Miscellaneous Provisions Act, 1952

(hereinafter referred to as “the EPF Act”) with effect from

01.01.1979.

2.2. The main objective of the Respondent Company, as per

its Memorandum of Association, was to encourage,

promote, develop, set­up or cause to be set­up a

readymade garments industry in the Marathwada

Region, with a view to provide gainful  employment to

people possessing skills in stitching, tailoring, and allied

activities, especially to  women from  the economically

weaker sections of the Society.

2.3. The Respondent Company engaged women workers who

were provided with cut fabric, thread, buttons, etc. to be

made  into  garments  at their  own homes.  The sewing

2

3

machines used by the women workers were owned by

them, and not provided by the Respondent Company.

2.4. On  12.03.1991,  Appellant  No. 1 –  Officer In­Charge,

Sub­Regional  Provident Fund Office, issued a Show

Cause Notice to the Respondent Company calling upon

it to pay the Provident Fund contributions for the

women workers. The  Balance Sheet of the Respondent

Company for the year 1988 – 89, revealed large debits

towards salary and wages for direct and indirect

workers, but the  Respondent  Company  made  a false

statement that it had only 41 employees.

2.5. On 30.11.1992, Appellant No. 1 issued summons to the

Respondent Company for personal hearing under

Section 7­A of the EPF Act.

2.6. The representative of the Respondent Company

appeared before  Appellant  No.  1,  and contended that

the women workers who were fabricating garments for

the  Respondent  Company,  were  not their employees,

and hence not covered by Section 2(f) of the EPF Act.

Therefore, even though wages were paid to those women

3

4

workers, the Respondent Company was not liable to pay

Provident Fund contribution in respect of them.

2.7. The Provident Fund Officer – Appellant No. 1 vide Order

dated 19.04.1993 held that the women workers engaged

for stitching garments were covered by the definition of

“employee” under Section 2(f) of the EPF Act. An

amount of Rs. 15,97,087/­ was assessed towards

Provident Fund dues of the Respondent Company for

the period from November, 1979 to February, 1991. The

Respondent Company was directed to pay the said

amount within 7 days.

2.8. The Respondent Company challenged the aforesaid

Order by filing W.P. No. 1615 of 1993 before the

Bombay High Court.

   The  Bombay  High  Court,  Aurangabad bench  vide

Final  Judgment  and  Order  dated  27.04.2012 allowed

the Writ Petition filed by the Respondent Company, and

set  aside the  Order  dated  19.04.1993  passed  by the

Appellant No. 1. It was held that the Respondent

Company had no direct or indirect control over the

4

5

women workers. The conversion of cloth into garment

could be done by any person on behalf of the women

workers. Hence, the Respondent Company did not

exercise any supervisory control over the women

workers.

2.9. Aggrieved by the aforesaid Judgment, the present Civil

Appeal has been filed by the Provident Fund Office.

3. We have heard the learned Counsel for the parties, and

perused the pleadings and written submissions filed by the

parties.

4. Mr. R.R. Rajesh, learned Counsel appearing on behalf of the

Appellants, submitted that the women workers employed by

the Respondent Company fall within the definition of

“employee” under Section 2(f) of the EPF Act.    Reliance was placed on this Court’s decision in  M/s P.M.

Patel & Sons and Ors. v. Union of India and Ors.1 to contend

that the women workers employed by the Respondent

Company were covered by the definition of “employee” under

Section 2(f) of the EPF Act. Hence, the Respondent Company

1 (1986) 1 SCC 32.

5

6

is liable to  pay  Provident  Fund  contribution in respect of

those women workers.

5. Mr. Anoop Kandari, learned Counsel appearing on behalf of

the Respondent Company, submitted that there was no

employer­employee relationship between the Respondent

Company and the women workers. The women workers were

not employees under Section 2(f) of the EPF Act. They were

independent contractors.

  It was further submitted that the sewing machines used by

the women workers were owned by them, and not provided by

the Respondent Company. The women workers worked from

their homes, and not at the production centers of the

Respondent Company. Hence, the work performed by them,

could be done by their relatives, or any other person on their

behalf. Furthermore, the women workers were not bound to

report to the production centers regularly, nor  were they

required to work at the production centers. The Respondent

Company exercised no supervisory control over the women

workers.

6

7

6. The short issue which arises for consideration is whether the

women workers employed by the Respondent Company are

covered by the definition of “employee” under Section 2(f) of

the EPF Act or not.

  Section 2(f) of the EPF Act is set­out hereinbelow for ready

reference: “(f) “employee” means  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,­­

(i) employed by or through a contractor in or in connection with the work of the establishment;

(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment;”

(emphasis supplied)

6.1. The definition of “employee”  under Section 2(f)  of the

EPF Act is an inclusive definition, and is widely worded

to include any person engaged either directly or

indirectly in connection with the work of an

establishment.

6.2. In the present case, the women workers employed by

the  Respondent  Company  were provided all the raw

7

8

materials, such as the fabric, thread, buttons, etc. from

the Respondent – Employer.  With this  material, the

women workers were required to stitch the garments as

per the specifications given by the Respondent

Company. The women workers could stitch the

garments at their homes, and provide them to the

Respondent Company.  The Respondent  Company had

the absolute right to reject the finished product i.e. the

garments, in case of any defects.

6.3. The  mere fact that the  women  workers stitched the

garments at home, would make no difference. It is the

admitted  position that the  women workers  were  paid

wages directly by the Respondent Company on a per­

piece basis for every garment stitched.

6.4. The issue in the present case is squarely covered by the

decision of this Court in  Silver Jubilee Tailoring House

and Ors. v. Chief Inspector of Shops and Establishments

and Ors.2  The appellants therein were engaged in the

business of producing garments. They employed

2 (1974) 3 SCC 498.

8

9

workers  who were  provided  with the cloth,  and were

instructed by the appellants how to stitch it. The

workers were paid on piece­rate basis. If a worker failed

to stitch a garment as per the instructions, the

appellants rejected the work, and asked the worker to

re­stitch the garment. This Court held that such

workers fell within the definition of “person employed”

under Section 2(14) of the Andhra Pradesh (Telangana

Area) Shops and Establishments Act, 1956. It was held

that: “35. Quite apart from all these circumstances, as the employer has the right to reject the end product if it does not conform to the instruction of the employer and direct the worker to restitch it, the element of control and supervision as formulated in the decisions of this Court is also present.”

(emphasis supplied)

6.5. On the issue where payment is made by piece­rate to

the workers, would they be covered by the definition of

“employee”, this  Court in  Shining Tailors  v.  Industrial

Tribunal II, U.P., Lucknow and Ors.,3 held that: “5. We have gone through the record and especially the evidence recorded by the Tribunal. The Tribunal has committed a glaring error apparent  on record that  whenever  payment is

3 (1983) 4 SCC 464.

9

10

made by piece rate, there  is no relationship of master and the servant and that such relationship can only  be  as  between  principal and principal and therefore, the respondents were independent contractors. Frankly, we must say that the Tribunal has not clearly grasped the meaning of what is the piece rate, If every piece rated  workmen is an independent contractor, lakhs and lakhs of workmen in various industries where payment is correlated to production would be carved out of the expression ‘workmen’ as defined in the Industrial Disputes Act.  In the past the test to determine the relationship of employer and the workmen was the test of control and not the method of payment.  Piece  rate payment meaning  thereby payment correlated to production is a well­ recognised mode of payment to industrial workmen. In fact, wherever possible that method of payment has to be encouraged so that there is utmost sincerity, efficiency and single  minded devotion to increase production which would be beneficial both to the employer, the  workmen and the nation at large. But the test employed in the past was one of determining the degree of control that the employer wielded over the workmen. However, in the identical situation in Silver Jubilee Tailoring House and Ors. v. Chief Inspector of Shops and Establishments and Anr. (1973) IILLJ 495 SC Methew, J. speaking for the Court observed that the control  idea was more suited to the agricultural society prior to Industrial Revolution and during the last two decades the emphasis in the field is shifted from and no longer rests exclusively or strongly upon the question of control. It was further observed that a search for a formula  in the nature of a single test will not serve the useful purpose, and all factors that have been referred to in the cases on topics, should be considered to tell a contract of service. Approaching the matter from this angle,  the  Court observed that the employer's right to reject the end product if it does not conform to the instructions of the employer

10

11

speaks for the element of control and supervision. So also the right of removal of the workman or not to give the work has the element of control and supervision. If these aspects are considered decisive, they are amply satisfied in the facts of this case. The Tribunal ignored the well laid test in law and completely misdirected itself by showing that piece rate itself indicates a relationship of independent contractor and error apparent on the record disclosing a total lack of knowledge of the method of payment in various occupations in different  industries. The right of rejection coupled with  the right  to refuse work would certainly establish master servant relationship and both these tests are amply satisfied in the facts of this case. Viewed from this angle, the respondents were the workmen of the employer and the preliminary objection therefore, raised on behalf of the appellant­ employer was untenable and ought to have been overruled and we hereby overrule it.”

(emphasis supplied)

6.6. In M/s P.M. Patel & Sons and Ors. v. Union of India and

Ors.,4  the appellants therein were engaged in the

manufacture and sale of  bidis. The appellants engaged

contractors, and the contractors engaged workers who

rolled the  bidis  at their own homes after obtaining the

raw  materials either directly from the appellants, or

through the contractors. The appellants contended that

those  workers  were not covered by the definition of

“employee” under Section 2(f) of the EPF Act. This Court

4 (1986) 1 SCC 32.

11

12

rejected the contentions raised by the appellants

therein, and held that: “8. … Clause (f) of Section 2 of that Act defines an “employee” 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.” It  will be  noticed that the terms of the definition are wide. They include  not  only  persons  employed  directly  by the employer but also persons employed through a contractor. Moreover, they include not only persons employed in the factory but also persons employed in connection with the work of the factory. It seems to us that a home worker, by virtue of the fact that he rolls beedis, is involved in an activity connected with the work of the factory. We are unable to accept the narrow construction sought by the petitioners that the words “in connection with” in the definition of “employee” must be confined to work performed in the factory itself as a part of the total process of the manufacture.

10.  In the context of the conditions and the circumstances set out earlier in which the home workers of a single manufacturer go about their work, including the receiving of raw  material, rolling the beedis at home and delivering them to the manufacturer subject to the right of rejection there is sufficient evidence of the requisite degree of control and supervision for establishing the relationship of master and servant between the manufacturer and the home worker. It must be remembered that the work of rolling  beedis  is  not  of  a  sophisticated nature, requiring control and supervision at the time when the work is done. It is a simple operation

12

13

which, as practice has shown, has been performed satisfactorily by thousands of illiterate workers. It is a task  which can be performed by young and old, men and women, with equal facility and it does not require a high order of skill.  In the circumstances, the right of rejection can constitute in itself an effective degree of supervision and control. We may point out that there is evidence to show that the rejection takes place in the presence of the home worker. That factor, however, plays a  merely supportive role in  determining the  existence  of the relationship of the master and servant.  The petitioners point out that there is no element of personal  service in  beedi rolling  and that it is open to a home worker to get the work done by one or the other member of his family at home. The element of personal service, it seems to us, is of little  significance when the test of control and supervision lies in the right of rejection.”

(emphasis supplied)

6.7. The aforesaid judgments make it abundantly clear that

the women workers employed by the Respondent

Company  are covered  by the  definition  of “employee”

under Section 2(f) of the EPF Act.

6.8. The  EPF  Act is a  beneficial social  welfare legislation

which was enacted by the Legislature for the benefit of

the workmen.5  This Court  in  The Daily Partap  v.  The

Regional Provident Fund Commissioner, Punjab,

5 Regional Provident Fund Commissioner v. The Hooghly Mills Company Ltd. and Ors., 2012 (1) SCALE 422.

13

14

Haryana, Himachal Pradesh and Union Territory,

Chandigarh,6 held that:  

“9. … It has to be kept in view that the Act in question, is a beneficial social welfare legislation meant  for the protection of  weaker  sections  of society,  namely, workmen who had to eke out their livelihood from the meagre wages they receive after toiling hard for the same.”

  Hence, the provisions under the EPF Act have to be

interpreted in a manner which is beneficial to the

workmen.

6.9. In the present case, the women workers were certainly

employed for wages in connection with the work of the

Respondent Company. The definition of “employee”

under Section 2(f) is an inclusive definition, and

includes  workers who are engaged either directly or

indirectly in connection with the work of the

establishment, and are paid wages.

  In the present case, the women workers were directly

engaged by the  Management in connection  with the

6 (1998) 8 SCC 90.

14

15

work of the Respondent Company, which was set up as

a ready­made garments  industry in  Marathwada.  The

women workers were paid wages on per­piece basis for

the services rendered. Merely because the women

workers were permitted to do the work off site, would

not take away their status as employees of the

Respondent Company.

7. The  Respondent  Company  placed reliance on this  Court’s

decision  in  C.E.S.C.  Limited and Ors.  v.  Subhash Chandra

Bose and Ors.,7 wherein it was held that:

“14. … In the textual sense ‘supervision’ of the principal employer or his agent  is on ‘work’ at the places envisaged and the word ‘work’ can neither he construed so broadly to be the final act of  acceptance  or rejection  of  work,  nor so narrowly so as to be supervision at all limes and at each and every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two extremes. When the employee is put to work under the eye and gaze of the principal employer, or his agent, where he can be watched secretly, accidentally, or occasionally, while the work is in progress, so as to scrutinise the quality thereof and to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the satisfactory completion and acceptance of the work, that would in our view be supervision for the purposes of Section 2(9) of the Act.”

7 (1992) 1 SCC 441.

15

16

  The decision  in  C.E.S.C.  Limited  (supra)  however,  is not

applicable to the facts of the present case. In that case, this

Court interpreted the meaning of the term “supervision” as

used in the definition of “employee” Section 2(9) of the

Employees’ State Insurance  Act, 1948.  However, the term

“supervision” is nowhere used in the definition of “employee”

under Section 2(f) of the EPF Act. The decision in P.M. Patel

(supra) could not be used to interpret the word “supervision”

under the Employees’ State Insurance Act, 1948 because the

said word has not been used in Section 2(f) of the EPF Act.  

8. In view of the aforesaid discussion, the judgment passed by

the Bombay High Court  vide  the Impugned Order dated

27.04.2012, being contrary to settled law, is set aside.

  The Order dated 19.04.1993 passed by the Appellant No. 1

is restored. The Respondent Company is directed to deposit

the amount assessed by Appellant No. 1 towards Provident

Fund dues of the women workers within 1 month from the

date of this Judgment.

16

17

The Civil Appeal is allowed in the aforesaid terms. All

pending Applications, if any, are accordingly disposed of.

Ordered accordingly.

.....................................J. (ABHAY MANOHAR SAPRE)

.…...............………………J. (INDU MALHOTRA)

New Delhi, July 24, 2019

17