Case Laws on Employee’s Provident Funds and Miscellaneous Provisions Act, 1952

1.       Silver Jubilee Tailoring House v. Chief Inspector of Shops and Establishments [1974 AIR 37, 1974 SCR (1) 747] -  Cited in The Officer In Charge vs M/S Godavari Garments Limited [CIVIL APPEAL NO. 5821 OF 2019]

The reputation of a tailoring establishment depends not only on the cutter but also upon the tailors. In a many cases, stitching is a delicate operation when the cloth upon which it is to be carried on is expensive. The defect in stitching might mar the appearance not only of the garment but also of its wearer. So when the tailor returns a garment, the proprietor has got to inspect it to see that it is perfect. He has to keep his customers pleased and he has also to be punctual, which means that the stitching must be done according to the instruction of the employer and within the time specified. The degree of control and supervision would be different in different types of business. If an ultimate authority over the worker in the performance of his work resided in the employer so that he was subject to the latter's direction that would be sufficient to qualify them as “Employee”.

That some of the employees take up the work from other tailoring establishments and do that work also in the shop in which they generally attend for work, as spoken to by the proprietor in his evidence, would not in any way militate against their being employees of the proprietor of the shop where they attend for work.

A person can be a servant of more than one employer. A servant need not be under the exclusive control of one master. He can be employed under more than one employer. That the workers are not obliged to work for the whole day in the shop is not very material. There is of course no reason why a person, who is only employed part time, should not be a servant and it is doubtful whether regular part time service can be considered even prima facie to suggest anything other than a contract of service. According to the definition in section 2(14) of the Act, even if a person is not wholly employed, if he is principally employed in connection with the business of the shop, he will be a "person employed" within the meaning of the sub-section. Therefore, even if he accepts some work from other tailoring establishments or does not work whole time in a particular establishment, that would not in any way derogate from his being employed in the shop where he is principally employed.

2.       The Palliadi Handloom Weavers Co-op Production and Sale Society v Regional Provident Fund Commissioner [S.A(MD)No.2120 of 2003]

This Court keeps in mind that the EPF Act is a beneficial social welfare legislation which was enacted by the Legislature for the benefit of the workmen. It is 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. A harmonious construction alone would help carry out the purpose of the Act.

3.       Shri Birdhichand Sharma v. First Civil Judge, Nagpur and Others [1961 3 S.C.R. 161] - Cited in Messrs P.M. Patel & Sons vs Union of India [1987 AIR 447, 1985 SCR Supl. (3) 55]

Manufacturer had employed workmen in his beedi factory and who were at liberty to work at their homes, and the Court held that the conditions in which they worked made them "workers" within the meaning of clause (1) of s. 2 of the Factories Act. The significant feature of the judgement lies in the observation of the Court that in the case of the beedi industry the right of rejection of the beedis if they did not come up to the proper standard was evidence of the supervision and control exercised by the manufacturer. Noting that the nature and extent of supervision and control varied in different industries the Court said:-

"Taking the nature of the work in the present case it can hardly be said that there must be supervision all time when biris are being prepared and unless there is such supervision there can be no direction as to the manner of work. In the present case the operation being a simple one, the control of the manner in which the work is done is exercised at the end of the day, when biris are ready, by the method of rejecting those which do not come up to the proper standard. In such a case it is the right to supervise and not so much the mode in which it is exercised which is important."

4.       Regional Provident Fund Commissioner, Andhra Pradesh v. Shri T.S. Hariharan [1971 Suppl. S.C.R. 305]

The Act was brought on the statute book for providing for the institution of a 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,

5.       M. Abdul Samad Sahib Sons, Samad  vs Presiding Officer

Therefore, a reading of the provisions of the E.P.F. Act and the scheme framed thereunder, makes it clear that it will have to ensure that the coverage of the employees either employed directly by the principal employer or through any contractor and that the contributions are duly recovered and paid along with the employer's contribution to the second respondent. It will have to be born in mind that it is a welfare legislation meant for the benefit of the employees concerned and therefore, every attempt should be made to ensure that the purport of the enactment is not defeated by resorting to any unfair means to deprive the benefit of Provident Fund to the employees concerned.

6.       Regional Provident Fund Commissioner and Anr. v. Dharamsi Morarji Chemical Company Limited – Cited in The Regional Provident Fund vs B. Ganapathy Bhandarkar [2003 (4) KarLJ 10, (2003) IIILLJ 356 Kant]

So far as this contention is concerned the finding reached by the High Court, as extracted earlier, clearly shows that there was no evidence to indicate any such interconnection between the two factories in the matter of supervisory, financial or managerial control. Nothing could be pointed out to us to contradict this finding. Therefore, the net result is that the only connecting link which could be effectively pressed in service by the learned Counsel for the appellant for culling out interconnection between Ambarnath factory and Roha factory was that both of them were owned by a common owner, namely, the respondent-company and the Board of Directors were common. That by itself cannot be sufficient unless there is clear evidence to show that there was interconnection between these two units and there was common supervisory, financial or managerial control. As there is no such evidence in the present case, on the peculiar facts of this case, it is not possible to agree with the learned Counsel for the appellant that Roha factory was a part and parcel of Ambarnath factory or it was an adjunct of the main parent establishment functioning at Ambarnath since 1921. – Meaning that two units will be treated distinct and different for the applicability of the act, where there is no inter-connection between them.

7.       Khoja Lime Udyog vs R.P.F. Commissioner [1991 (62) FLR 252, (1992) ILLJ 903 Raj, 1990 (1) WLN 361]

That was a case where the entrepreneur owned a press as also published a newspaper and the question was whether these two units are one establishment or are distinct and separate units and their lordships laid down the criteria for testing whether the units is one or they are separate units. The most important lest pointed out by their lordships was that of functional 'integrality' that means of the unity of finance and employment and of labour. In that case, unity of ownership existed ex-hypothesi but there should have been such functional inter-dependence that one unit could not exist conveniently and reasonably without the other and their finances and employment should have been integrated in order to make them one unit of establishment. I have already referred to the question of functional Integrality and unity of finance and so far as the question of ownership is concerned, in our case there is no such unity of ownership as such and it has been clearly shown that the three proprietors of the three different concerns are different and independent entities.

8.       Bridge & Roof Co. (India) Ltd vs Union Of India [1963 AIR 1474, 1963 SCR (3) 978] – Most Important Judgment

The main question therefore that falls for decision is as to which of these two rival contentions is in consonance with s. 2 (b). There is no doubt that ",basic wages" as defined therein means all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash.
If there were no exceptions to this definition, there would have been no difficulty in holding that production bonus whatever be its nature would be included within these terms. The difficulty, however, arises because the definition also provides that certain things will not be included in the term "basic wages", and these are contained in three clauses. The first clause mentions the cash value of any food concession while the third clause mentions any presents made by the employer.

The fact that the exceptions contain even presents made by the employer shows that though the definition mentions all emoluments which are earned in accordance with the terms of the contract of employment, care was taken to exclude presents which would ordinarily not be earned in accordance with the terms of the contract of employment.

Similarly, though the definition includes "all emoluments" which are paid or payable in cash, the exception excludes the cash value of any food concession, which in any case was not payable in cash. The exceptions therefore do not seem to follow any logical pattern which would be in consonance with the main definition.

It excludes dearness allowance, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment. This exception suggests that even though the main part of the definition includes all emoluments which are earned in accordance with the terms of the contract of employment, certain payments which are in fact the price of labour and earned in accordance with the terms of the contract of employment are excluded from the main part of the definition of "basic wages".

It is undeniable that the exceptions contained in explanation (ii) refer to payments which are earned by an employee in accordance with the terms of his contract of employment. It was admitted by counsel on both sides before us that it was difficult to find any one basis for the exceptions contained in the three clauses. It is clear however from cl. (ii) that from the definition of the word "basic wages" certain earnings were excluded, though they must be earned by employees in accordance with the terms of the contract of employment.

Having excluded "dearness allowance" from the definition of "basic wages" section 6 then provides for inclusion of dearness allowance for purposes of contribution. But that is clearly the result of the specific provision in section 6 which lays down that contribution shall be 6-1/4 per centum of the basic wages, dearness allowance and retaining allowance (if any).

We must therefore try to discover some basis for the exclusion in cl. (ii) as also the inclusion of dearness allowance and retaining allowance (for any) in section 6. It seems that the basis of inclusion in section 6 and exclusion in cl. (ii) is that whatever is payable in all concerns and is earned by all permanent employees is included for the purpose, of contribution under s. 6, but whatever is not payable by all concerns or may not be earned by all employees of a concern is excluded for the purpose of contribution.

·         Dearness allowance, for examples is payable in all concerns either as an addition to basic wages or as a part of consolidated wages where a concern does not have separate dearness allowance and basic wage.

·         Similarly, retaining allowance is pay able to all permanent employees in all seasonal factories like sugar factories and is therefore included in section 6;

·         But house-rent allowance is not paid in many concerns and sometimes in the same concern it is paid to some employees but not to others, for the theory is that house- rent is included in the payment of basic wages plus dearness allowance or consolidated wages. Therefore, house-rent allowance which may not be payable to all employees of a concern and which is certainly not paid by all concern is taken out of the definition of "basic wages", even though the basis of payment of house rent allowance where it is paid is the contract of employment.

·         Similarly, overtime allowance though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment; but because it may not be earned by all employees of a concern it is excluded from basic wages".

·         Similarly, commission or any other similar allowance is excluded from the definition of "basic wages" for commission and other allowances are not necessarily to be found in all concerns; nor are they necessarily earned by all employees of the same concern, though where they exist they are earned in accordance with the terms of the contract of employment.

It seems therefore that the basis for the exclusion in cl. (ii) of the exceptions in s. 2 (b) is that all that is not earned in all concerns or by all employees of concern is excluded from basic wages. To this the exclusion of dearness allowance in cl. (ii) is an, exception. But that exception has been corrected by including dearness allowance in s. 6 for the purpose of contribution. Dearness allowance which is an exception in, the definition of "basic wages", is included for the purpose of contribution by s. 6 and the real exceptions therefore in el. (ii) are the other exceptions beside dearness allowance, which has been included through section 6.


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