CORAMTHE HONOURABLE MR v. The Presiding Officer Employees' Provident Fund Appellate Tribunal

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 30.10.2009CORAMTHE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMW.P.No.11953 OF 1999Messrs. Suprem TextilesProcessing Ltd.Regd. Office 'Suprem'P.B.No.388817, Race CourseCoimbatore - 641 018 ... PetitionerVs1. The Presiding Officer Employees' Provident Fund Appellate Tribunal, 7th Floor No.60, Skylark Buildings Nehru Place, New Delhi - 110 0192. The Regional Provident Fund Commissioner, Dr.Balasundaram Road Coimbatore - 641 018... RespondentsWrit petition under Article 226 of the Constitution of India prayingfor a writ of Certiorari to call for the records from the file of thefirst respondent herein in Appeal No.ATA.13(96)98/1332 dated13.05.1999 and quash the same.For Petitioner: Mr.S.JayaramanFor Respondents: Mr.V.Vibhishanan O R D E R The petitioner is a Textile Unit and has filed the abovewrit petition challenging the order passed by the first respondentdated 13.05.1999, confirming the order passed by the secondrespondent dated 17.08.1998. 2.The matter arises under The Employees' Provident Fundsand Miscellaneous Provisions Act, 1952 (hereinafter referred to as"the Act"). https://hcservices.ecourts.gov.in/hcservices/

3.The petitioner industry is covered under the Provisionsof the Act with effect from 22.09.1997. A notice of coverage wasissued to the Establishment on 04.03.1998 and the Enforcement Officervisited the Establishment on 02.04.1998 and 15.04.1998 and reportedthat the employer has enrolled only five persons as EPF members andother 141 persons are not enrolled, on a plea that they areapprentices. Therefore, the Enforcement Officer by a proceeding,dated 27.04.1998, requested the petitioner to enroll the otheremployees. The petitioner requested for an opportunity of personalhearing and the same was given and the hearing was fixed for06.07.1998. On the said date, the petitioner represented by theCompany Secretary appeared for hearing and filed a written statementof their defence enclosing copies of documents relied on by them. Thecontentions which were raised by the petitioner before the Authoritycould be summarized as follows:-(a) The Unit is a new Unit and engaged one and onlycategory of persons with the nomenclature Apprentices.(b) The apprentices are not covered under the scheme of theAct, since section 2(f) of the Act excludes apprentices.(c) Apprentices have signed contracts and are engaged for aperiod of 36 months and during that period of training they are paidstipends.(d) The settlement under Section 18(1) of the IndustrialDisputes Act has been entered into with the apprentices.4.The second respondent, after taking into considerationthe contention raised by the petitioner, by an order dated 17.08.1998held that the 135 persons categorized as apprentices by thepetitioner are only employees of the Establishment, who are liablefor E.P.F. membership. Aggrieved by the said order, the petitionerpreferred an appeal to the first respondent under Section 7(I) of theAct. The same grounds which were raised before the second respondentwere reiterated and eight documents were filed in support of theircontentions. A counter statement was filed by the second respondentin the appeal petition. A rejoinder affidavit along with anapplication for raising additional grounds was filed before the firstrespondent. In the application for raising additional grounds thefollowing contentions were raised:-(a) The petitioner unit started commercial production on11.04.1997 and under Section 16(1)(d) of the Act and the unit wasentitled for infancy protection till 11.04.2000. Therefore therespondents are not justified in demanding contribution.(b) Though Section 16(1)(d) of the Act was repealed and suchprotection was denied from 22.09.1997, the same would not affect thevested right in favour of petitioner and in view of the provision ofSection 6 of the General Clauses Act, they are entitled for infancyprotection from 11.04.1997 to 11.04.2000. On the above grounds, the https://hcservices.ecourts.gov.in/hcservices/ petitioner prayed for allowing the appeal petition filed before thefirst respondent.5.The first respondent passed an order dated 13.05.1999rejecting the appeal by holding that the so-called apprentices areemployees of the appellant and they are bound to comply with theprovisions of the Act. On the question of the infancy protectionunder section 16(1)(d), it was stated that the appellant ought tohave raised this issue before the second respondent during the courseof enquiry under Section 7A of the Act and that there is no vestedright in favour of the petitioner for claiming the benefit of infancyprotection.6.Mr.S.Jayaraman, learned counsel appearing for thepetitioner would assail the correctness of the orders impugned on twogrounds. Firstly, on the ground that the petitioner is entitled forthe protection under section 16(1)(d) of the Act. The second groundbeing that the petitioner is a Modern Textile Unit and large numberof apprentices ought to have been trained and sent abroad for furthertraining and they have produced agreements entered into betweenapprentices and the management and the same cannot be disbelieved.It is further contended that once the second respondent accepts thereis a contract between management and the apprentices, the number ofapprentices is of no consequence. Therefore, the learned counselcontended that the respondents concurrently erred in rejecting theplea raised by the petitioner. 7. Mr.V.Vibhishanan, learned counsel appearing for therespondents / Organization resisted the arguments advanced by thelearned counsel for the petitioner by stating that the EnforcementOfficer in his inspection report dated 15.04.1998 stated that theemployer has enrolled only 5 employees as EPF members and 141employees were not enrolled on a plea that they are apprentices. 8.The learned counsel further submits that under Section 2(f) of the Act, apprentices, who are not engaged, either under theApprentices Act, 1961 or under the Standing Orders of theEstablishment, are to be treated as employees. The settlement underSection 18(1) of the Industrial Disputes Act (hereinafter referred toas "the I.D. Act") between the Management and so-called apprenticesis not a standing order referred to under the Act. In the absence ofcertified standing order, the petitioner cannot claim that theemployees are apprentices. Further, the learned counsel would contendthat the proportion of apprentices to that of the permanent employeesis unreasonably high and it is not known how five regular employeescan impart training to 135 apprentices in various Departments. Thelearned counsel by relying upon the averments made in the counteraffidavit would contend that as per the inspection report given on28.06.1999, i.e., after the impugned orders were passed, the https://hcservices.ecourts.gov.in/hcservices/ Enforcement Officer has reported that 254 persons called asapprentices are employed in the petitioner unit and they have notbeen enrolled as P.F. members and in view of the stay granted in thepresent writ petition, no action has been taken. On the abovegrounds, the learned Counsel, would submit that the writ petition isliable to be dismissed.9.I have carefully considered the submissions on eitherside and perused the materials available on record.10.The question as regards the applicability of the Act andas to whether the petitioner would be entitled to the infancyprotection under Section 16(1)(d) of the Act for a period of threeyears from 11.04.1997 to 11.04.2000, even though the said provisionwas repealed by Act 10 of 1998 with effect from 22.09.1997, is nolonger res-integra. A Division Bench of Bombay High Court in thecase of Magic Wash Industries (P) Ltd. & Ors. V. Asstt. ProvidentFund Commssioner & Ors., reported in 1999 II LLJ 792 BOM (DB) wasconsidering the effect of Section 16(1)(d), after the period ofinfancy protection was reduced from five to three years by Act 10 of1998. In the said decision, the Division Bench has held as follows:-".... that there is no doubt that the vested rights orbenefits under the legislation would be retrospectivelytaken away by legislation, but then statute taken away suchrights or benefits must expressly reflect its intention tothat effect. The infancy period prior to the amendedprovision of Section 16(1)(d) was five years in the caseof establishments employing 20 to 50 workers and in theevent this infancy benefit was to be withdrawn, it wasnecessary that the intention of the Legislature should havebeen clearly reflected in the amended provision itself thatthe rights and benefits which had already accrued stoodwithdrawn. The amended Clause 16(1)(d) came on the statutebook on June 2, 1988, when it was assented by the Presidentof India but the amended Section 16 was put into operationonly with effect from August 1, 1988, in terms of Section16(2) of the Amendment Act, 1988 which empowered theCentral Government to appoint different dated for thecoming into force of different provisions of the Act. Thus,though the amended Section 16(1)(d) came on the statutebook on June 2, 1988, but it was brought into force onAugust 1, 1988, in the intervening period, theestablishments would be set up, that is to say before thecoming into force of Section 16(1)(d) and theseestablishments would come within the expression, "or hasbeen set up" used in Section 16(1)(d), since theseestablishments would be treated as newly set up for thepurpose of the Act". It was further ruled therein that https://hcservices.ecourts.gov.in/hcservices/ "this means that the Central Government is empowered tospecify other establishments to which the provisions of theAct shall extend subject to the provisions contained inSection 16 of the Act. The notification of suchestablishments, may come after the amended provisionSection 16(1)(d) to whom the benefits may be extended andsuch establishments would also fall within the latter partof the expression, "or has been set up" used in Section 16(1)(d) of the Act. Section 16(1)(d), essentially applies toestablishments newly set up after the coming into effect ofthe said provision on the statute book, though theenforcement of the same was effective from a later date.This is the only way in which a harmonious construction canbe put to Section 16(1)(d) In view of the significantchange made in the amended provision by adding "newly setup". It was further held that "we find it difficult in thecircumstances, to conclude that the intention of theLegislature was to take away the benefit of infancy periodwhich had already accrued to the existing establishmentsand this benefit has not been expressly taken away or byimplication by the amended provision of Section 16(1)(d)". The said Division Bench Judgment was followed by the Bombay HighCourt in a subsequent case in OM SAI HOTELSADN RESTAURANTS V.REGIONAL PROVIDENT FUND COMMR., reported in 2004-I-LLJ 895. whichhas been relied on by the learned counsel for the petitioner. One ofthe question which came out for consideration in the said case wasregarding the claim of infancy protection for a period of three yearsfrom the date of commencement of production of said unit. Afterfollowing the Division Bench judgment in the case of Magic WashIndustries (referred to supra), the Bombay High Court held asfollows:-12.Hence, following the decision of a Division Bench inMagic Wash Industries's case (Supra) and considering thescope of the amendment brought about by deletion of clause(d) of Section 16(1) of the Said Act, the petitioner isjustified in contending that it would be entitled forbenefit of three years' infancy period starting fromSeptember 5, 1995. Merely because the petitioner hadapproached the respondents under letter dated October 20,1997, that would not estop the petitioner from claimingsuch infancy period as the said rule has not application incases where a statutory right is created in favour of theparty."11.The Hon'ble Supreme Court in SANGAM SPINNERS V. REGL.PROVIDENT FUND COMMR.I reported in 2008(1) SCC 391 considered the https://hcservices.ecourts.gov.in/hcservices/ question of the temporal effect of omission (retrospective orprospective) after the provision, namely Section 16(1)(d), wasomitted with effect from 22.09.1997. The Hon'ble Supreme Court afteranalyzing the position of Section 16 at different points of time andafter referring to the judgments of the Hon'ble Apex Court on thequestion of effect of amendment of statute on the existing rights,and after referring to the following judgments:- 1. Jayantilal Amrathlal v. Union of India reported in(1972) 4 SCC 174 : AIR 1971 SC 11932. In Govind Das v. ITO reported in (1976) 1 SCC 906 : 1976 SCC (Tax)133 : AIR 1977 SC 552and the judgment of the Division Bench of the Bombay High Court inMagic Wash Industries (referred as supra) held that the appellanttherein shall be entitled to protection for the period of three yearsstarting from the date of Establishment was setup irrespective ofrepeal of the provision for such infancy protection. In a recentdecision, in the case of The Management of Sterling Spinners LimitedVs. The Union of India and another W.A.No.1702 of 2000, dated24.07.2009, the Hon'ble Division Bench of this Court had an occasionto consider the similar question. The Hon'ble Division Bench of thisCourt by applying law laid down by the Hon'ble Supreme Court heldthat the petitioner / the appellant therein was entitled to infancyprotection irrespective of the repeal.12.Thus, in view of the law laid down by the Hon'bleSupreme Court and the Hon'ble Division Bench by the Bombay High Courtas well as in the Hon'ble Division Bench of this Court, I am of theconsidered view that the petitioner shall be entitled to the infancyprotection for the period of three years starting from the date onwhich the establishment was setup irrespective of the repeal of theprovision, for such infancy protection.13.Coming to the next question as regards whether the claimmade by the petitioner that except five employees the remaining areapprentices, in my view, this is essentially a question of fact, asrightly pointed out by the learned counsel for the respondents, thedefinition of employee under Section 2(f) of the Act states that anemployee shall include any person engaged as an apprentice not beingan apprentice engaged under the apprentices Act, 1961 or under thestanding orders of the Establishment. Thus, the onus is on themanagement to prove that the "employees" are not covered within thedefinition of "employee" that has been laid under Section 2(f) Act.However, in view of the finding rendered on point No.1 holding thatthe petitioner is entitled for infancy protection, I am of the viewthat the issue relating to the claim that the major chunk ofemployees are apprentices could be relegated back to the authoritiesfor fresh decision on merits. Since the petitioner would be entitled https://hcservices.ecourts.gov.in/hcservices/ to protection up to 11.04.2000 and it is the period thereafter whichhas to be considered. In that view of the matter, I deem itappropriate that liberty should be granted to the second respondentto issue a fresh notice under Section 7A of the Act for the purposeof determining whether the persons engaged by the petitioner in theirunit would fall within the definition of Section 2(f) of the Act anddecide the matter after conducting a thorough enquiry as contemplatedunder Section 7A of the Act after affording sufficient opportunity tothe petitioner, to lead oral and documentary evidence in support oftheir claim on the fresh proceeding and the same shall be commencedby the second respondent within a period of six weeks from the dateof receipt of copy of this order and the Enquiry shall be completedwithin a period of three months, after the petitioner submits theirobjections to the notice to be issued under Section 7A. 14.In view of the above, the writ petition is allowed onthe above terms. No costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrar rnsTo1. The Presiding Officer Employees' Provident Fund Appellate Tribunal, 7th Floor No.60, Skylark Buildings Nehru Place, New Delhi - 110 0192. The Regional Provident Fund Commissioner, Dr.Balasundaram Road Coimbatore - 641 018+1cc to Mr.S.Jayaraman, Advocate Sr 57582+1cc to Mr.V.Vibhishanan,Advocate Sr 57735CKN(CO)km/5.11.W.P.No.11953 OF 1999