High Court · 2008

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 24-03-2008CORAMTHE HONOURABLE MR. JUSTICE P.K. MISRAANDTHE HONOURABLE MR. JUSTICE K. MOHAN RAMW.P.NOs.15728, 15606, 15782, 15743, 15766, 16673, 17453 OF 2000, 8106 OF 2001 & 740 OF 2003Bharat Overseas Bank Limited,'Habeeb Towers', Erode Road,756, Anna Salai, Chennai 600 002rep. by its Chief Manager (Pers.).. Petitioner inWP.No.15728 of 2000City Union Bank Ltd.,Kumbakonam rep byMr.R. KuppuswamyAsst. General Manager(Personnel and Investments)... Petitioner in W.P.15606/2000Bank of Madura Ltd.,758 Anna SalaiChennai-2, rep by its Assistant Vice President... Petitioner in W.P.15782/2000The Karur Vysya Bank Ltd.,Central Office Erode Road, Karur rep by General Manager ... Petitioner in W.P.15743/2000The Lakshmi Vilas Bank Ltd,personnel DepartmentAdministrative Office Salem Road, KathaparaiKarur- 639 006 rep by itsAssistant General Manager ... Petitioner in W.P.15766/2000 https://hcservices.ecourts.gov.in/hcservices/ Tamilnadu Mercantile Bank LtdRegd.Office 57 V.E. Road,Thoothukudi 628 002 rep byits Chief General Manager ... Petitioner in W.P.16673/2000Karur Vysya Bank Employees Unionrep by its PresidentThambu Chetty Street,Chennai-1... Petitioner in W.P.17453/2000Standard Chartered Grindlays BankNo.1, Haddows Road,Chennai-6rep by its Area Manager ER... Petitioner in W.P.8106/2001Citi Bank NANo.2 Club House Road,Chennai-2rep by Assistant Vice President Human Resources... Petitioner in W.P.740/2003Vs.The Government of India, rep. by the Secretary,Ministry of Labour, New DelhiUnion of India... ISt Respondent in W.P.15728/00,15606/2000,15782/ 2000, 15743/ 2000,15766/ 2000, 16673/ 2000,17453/ 2000, 8106/2001, 740/03The Enforcement Officer,Employees Provident FundsCH.XVI Division, Chennai 600 014.... 2nd Respondent in W.P.15728/2000, 8106/01, 740/03 and 3rd respondent in W.P.15782/2000 https://hcservices.ecourts.gov.in/hcservices/ The Assistant Provident Fund Commissioner Office of the Regional Provident FundCommissioner, Employees Provident Fund(Tamil Nadu & Pondicherry),No.20, Royapettah High Road,Chennai 600 014... 3rd Respondent inWP.NO.15728 of 2000, 8106/01, 740/03The Regional Provident Fund Commissioner Sri ComplexMadurai Road, Tiruchirapalli-8... 2nd Respondent in W.P.15606/2000The Enforcement OfficerE.P.F. Kamaraj Road,Kumbakonam... 3rd Respondent in W.P.15606/2000Regional Provident fund CommissionerTamilnadu20, Royapettah High Road,Chennai-14.... 2nd Respondent in W.P.15782/2000The Enforcement OfficerEmployees provident fundsMunicipal Shopping ComplexAzad Road, Karur... 2nd respondent in W.P.15743/2000, 15766/2000, 17453/2000The Regional Commissioner ofProvident Funds,Tirunelveli... 2nd Respondent in W.P.16673/2000Petition presented to this Court under Article 226 of theConstitution of India to issue a Writ of I. Certiorari calling forthe records of the first respondent 1. leading to the issue ofNotification dated 25-2-2000 and 9-3-2000 and quash thenotification dated 9-3-2000 (W.P.15728/2000, 15782/2000,15743/2000, 15766/2000, 16673/2000, 8106/01 and 740/03) https://hcservices.ecourts.gov.in/hcservices/

2. connected with the notification dated 25.2.2000 called "TheEmployees provident Fund Amendment) Scheme 2000 and to quash thesame in so far as clause 2 (i) is concerned (W.P.15606/2000).II. Declaration declaring the Notification of the Istrespondent dated 25.2.2000 under the employees provident FundScheme 1952 and the notification dated 9.3.2000 under the employeesprovident Fund and miscellaneous Provision Act 1952 asunconstitutional and null and void. (W.P.17453/2000)For Petitioners in WP.NOs. Mr.A.L. Somayaji15728, 15743, 15766, : Senior Counsel 16673/2000, 8106/2001 Assisted by & 740/2003 M/s.V. Karthic & G. Ananthakrishnan for M/s.T.S.Gopalan For Petitioners in WP.15606 & Mr. Sanjay Mohan15782 of 2000: Senior Counsel for M/s.S.Ramasubramaniam & AssociatesFor Petitioner in: Mr.R. Yashod VardhanWP.No.17453 of 2000For Respondents : Mr.V. VibhishananCOMMON JUDGMENTP.K. MISRA, JAll these writ petitions, except W.P.No.17453 of 2000,have been filed by commercial banks having branches in Tamil Naduas well as in other States for quashing the notification dated25.2.2000 issued by the Union of India and raising the question ofapplicability of the provisions contained in the Employees'Provident Funds and Miscellaneous Provisions Act, 1952 and theScheme made thereunder. W.P.No.17453 of 2000 is filed by the KarurVysya Bank Employees' Union essentially for the very same purpose.2. Under the Sastri Award, while considering the demandrelating to introduction of Provident Fund, certain recommendationshad been made regarding introduction of Provident Fund foremployees in various Banks having branches in more than one State.Accordingly, such provisions were made by the Banks concerned.Initially Banks were not coming within the scope of the Employees https://hcservices.ecourts.gov.in/hcservices/ Provident Fund, in short "EPF", until notification dated 18.12.1965in respect of Banks "... doing business in one State or UnionTerritory and having no departments or branches outside that Stateor Union Territory." was issued under the Employees' ProvidentFunds and Miscellaneous Provisions Act (hereinafter referred to as"the Act"). Thus the Banks having branches in more than one Statewere not coming within such coverage. Such Banks, which were thusoutside the purview of the provisions of the Act, had their ownscheme for payment of EPF as per the Sastry Award. Variouspetitioner banks having branches in more than one State, wereeither not covered under the Act or were subsequently excluded fromsuch operations. However, all such banks have their own Employees'Provident Fund Rules as well as Bank Employees' Pension Schemes inthe place in accordance with various awards or settlements. It isclaimed that the provisions relating to the Provident Fund as wellas payment of Pension are much more beneficial to the employees.As per such provisions, for payment of Provident Fund, those whoopt for such Fund are given the benefit, and other employees whoopt for pension are given the benefit of the pension. While thematter stood thus, the Central Government, in exercise of powersconferred by Sections 5 and 7 (1) of the Act, amended the EmployeesFund Scheme, 1952 by substituting in the notification dated18.12.1965 the expression "banks other than the nationalised banksestablished under any Central or State Act" in the place "the banksdoing business in one State or Union Territory and having nodepartments or branches outside that State or Union Territory",which was published in the Gazette dated 9.3.2000. This amendmentissued by the Central Government is being questioned by the variouspetitioner banks which having branches in more than one State andalso by the Union. 3. The main basis for the challenge is to the effectthat, while extending the applicability of the provisions of theAct in the notification dated 25.12.1965, which came into effectfrom 1.1.1966, the Banks doing business in one State or UnionTerritory and having no departments or branches outside that Stateof Union Territory were only covered and the Banks having suchbranches outside the State or the Union Territory were not covered.Whereas, under the amendment effected, as per the impugnednotification dated 9.3.2000, the Act and the Scheme have been madeapplicable to the Banks other than the Nationalised Banksestablished under any Central or State Act, which has resulted indiscrimination between the Nationalised Banks and other Banks likethe petitioners, who are also having branches in more than oneState, and there is no basis for such discrimination. It isfurther contended that at any rate the provisions made by theconcerned petitioner Banks providing for payment of Provident Fundor the Pension being more beneficial to the employees, therespondent should not have amended the notification. https://hcservices.ecourts.gov.in/hcservices/

4. Counter affidavits have been filed in all the writpetitions. It is admitted in the counter affidavit that thepetitioner banks were having branches in more than one State andtherefore were excluded from operation of the Act either from theinception or by the subsequent orders. It is also admitted thatthe petitioner banks had their own Provident Fund Scheme and theyhad also introduced Pension Scheme pursuant to the settlement madebetween the management of the banks and the workmen, as per whichbenefit of pension has been made available to those who opted forpension scheme. It is further stated that, by notification dated25.2.2000, the Union of India has amended the Employees' ProvidentFunds Scheme, amending clause (a) of paragraph 1(3) substitutingfor the words "banks doing business in one State or Union Territoryand having no departments or branches outside that State or UnionTerritory" with the words "banks other than the nationalised banksestablished under any Central or State Act". The net result ofwhich is that only the Nationalised Banks are outside the coverageand the petitioner banks and other private banks having branches inmore than one State which were not hitherto covered under the Act,were brought under the purview of the Act and the EPF Scheme. Ithas been further stated that the provisions contained in the Actand the Scheme being beneficial provisions, have been madeapplicable. It is further stated that the Nationalised Banks standon a different footing and, therefore, the allegation ofdiscrimination cannot hold good.5. The Employees' Provident Funds and MiscellaneousProvisions Act, 1952 is an Act to provide for the institution ofprovident funds, pension fund and deposit-linked insurance fund foremployes in factories and other establishments. As per Section 1(3)(a), the Act applies to every establishment, which is a factoryengaged in any industry specified in Schedule I and in which twentyor more persons are employed. However, such provision has got norelevance for the present case as the Banking service is not one ofthe industries specified. As per Section 1(3)(b), the Act appliesto any other establishment employing twenty or more persons orclass of such establishments which the Central Government bynotification in the Official Gazette specify. Under Section 1(5),an establishment to which the Act applies shall continue to begoverned by the Act notwithstanding that the number of personsemployed in such establishment falls below twenty at any time.As per Section 2(kB) "Pension Scheme" means the Employees'Pension Scheme framed under sub-section (1) of Section 6A and underSection 2(l) "Scheme" means the Employees' Provident Funds Schemeframed under Section 5. https://hcservices.ecourts.gov.in/hcservices/ Section 4 empowers the Central Government to add to Schedule-Iany other industry, if it is of the opinion that a Provident FundScheme should be framed in respect of such employees. However, asper Section 4(2), all notifications under sub-section (1) shall belaid before Parliament as soon as may be, after their issue. Asper Section 5(1), the Central Government may frame EmployeesProvident Fund Scheme for the establishment of provident fundsunder the Act for employees or for any class of employes andspecify the establishments or class of establishments to which thesaid Scheme shall apply. As per Section 5(1B), the Scheme framedunder Section 5(1) may provide for all or any of the mattersspecified in Schedule II. Pursuant to the aforesaid enablingprovision, the Employees Provident Funds Scheme, 1952 has beennotified. Section 5(1) also contemplates that as soon as afterframing of the Scheme, the Central Government shall establish aFund in accordance with the provisions of the Act and the Schemeand as per Section 5(1A), the Fund shall vest in and beadministered by the Central Board constituted under section 5A. Section 6 provides for payment of contribution by the employerto the Fund. Similarly Section 6A empowers the Central Governmentto frame an Employees' Pension Scheme providing for superannuationpension, retiring pension or permanent total disablement pension tothe employees of any establishment or class of establishments andthe pension payable to widower or children of such employees.Similarly, under Section 6A(2), a Pension Fund is required to beestablished. Under Section 6C, the Central Government may frameEmployes' Deposit-linked Insurance Scheme for the purpose ofproviding life insurance benefits to the employees and underSection 6C(2), a Deposit-linked Insurance Fund is required to beestablished. Under Section 6D, every Scheme framed under Sections5, 6A and 6C are required to be laid before each House ofParliament. Under Section 7, the Central Government is empoweredto amend either prospectively or retrospectively any of the Schemesby notification which is again required to be placed before theParliament. Section 16(1)(a) contemplates that the Act shall not apply toany establishment registered under the Co-operative Societies Act,1912 or any other law in force in any State relating to co-operative societies employing less than fifty persons and workingwithout the aid of power and under Section 16(1)(b), the Act shallnot apply to any other establishment belonging to or under thecontrol of the Central Government or a State government and whoseemployees are entitled to the benefit of contributory providentfund or old age pension in accordance with any scheme or ruleframed by the Central Government or the State Government governingsuch benefits. Under Section 16(1)(c), the Act shall not apply toany other establishment set up under any Central, Provincial or https://hcservices.ecourts.gov.in/hcservices/ State Act and whose employees are entitled to the benefits ofcontributory provident fund or old age pension in accordance withany Scheme or rule framed under that Act. Under Section 16(2), theCentral Government may exempt any particular class ofestablishments from the operation of the Act for such period as maybe specified in the notification having regard to the financialposition of any class of establishments or other circumstances andthe Central Government is of the opinion that it is necessary orexpedient to exempt such class of establishments. Under Section 17, the appropriate Government is empowered toexempt from operation or all or any of the provisions of theScheme, any establishment, if in the opinion of the appropriateGovernment, the rules of its provident fund with respect to therates of contribution are not less favourable than those specifiedin Section 6 and the employees are also in enjoyment of otherprovident fund benefits which are not less favourable to theemployees as compared to the benefits provided under the Act or theScheme in relation to the employees in any other establishment of asimilar character. Similarly, under Section 17(1)(b) it may exemptany establishment, if the employees of such establishment are inenjoyment of benefits in the nature of provident fund, pension orgratuity, which are on the whole not less favourable to suchemployees as compared to the benefits provided under the Act or theScheme in any other establishment of a similar character. However,as per the proviso, before granting such exemption, the CentralBoard is required to be consulted. However, where even suchexemption is granted under Section 17(1A), certain provisions suchas Sections 6, 7A, 8 and 14B shall apply to the employer so far asmay be and in case of default the penal provision of Section 14 isalso applicable notwithstanding such exemption. 6. The main contention of the learned counsels appearingfor the petitioners are to the effect that as per the previousnotification, the Banks which were not having any branch outsidethe State were coming within the scope of the Act and the Bankswhich were having branches outside the State were not coming withinthe purview of the Act. It is contended that in the abovebackground and particularly keeping in view the fact that all theBanks are required to provide for provident fund as per the Sastryaward, there is no justification to amend the notification issuedunder Section 1(3)(b), whereunder the Act is made applicable to allthe Banks except the nationalised banks. It is submitted thatthere is no basis to treat the banks having branches outside theState on a different footing as compared to the nationalised banksand this would amount to discrimination and violative of theprovisions contained in Article 14 of the Constitution of India.In support of such contention, the learned counsels have placedstrong reliance upon a decision of the single Judge of Karnataka https://hcservices.ecourts.gov.in/hcservices/ High Court reported in 2007-I-LLJ 116 (KARNATAKA BANK LTD.,MANGALORE AND OTHERS v. UNION OF INDIA) (cited supra). In theaforesaid decision, the very same question was posed. There it wasobserved by the learned single Judge as follows :-"13. There is no serious dispute as to the serviceconditions of the employees of the petitioners and thatof Nationalised Banks being alike in all respects. Noris there any dispute of the petitioners being governed bythe provisions of the Banking (Regulation) Act, 1949 andtheir business, management and administration beingcontrolled by the Reserve Bank of India under theprovisions of the Banking (Regulation) Act and theReserve Bank of India Act, 1934.14. There are no material and characteristicdifference between the petitioners and Nationalised Banksfor purposes of implementation of the Provident Fund andPension Schemes under the Provident Fund Act and Schemes.There is therefore, no basis for exclusion of thenationalised Banks under the impugned notifications."7.The Sastry Award indicates that one of the issuesreferred to such Tribunal was relating to 'Provident fund'. Thebanking companies having branches in more than one State wereparties to such reference. The Sastry Award gave clear directionthat the banks should have an appropriate Provident Fund Scheme andaccordingly all such banks, which had branches in more than oneState, had introduced Provident Fund Schemes in terms of the Award.That was obviously the basic reason why as per the Notificationdated 31.01.1966 the Government of India had extended theprovisions of the Act only to the banks having branches “within oneState”, because, obviously, the banks having branches in more thanone State had already introduced Provident Fund Schemes inaccordance with the Sastry Award. It is, of course, true that in1969 certain banks were nationalised. However, those nationalisedbanks having branches in more than one State, like the other bankshaving branches in more than one State, continued to be outside thepurview of the Act. It is also not in dispute that subsequentlyPension Scheme has been introduced in such banks having branches inmore than one State pursuant to different bi-partiate settlements.8.Keeping in view the above aspects, the question iswhether the Notification now applicable to non-nationalised bankshaving branches in more than one State, including such banks withinthe purview of the Provident Fund Scheme, can be held to bearbitrary and discriminatory when compared to the nationalisedbanks which obviously have branches in more than one State. https://hcservices.ecourts.gov.in/hcservices/

9.Since hitherto all the banks having branches in morethan one State were treated alike and had not been included withinthe Scheme obviously because of their own Provident Fund Scheme asper the Sastry Award and Pension Scheme as per the subsequentsettlements.10.In the absence of any justification given by therespondents, the Notification appears to be arbitrary,discriminatory and not based on any justifiable consideration. Inthis context, it is to be noticed that in the counter affidavitfiled on behalf of all the respondents, except highlighting theobjects and reasons of the Act and the beneficial purpose it seeksto achieve, nothing has been indicated as to why, out of all thebanks having branches in more than one State, only non-nationalisedbanks have been included in the Notification and the nationalisedbanks will continue to be outside the Scheme. There is noineligible basis for the classification nor there is any nexus, farless, any reasonable nexus for the object to be achieved and theclassification made. In such view of the matter, we are inrespectful agreement with the views expressed by the learned SingleJudge of the Karnataka High Court in the decision relied upon bythe petitioners.11.Apart from the above, as per the analysis of theprovisions made, it is apparent that when adequate provisions aremade for the payment of Provident Fund comparable to the benefitsavailable under the Act, a provision for exemption has been made asper Section 16 or Section 17 of the Act, as the case may be. Inthe present case, the Employees Union of many of the Banksconcerned have either filed independent writ petition challengingthe Notification or have filed affidavits supporting the stand ofthe Management regarding the Notification. In other words, theemployees are obviously convinced that more beneficial provisionsare available under the Provident Fund Scheme or Pension asintroduced by the concerned banks. Even though this may not be thesole guiding factor for considering the question as to whether theNotification is arbitrary, it is obviously relevant factor. If theabove factor can be taken for consideration for applyingexclusion, obviously the factor can be considered for decidingabout the arbitrary inclusion. 12.Similarly, keeping in view the provisions contained inSection 16, the fact that the concerned banks have already madeprovisions for payment of Provident Fund or Pension whichapparently appear to be beneficial to the employees, the contentionthat the inclusion of such banks by amending the Notificationappears to be arbitrary. https://hcservices.ecourts.gov.in/hcservices/

13.The petitioners have also highlighted the anomalousposition that may emerge among the bank employees if such banks arebrought under the purview of the Act and the Scheme as theemployees whose pay exceeds particular amount would find themselvesout of the umbrella of the benefits presently available. Thissubmission made on behalf of the petitioners also appears to berelevant submission which apparently has not been considered whilethe impugned Notification was issued.14.Learned counsel for the respondent placed reliance onvarious decisions of the Supreme Court upholding the validity ofthe Act and highlighting the benefits and social purpose. We havenot specifically referred to all those decisions as, in ourconsidered opinion, the question is not relating to the validity ofthe Act or the Scheme made thereunder as such but, relating tojustifiability of the amendment where under the banks havingbranches in more than one State, who were not hitherto comingwithin the purview of the Act because of their own Provident FundScheme as per the Sastry Award, are arbitrarily brought within theprovisions of the Act.15.For the aforesaid reasons, we are unable to sustainthe validity of the Notification, where under all the banks exceptnationalised banks have been brought under the purview of ProvidentFund Scheme notwithstanding the fact that all the banks havingbranches in more than one State have their own Provident FundSchemes and Pension Schemes which are atleast comparable with thebenefits available under the Act and the Scheme made thereunder. 16.For the aforesaid reasons, we allow the writ petitionsand quash the impugned Notification. The net result of the abovewould be that the banks having branches in more than one Statewould continue to be governed by their own Provident Fund Schemesand Pension Schemes and would not be coming with the coverage ofEmployees Provident Fund Scheme under the Employees' ProvidentFunds and Miscellaneous Provisions Act, 1952. No costs.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.dpk https://hcservices.ecourts.gov.in/hcservices/ To1. The Secretary to the Government of India Ministry of Labour, New Delhi.2. The Enforcement Officer, Employees Provident Funds CH.XVI Division, Chennai 600 014.3. The Asst. Provident Fund Commissioner Office of the Regional Provident Fund Commissioner, Employees Provident Fund (Tamil Nadu & Pondicherry), No.20, Royapettah High Road, Chennai 600 014.4. The Regional Provident Fund Commissioner , Sri ComplexMadurai Road, Tiruchirapalli-85. The Enforcement OfficerE.P.F. Kamaraj Road,Kumbakonam6.The Regional Provident fund Commissioner, Tamilnadu20, Royapettah High Road,Chennai-14.7.The Enforcement OfficerEmployees provident FundsMunicipal Shopping ComplexAzad Road, Karur8.The Regional Commissioner ofProvident Funds,Tirunelveli6 ccs to Mr.T.S. Gopalan, Advocate, Sr. 160201 cc to Mr.R. Sunilkumar, Advocate, SR. 163421 cc to Mr.V. Vibhishanan, Advocate, sr. 163202 ccs to Mr.S. Ramasubramaniam, Associates, Sr. 16591 WP.NOs.15728/2000 & batchBV (CO)kk 3/4