Central Tobacco Research Institute, Research Station Vedasandur v. The Regional Provident Fund Commissioner

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 29.08.2007CORAMTHE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MS. JUSTICE K.SUGUNAW.A. NO. 4149 OF 2004 Central Tobacco ResearchInstitute, Research StationVedasandur, rep. by its Head.. Appellant / Petitioner in W.P.2649/97- Vs -The Regional ProvidentFund CommissionerCollege RoadMadurai – 2... Respondents/ Respondent in W.P.2649/97Writ Appeal filed against the order passed by the learnedsingle Judge dated 20th Oct., 2004, in W.P. No.2649/97 as statedtherein Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of certiorari call for the records ofthe respondent relating to his order RPF-C.P.IRef. No.TN/Recy/TN/8038/97 dated 10.1.97 and quash the same. For Appellant: Mr. Bala Murali KrishnanFor Respondents : Mr. K.GunasekarJUDGMENTS.J.MUKHOPADHAYA, J.The appellant – Central Tobacco Research Institute, Vedasandur,(hereinafter referred to as 'Research Institute'), is a CentralGovernment body under the control of Indian Council for AgriculturalResearch (ICAR). It was remitting the employers and employees shareof the contribution under the Employees Provident Funds and Miscellaneous Provisions Act, 1952, (hereinafter referred to as the'Provident Fund Act). The share of the employees having beendeducted since Nov., 1990 onwards, it was remitting both theemployees and employers share since Nov., 1990. Later on, theemployers share of contribution was also remitted for the periodAug., 1982 to Oct., 1990. https://hcservices.ecourts.gov.in/hcservices/

The respondent, Regional Provident Fund Commissioner, Madurai, initially asked the appellant to deposit its contributionfor the period from 1.7.1965 to July, 1982, but it was not depositedby the appellant Research Institute on the ground that it was liableto pay its share only from 1st Aug., 1982. Having served with noticeof demand dated 10th Jan., 1997, u/s 8-B to 8-G of the Provident FundAct for recovery of arrears payable by the employer for itsemployees under the provisions of the said Act from 1st July, 1965,the appellant unsuccessfully challenged the writ petition asdismissed by impugned order dated 20th Oct., 2004, passed by thelearned single Judge in W.P. No.2644/97.

The only question required to be determined in this caseis :-Whether the appellant Research Institute is liable to payemployers share with effect from 1st July, 1965 or with effect from1st Aug., 1982.

For determination of the said issue, we have noticedrelevant facts as was set out in the writ petition and theenclosures with the typed set of papers as mentioned hereunder :-The Employees Provident Funds and Miscellaneous Provisions Act,1952, since it came into force specified the industries in Schedule-I in respect of whom the Act was made applicable, if theestablishment is a factory in such industry in which specifiednumber or more persons are employed. It included industries such ascement, cigarettes, iron and steel, etc. Later on, in exercise ofpower conferred by Section 4 of the Provident Fund Act, certainother industries were added in Schedule-I, including industriesadded vide GSR 768 dated 18th May, 1965, with effect from 30th June,1965, as quoted hereunder :-"Stemming or re-drying of tobacco leaf industry, that is to say, any industry engaged in stemming, re-drying, handling, sorting, grading or packing oftobacco leaf. "Certain establishments other than the industries such as University, Colleges, School, Scientific Institutions, ResearchInstitutes, etc., were not covered by the Provident Fund Act. Inexercise of power conferred by clause (b) of sub-section (3) of Section 1 of the Provident Fund Act, the Central Governmentspecified the following classes of establishments vide S.O.986 dated19th Feb., 1982, published in the gazette dated 6th March, 1982, inwhich 20 or more persons were employed as establishments to whichthe said Act was made applicable, as quoted hereunder :-"In exercise of the powers conferred by clause (b)of sub-section (3) of Section 1 of the EmployeesProvident Funds and Miscellaneous Provisions Act,1952 (19 of 1952) the Central Government herebyspecifies the following classes of establishment ineach of which twenty or more persons are employed asestablishments to which the said Act shall apply, namely :-(i) any University ; https://hcservices.ecourts.gov.in/hcservices/ (ii) any college, whether or not affiliated toa University ;(iii) any school, whether or not recognised oraided by the Central or a State Government ;(iv) any scientific institution ;(v) any institution in which research inrespect of any matter is carried on; and(vi) any other institution in which the peuvnyof aspartine knowledge or training issystematically carried on. "

Having noticed this, the parent organisation of theappellant Research Institute, requested for grant of exemption ofits units from the operations of the provisions of the ProvidentFund Act. The Government of India from its Ministry of Labour and Rehabilitation Department, New Delhi, vide letter dated24/25.1.1983, informed that the general question of grant ofexemption of autonomous bodies, like ICAR, was under considerationand pending final decision in the matter, the provident fundauthorities have been advised to stay recovery action against unitsof ICAR. Later on, the employees provident fund scheme wasimplemented and from letter dated 17th Dec., 1991, it appears thattheir share was deducted with effect from 1st Nov., 1990. Havingcome to know that the scheme was to be given effect from 1st Aug.,1982, in view of S.O.986 dated 19th Feb., 1982, gazetted on 6thMarch, 1982, request was made to exempt them from payment of theemployees share for the period from 1st Aug., 1982 to 30th Oct.,1990. The appellant-employer, while paid contribution of bothemployees and employers share from Nov., 1990, later on, depositedits share for the period from 1st Aug., 1982 to Oct. 1990. Theoffice of the Employees Provident fund Organisation, RegionalOffice, Madurai, by letter dated 30th April, 1996, informed theappellant that the Government having not exempted its establishmentfrom total operation of the Provident Fund Act, it was advised toimplement the provisions for the arrear period from July, 1965. Theappellant-Research Institute, by its letter dated 20th May, 1996,informed the Provident Fund Commissioner, New Delhi, that the schemehas been implemented with effect from 1st Aug., 1982, but the Regional Provident Fund Commissioner, Madurai, is asking toimplement it from July, 1965, which is incorrect. It was informedthat the legislation covering the research institute has come intoforce by notification dated 19th Feb., 1982, gazetted on 6th March,1982, with effect from 1st Aug., 1982. The correspondence continued, as appears from the letter of Regional Commissioner, Provident FundDepartment, dated 16th Oct., 1996, reply as submitted by appellant-research institute on 12th Nov., 1996, followed by letters dated 21stNov., 1996, 13th Dec., 1996, etc. Final demand notice u/s 8-B to 8-Ghaving issued on 10th Jan., 1997, the writ petition was preferred.

Learned single Judge mainly relied on GSR 768 dated 18th May,1965, which came into effect from 30th June, 1965 and a coverage memoforwarded to the appellant on 17th Feb., 1975, and held that stemmingor re-drying tobacco leaf industry, having covered vide GSR 768dated 18th May, 1965, with effect from 30th June, 1965, the appellant https://hcservices.ecourts.gov.in/hcservices/ was liable to remit the provident fund under the scheme with effectfrom 1st July, 1965, and dismissed the writ petition.

Similar stand has been taken by the learned counselappearing on behalf of the Regional Provident Fund Commissioner thatthe tobacco leaf industry being covered vide GSR 768 dated 18th May,1965, with effect from 30th June, 1965, the appellant is liable topay its share with effect from 1st July, 1965.On the other hand, learned counsel appearing on behalf of theappellant, while referred to the averments made in the writ petitionand different letters issued from time to time, submitted that theappellant being a research institute, it is covered by S.O. 968dated 19th Feb., 1982, gazetted on 6th March, 1982 and, thus, theappellant is liable to pay provident fund with effect from 1st Aug.,1982.

The Employees Provident Funds and Miscellaneous ProvisionsAct, 1952, was enacted to provide for the institution of providentfund, pension fund and deposit linked insurance fund for theemployees "in factories" and "other establishments". It wasintended for the whole of India except the State of Jammu and Kashmir and made applicable to the establishments as per sub-section(3) to Section 1, as quoted hereunder :-"1. Short title, extent and application. - ***(3) subject to the provisions contained in section16, it applies -(a) to every establishment which is a factoryengaged in any industry specified in Schedule I andin which [twenty] or more persons are employed; and(b) to any other establishment employing [twenty]or more persons or class of such establishmentswhich the Central Government may, by notification inthe Official Gazette, specify in this behalf :Provided that the Central Government may, aftergiving not less than two months' notice of itsintention so to do, by notification in the OfficialGazette, apply the provisions of this Act to anyestablishment employing such number of persons lessthan [twenty] as may be specified in thenotification.]"Section 2 (i) defines 'industry' means any industry specifiedin Schedule I, and includes other industry added to the Schedule bynotification u/s 4.

From the aforesaid provision it will be evident that Schedule I attached with the Act includes the industries asmentioned therein and defined u/s 2; certain other industries wereadded therein in exercise of power conferred by Section 4. Schedule-I is applicable to such establishments, who are covered byclause (a) of sub-section (3) to Section 1, that means theestablishments, (i) which is a factory; (ii) engaged in any industryspecified in Schedule-I; and (iii) in which 20 or more persons areemployed. The industries added vide GSR 768 dated 18th May, 1965, witheffect from 30th June, 1965, are thus applicable only to thoseestablishments which fall within the category of clause (a) of sub-section (3) of Section 1. On the other hand, "other establishment" where 20 or morepersons are employed, and do not fall within the category of clause(a) of sub-section (3) to Section 1, in their case, othernotifications are applicable, including S.O.968 dated 19th Feb.,1982, gazetted on 6th March, 1982, which have been issued in exerciseof power conferred by clause (b) of sub-section (3) to Section 1.

Now, the question to be determined is whether theappellant's establishment is covered by clause (a) of sub-section(3) to Section 1 or clause (b) of sub-section (3) to Section 1. From letter Ref. No.AP/17680/AG-III-4/93/75 dated 13th May,1993, issued by the Regional Provident Fund Commissioner, Vishakapatnam, it appears that the appellant's research institute issituated at Rajamundhry in the State of Andhra Pradesh, saidinstitute was informed that the establishment is covered under the Provident Fund Act with effect from 1st Aug., 1982. In their letter, the appellant's research institute at Rajamundry, which is withinthe State of Andhra Pradesh has informed the Provident FundCommissioner that it has implemented the provident fund scheme witheffect from 1st Aug., 1982. By another letter dated 12th Nov., 1996,the appellant's research institute at Rajamundry, informed itsresearch station at Vedasandur that it being an unit of ICAR, NewDelhi and as it is a non-profit motivated institute and is aresearch institute, S.O. 986 dated 19th Feb., 1982 issued by the https://hcservices.ecourts.gov.in/hcservices/ Government of India will be applicable. By their letter dated 13thDec., 1996, the Regional Provident Fund Commissioner, Madurai, wasalso informed that the research institute at Vedasandur, Madurai isa research station of said Research Institute.

In the writ petition, the appellant specifically pleadedthat its other tobacco research institutes, which are in five otherStates, provident fund authorities have applied this scheme witheffect from 1st Aug., 1982, being a research institute. The name of Central Tobacco Research Institutes at the following places havebeen shown therein :-i) Guntur, Andhra Pradesh ;ii) Hunsur, Karnataka ;iii) Dinhatta, West Bengal ;iv) Pusa, Bihar ;v) Kandupur, Andhra Pradesh ; andvi) CTRI, Vedasandur, Tamil Nadu (appellant's institute).It was specifically pleaded that the appellant institute isengaged in conducting research in all fields concerning tobaccoevolving new varieties of chewing, cigar, cherost tobacco types withenhanced yield poterted, improved quality, resistance to biotic andabiotic stress factors, etc., and development of appropriate agro-techniques for the same. For this purpose, the appellant-institutehas been given 51 acres of land at Vedasandur, where the researchactivities are carried on since 1948. There is absolutely no profitmotive for the appellant-institute.

Though a counter affidavit was filed on behalf of the Regional Provident Fund Commissioner, Madurai, it referred todifferent circulars and different provisions of law and circularsand took simple plea that the appellant establishment was coveredwith effect from 1st July, 1965, under Schedule-I head "Stemming orRe-Drying of Tobacco Leaf" in code No.TN/8038.No discussion has been made either by the Regional ProvidentFund Commissioner, Madurai, or by the learned single Judge on theissue whether the appellant establishment is a 'factory' engaged inany industry specified in Schedule-I. Stemming or Re-Drying oftobacco leaf industry is different than a research institute, whichis engaged in conducting research in fields concerning tobacco, evolving new varieties of chewing, cigar, chroast tobacco types withenhanced yield poterted or having improved quality, resistance tobiotic and abiotic stress factors, etc., and development of properagro-techniques, etc. There is nothing on record to suggest thatthe appellant's establishment is a factory engaged in stemming orre-drying or handling or assorting or grading or packing of tobaccoleaf. Without such discussion, the Regional Provident FundCommissioner, Madurai, brought the establishment of the appellantwithin the purview of clause (a) of sub-section (3) to Section 1,which cannot be accepted in absence of specific finding.

It has not been disputed that the appellant is a researchinstitute making research on enhancement of yield poterted toimprove quality and researching on other issue, such as resistanceto bio-tech and a-biotech stress factors in the field concerning https://hcservices.ecourts.gov.in/hcservices/ tobacco. That means, it is not preparing or manufacturing or doingany work in its factory establishment for any industrial purpose norit has any factory. It do not fulfil all the three ingredients tofall within clause (a) of sub-section (3) to Section 1. Therefore, it cannot be held that the appellant's research institute is coveredby GSR 768 dated 18th May, 1965, with effect from 30th June, 1965.On the other hand, as the appellant is doing research, which has notbeen disputed. In absence of any other evidence to the contrary, it can be safely stated that the appellant research institute fallswithin the category of "other establishment" covered under clause(b) of sub-section (3) to Section 1 of the Provident Fund Act andthus it is guided by S.O. 986 dated 19th Feb., 1982, which has comeinto force in the year 1982.

In view of our specific finding aforesaid, neither theimpugned demand notice dated 10th Jan., 1997, could be upheld nor theorder dated 20th Oct., 2004, passed by the learned single Judge inW.P. No.2649/97. They are accordingly set aside. The writ appealis allowed. But there shall be no order as to costs. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.GLNToThe Regional ProvidentFund CommissionerCollege RoadMadurai – 2.1 cc to Mr.N. Bala Murali Krishnan, Advocate, Sr. 540251 cc to Mr.K. Gunasekar, Advocate, Sr. 53809 W.A. NO. 4149 OF 2004 NSM (CO)kk 6/9