CENTRAL PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION & OTHERS v. THE KOLKATA MUNICIPAL CORPORATION & OTHERS

#3. The EPF organization contested the writ petition by contending that KMC being the principal employer are required to extend the benefits of the EPF Scheme to the employees of the establishments and having committed default, the action initiated under the EPF Act was fully justified. Further, it was contended that on and after publication of the notification dated 8th January, 2011 it is not open to KMC to contend that the EPF Act is not applicable to them.

#4. KMC filed an affidavit-in-reply reiterating the stand as to the applicability of the EPF Act to their organization. The Union of India in their written notes of submission pointed out the purpose of issuing the notification dated 8th January, 2011 was with a view to bring the employees of the Corporations within the ambit of the EPF Act and it is applicable to KMC as well. Further it was pointed out that the request made by KMC for exemption was rejected and no appeal was preferred against the said order and therefore, KMC is estopped from challenging the notification dated 8th January, 2011.

#5. The learned Writ Court after considering the submissions on either side FMA NO. (1760 OF 2019 AND 1761 OF 2019) by the impugned order held that the notification dated 8th January, 2011 is not application to the KMC and consequently all steps taken by the EPF authorities were declared to be not sustainable in law and accordingly were set aside. Dealing with the argument on behalf of the KMC with regard to the effect of Article 243Q of the Constitution the learned Writ Court held that Part IX A of the Constitution was inserted by the 74th Amendment with effect from 1st June, 1993 and KMC has been in existence long before as it was initially constituted by the Act of 1889 followed by Act of 1923, subsequently by Act of 1951 and presently by Act of 1980. Thus it was opined that by whichever Act KMC might have been constituted undoubtedly preceded the insertion of Article 243Q of the Constitution and therefore, KMC cannot be stated to have been constituted by or under the amended provisions of the Constitution of India. The EPF Organizations and KMC being aggrieved by the order passed in the writ petition have preferred these two appeals, MAT No. 1207 of 2018 by the EPF Organization and FMA No. 1760 of 2019 by the KMC. The appeals were heard on various dates for a considerable length of time and by order dated 16.03.2022 four issues were framed for consideration, namely, (i) Whether Section 16(1) of the EPF Act could be applicable to KMC? (ii) Whether Section 1(3) (b) of the EPF Act overrides Section 16 of the Act? (iii) What is the effect of the amendment to the Constitution of India by insertion of Article 243Q with effect from 1993 on KMC which was constituted much prior to the Constitutional Amendment? FMA NO. (1760 OF 2019 AND 1761 OF 2019) (iv) Whether the KMC is estopped from challenging the notification dated 8th January, 2011 after having applied for exemption from the provisions of the EPF Act which application stood rejected?

#6. We have elaborately heard Mr. S.C. Prasad, learned Standing Counsel for the EPF Organization, Mr. Ashok Kr. Banerjee, learned Senior Advocate for KMC and Mr. N.L. Singhania, learned Advocate for the Union of India and perused the written notes of arguments submitted on behalf of the Union of India.

#7. We first take up for consideration Issue No. (iii) which is as follows: (iii) What is the effect of the amendment to the Constitution of India by insertion of Article 243Q with effect from 1993 on KMC which was constituted much prior to the Constitutional Amendment?

#8. Article 243P to Article 243ZG of the Constitution was inserted by the 74th Amendment Act, 1992 with effect from 1st June, 1993. Article 243P defines committee, District, Metropolitan area, Municipal area, Municipality, Panchayat and population. Municipality has been defined in Clause (c) of Article 243P to mean an institution of self-Government constituted under Article 243Q. Article 243Q deals with constitution of municipalities and reads as follows: Article 243 Q of the Constitution of India, (Constitution of Municipalities): (1) There shall be constituted in every state,- (a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area, FMA NO. (1760 OF 2019 AND 1761 OF 2019) in accordance with the provisions of this Part: Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the governor may, having regard to the size of the area and the municipal services being provided by and industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township.

#9. In terms of Clause 1(c) of Article 243 Q there shall be constituted in every State a Municipal Corporation for a larger urban area in accordance with the provisions of Part IX A of the Constitution. Proviso states that a municipality under Clause (c) constituted in such urban area or part thereof as the Governor may, having regarded to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment and that area and such other factors as he may deem fit, by public notification, specified to be an industrial township. Admittedly, KMC is a large urban area which falls within the ambit of Article 243 Q (1) (c). Article 243R deals with the composition of municipalities. Article 243 S speaks of constitution and composition of ward, committees etc. Article 243 T provides for reservation of seats in every municipality for Schedule Casts and Schedule Tribes. Article 243U speaks of duration of municipalities etc. Article 243 V deals with disqualification of membership. Article 243 W deals with the power, authority and responsibilities of municipalities etc. Article 243 X deals with the power to impose taxes by and funds of the municipalities. Article 243 ZF deals with contention of existing laws of municipalities. It states notwithstanding anything in Part IX A of the Constitution, in provision of any law relating to municipalities in force in the year immediately before the FMA NO. (1760 OF 2019 AND 1761 OF 2019) commencement of the Constitution 74th Amendment Act, 1992 which is inconsistent with the provisions of Part IX A, shall continue to be in force until amended or repealed by a competent legislature or by a competent authority or until the expiration of one year from such commencement, whichever is earlier. Proviso states that all the municipalities existing immediately before such commencement shall continue till the expiration of their duration unless sooner dissolved by a resolution passed to that effect by the Legislative Assembly of that State, or in the case of a State having a Legislative Council, by each House of the Legislature of that State.

#10. Article 243ZF assumes significance to consider the correctness of the finding of the learned Writ Court that the amendment brought out by Constitution 74th Amendment Act, 1992 would not apply to KMC as it was constituted much prior to the coming into force of the Amendment Act. We find from the impugned order that the effect of Article 243 ZF has not been taken not of. As noted Article 243 ZF commences with a non-obstante clause, and states that notwithstanding anything in Part IX any provision of law relating to municipalities in force in the State immediately before the commencement of the Constitution 74th Amendment Act, 1992 which is inconsistence with the provision of Part IX A of the Constitution can remain in force until amended or replaced or till the expiration of one year from such commencement whichever is earlier. Admittedly, the period of one year after coming into force of the Constitutional Amendment Act, 1992 is over and consequently, all the provisions commencing from Article 243 B as enumerated in Part IX A would apply with full force to KMC. Therefore, the finding rendered by the learned Writ Court in this regard is not sustainable. FMA NO. (1760 OF 2019 AND 1761 OF 2019) Therefore, it will be too late in the day for KMC to contend that no notification could have been issued under Article 243 Q (1), (b), (c) of the Constitution which would bind them. Therefore, the impugned notification does not suffer from any incompetence so as to cover the Municipal Corporations. The question would therefore be as to whether Courts has the power to declare the Act of legislature to be invalid. In Government of Andhra Pradesh & Ors. Versus Smt. P. Laxmi Devi 1 the Hon’ble Supreme Court answered such question in the affirmative by observing that the Courts have power to declare the Act of legislature to be invalid and the reasoning for this view can be derived from theory in jurisprudence of imminent juries Kelsen (The pure theory of law). It was pointed out that according to Kelsen, in every country there is a hierarchy of legal norms, headed by what he calls as “grand norm” (the basic norm). If a legal norm in a higher layer of this hierarchy conflicts with a legal norm in a lower layer, the former will prevail. It was pointed out that in India grand norm is the Indian Constitution and the hierarchy is (i) the Constitution of India, (ii) statutory law, which may be either law made by Parliament or by the State Legislature; (iii) delegated legislation, which may be in the form of rules made under the statute, regulation made under the statute etc; (iv) purely executive orders not made under any statute. It was further pointed out that if a law (norm) in a higher layer in the above hierarchy clashes with the law in a lower layer, the former will prevail. Thus, it was held that the constitutional provision will prevail over all other laws, whether in a statute or in delegated legislation or in an executive order. This is so because the Constitution is the highest law of the land and no law 1 (2008) 4 SCC 720 FMA NO. (1760 OF 2019 AND 1761 OF 2019) which is in conflict with it can survive and the law made by the legislature is in the second layer of the hierarchy obviously it will be invalid if it is in conflict with a provision in the Constitution except the Directive Principles which, by Article 37, have been expressly made non-enforceable. In the light of the above decision, the Amendment brought to the Constitution by insertion of Part IX A being a constitutional provision will prevail over other laws and therefore, it will prevail over the provisions of the KMC Act. Therefore, the answer to the above question is that the amendment to the Constitution of India by insertion of Article 243Q will apply with full force to the KMC.

#11. The next question is question No. (i) which is : (i) Whether Section 16(1) of the EPF Act could be applicable to KMC?

#12. It is the argument of Mr. Prasad that the EPF Act guarantees social security to the working class, it is a social welfare legislation and widest possible interpretation should be given to consider the purpose of the enactment. It is submitted that the casual employee employed by KMC in the regular course of their activities would be entitled to the benefits under the EPF Act and the scheme framed thereunder. To support such argument, reliance was placed on the decision of the Hon’ble Supreme Court in Regional Provident Fund Commissioner, Andhra Pradesh Versus T.S. Hariharan 2. It is further submitted that this legal principle has been 2 1971 (2) SCC 68 FMA NO. (1760 OF 2019 AND 1761 OF 2019) followed in P.M. Patel and Sons Versus Union of India 3 and Officer in Charge, Sub Regional Provident Fund Commissioner Versus Godavari Garments Limited 4 wherein seasonal employees working from their homes were held to be employees of the establishment. Further it is submitted that the Hon’ble Supreme Court in Pawan Hans Limited and Others Versus Aviation Karamchari Sanghatana and Others5 held that the management of the Pawan Hans Limited did not qualify the test laid down under Section 16 (1) (b) of the EPF Act because its provident fund rules did not provide for social security to its contractual employees who had been working for Pawan Hans for several years. It is submitted that KMC to be qualified for exclusion under clause (b) and clause (c) of Section 16 (1) of the EPF Act should have provided social security in respect of all their employees namely regular, contractual, casual, etc. This is so because the EPF Act entitles all the employees engaged directly or by through contractors of an establishment to be covered under it to social security. It is further contended that KMC employees are large in number they may be casual/contingent, are not extended the benefit of the Provident Fund or pension as envisaged under the EPF Act. It is further submitted that it is immaterial for the purpose of exclusion under Section 16 (1) of the EPF Act that regular employees are getting the benefit of Provident Fund and pension under the KMC Act in accordance with the scheme of rules framed by them. It is submitted that the exclusion clause in Section 16 (1) of the EPF Act is to be read with a larger perspective bearing in mind the intention of the Parliament. Therefore, it is