Madras High Court
T. Marimuthu Handloom Factory, ... vs The Regional Provident Fund ... on 15 September, 1989
Equivalent citations: (1990)ILLJ555MAD
ORDER Srinivasan, J.
1. In these two writ petitions, orders passed under S. 7A of the Employees' Provident Funds and Miscellaneous Provisions Act 1952, are being challenged. Though the petitioners are different, the facts are similar and the arguments are identical. Hence, the petitions were heard together.
2. An order under S. 7A of the Act was passed on 19th October 1973 against the petitioner in W.P. No. 8683 of 1982 and communicated to him. He had filed a petition under S. 19A of the Act before the Government of India questioning the applicability of the Act. He filed W.P. No. 1599 of 1974 in this Court for forbearing the respondents from enforcing the order passed under S. 7A of the Act. The writ petition was dismissed with a direction to serve a copy of the order passed by the Central Government under S. 19A of the Act on 14th August 1975 on the petitioner and then proceed further in accordance with law. The Central Government had decided that the Act was applicable to the petitioner by virtue of the provisions of S. 1(3)(a) of the Act. After the serving of the order on the petitioner as directed by this Court, proceedings were initiated under S. 7A of the Act again. Once again the petitioner filed an application under S. 19A of the Act on 30th January 1978 raising certain doubts as to the application of the Act under S. 1(3)(a) of the Act. He filed W.P. No. 2868 of 1978 contending that the proceedings under S. 7A of the Act should not be conducted till the disposal of the application under S. 19A of the Act. The Central Government passed an order on 14th May 1980 under S. 19A of the Act holding that the Act could be applied to the establishment under S. 1(3)(a) of the Act after issuing a fresh coverage notice. In view of the same, the writ petition was dismissed as infructous on 11th December 1980. A separate coverage notice was sent to the petitioner allotting a new Code number with retrospective effect from 1st April 1972 under the scheduled head of Industries 'Textiles'. As the petitioner failed to implement the provisions of the Act and the scheme framed thereunder, an enquiry was initiated under S. 7A of the Act. Several adjournments were granted at the instance of the petitioner; but he was absent on the date of final hearing and so ex parte orders were passed, which were communicated to him on 12th August 1982. That order is challenged in W.P. No. 8683 of 1982.
3. In so for as the petitioner in the other writ petition is concerned, his application under S. 19A of the Act was not made known to the first respondent unit he initiated proceedings under S. 7A of the Act. He filed W.P. No. 1600 of 1974 contending that the respondents should not proceed further till the disposal of his application under S. 19A of the Act. That writ petition was dismissed on 23rd July 1977 with a direction to the Central Government to dispose of the application under S. 19A of the Act within three months therefrom. Accordingly, the Central Government disposed of the application holding that the Act would apply to the establishment under the head 'Textiles'. The said order was challenged in W.P. No. 886 of 1978 which was dismissed in limine. As the petitioner did not comply with the provisions of the Act, proceedings were taken under S. 7A of the Act. The same is challenged in W.P. No. 8684 of 1982.
4. Three contentions are urged on behalf of petitioners. The first contention is that the petitioners will not be governed by the provisions of the Act, as there is no relationship of employer and employee between the petitioners and the weavers. Reliance is placed on some observations made by Padmanabhan, J. in W.P. No. 5393 of 1981 in his judgment dated 17th June 1983. Apart from the fact that the observations do not help the petitioners as such, the contention is not available to the petitioners in view of the orders passed under S. 19A of the Act, which have become final.
5. The second contention is that no reasonable opportunity was given by the respondents to the petitioners to make their representations. There is absolutely no substance in this contention as admittedly number of adjournments were granted by the first respondent to the petitioners at their instance.
6. The third contention is that S. 7A of the Act is ultra vires the provisions of the Constitution of India. Reliance is placed upon the decision of a Division Bench of the Delhi High Court in M/s. Wire Netting Stores v. Regional Provident Funds Commissioner, New Delhi and others (1982-I-LLJ-7), Apart from citing the decision, learned counsel did not advance any argument, thus indicating that the reasoning of the Delhi Bench will be the only argument advanced by him. It is seen from the judgment of the Delhi High Court that S. 7A of the Act is held to be violative of Art. 14 of the Constitution of India as there are no provisions for appeal and that sub-section (4) of S. 7A of the Act bars the jurisdiction of the Civil Courts. The Division Bench took the view that the determination of the amount payable by the employer under S. 7A of the Act affects civil rights, if not fundamental rights and, therefore, a provision should have been made for an appeal to a Tribunal, judicial or quasi-judicial. According to the Bench, the order under S. 7A of the Act may be passed by a duly competent and qualified person, but it is not subject to any review or revision judicially or quasi-judicially, and it is a serious lacuna in that Section. The Bench thought that the availability of the Constitutional remedy cannot supply the lacuna. The Bench also proceeded to state that there is no safeguard provided or provision made to enable an employer to have the same facilities of summoning witnesses, requiring discovery and production of documents or getting commissions issued. According to the Bench, the hearing provided in S. 7A of the Act is not an effective one and it is in clear violation of the rules of natural justice.
7. In our opinion, neither of the reasons given by the Division Bench of the Delhi High Court is correct. The absence of a provision for an appeal or review either judicially or quasi-judicially, does not vitiate the provisions of the Section, nor does it make it violative of Art. 14 of the Constitution of India. The view that the procedure prescribed in the Section for hearing is opposed to the principles of natural justice is also not correct. Before dealing with the said two aspects of the matter elaborately, we would like to advert to the object and the scheme of the legislation.
8. As disclosed by the preamble, the Act is one provided for the institution on provident funds, family pension fund and deposit linked insurance fund for employees in factories and other establishments. It applies to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed and to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in that behalf. The Central Government is also empowered, after giving not less than two months notice of its intention so to do, to apply the provisions of the Act by notification in the Official Gazette to any establishment employing such number of persons less than twenty, as may be specified in the notification. Undoubtedly, this is a beneficial legislation enacted as a measure of social justice and it should be construed liberally so as to confer benefit on the employees to the maximum extent. The entire Act is directed to bring within its fold all kinds of employees in order to benefit them by instituting provident funds. It is not as if the power of the Government is uncontrolled and uncanalised. The provisions of the Act contain the necessary guide-lines. Schedule I describes the various industries which would be covered by the provisions of the Act. S. 2 of the Act contains the definition. S. 4 enables the Central Government to add any industry to Schedule I.S. 5 provides for the scheme. S. 5A to 5D provide for the Central Board, State Board and appointment of Officers. S. 6 refers to the matters which may be provided in the scheme. S. 7A empowers the Central Provident Fund Commissioner, any Deputy Provident Fund Commissioner or any Regional Provident Fund Commissioner to determine the amount due from any employer under any provision of the Act or the scheme and for that purpose, he may conduct such enquiry as he may deem necessary. Under sub-S. (2) of the Section, the Officer is vested with the powers as are vested in a Court under the Code of Civil Procedure, with respect to the matters specified therein and the enquiry shall be deemed to be judicial proceeding within the meaning of Ss. 193 and 228 and for the purpose of S. 196 of the Indian Penal Code. Under sub-S. (3) of the Section, no order determining the amount due from any employer shall be made unless the employer is given a reasonable opportunity of representing his case. Sub-S. (4) makes the order passed under Section 7A final and it shall not be questioned in any Court of law. S. 16 contains the exemptions. S. 17 confers the power to exempt on the appropriate Government S. 19A was introduced in the Act later, enabling the Central Government to pass orders making provisions or giving directions, if any doubt arises as; to whether an establishment is engaged in any industry specified in Schedule I, whether any particular establishment falls within the scope of the Act, the number of persons employed in an establishment, the number of years which have elapsed from the date on which an establishment was set up and whether the total quantum of benefits to which an employee is entitled has been reduced by the employer.
9. A reading of the provisions of the Act shows that an establishment or factory of an industry mentioned in Schedule I, automatically comes into the ambit of the Act. If the definition in the Act is satisfied, the returns and the deposits etc., have to be made by such an establishment voluntarily in accordance with the provisions of the Act. It is only if the provision of the Act are not implemented by the concerned establishment, the question of determination of the amount due from the establishment arises and it requires to be considered under S. 7A of the Act. There is no necessity for constituting any separate Tribunal or authority for the purpose of determining the applicability of the Act as such. Whenever any person is desirous of raising the issue that his establishment does not fall within the scope of the Act, it is open to him to approach the Central Government under S. 19A or to raise the question in the enquiry under S. 7A of the Act. Even though there is no specific provision in S. 7A to the effect that the applicability of the Act should also be decided in the enquiry held in that connection, it is settled law that the question of the applicability of the Act should be decided by the concerned authority before an order is passed under S. 7A of the Act if that question is raised by the concerned establishment. In Messrs. Chokken Palani Vilas v. The Regional Provident Fund Commissioner Madras-14 (1973-I-LLJ-139), it was held that before an employer is called upon to pay his contribution under the Act, he should be given an opportunity to represent his case fully, that is, with regard to the applicability of the Act to his establishment as well as on the question of quantum of the amount due from him. It was observed in that case as follows (p. 142) :
"... Though it is not explicitly stated in S. 7A that it is open to the authorities specified therein to determine the liability of the employer, still it would be seen that the prerequisite for determining the amount of contribution is the liability of the employer. Therefore, in deciding the amount of contribution payable, it is necessary to decide the question of applicability of the Act also. In a case where a controversy is raised by the employer to the effect that his establishment does not come within the scope of the Act and the scheme, he need not necessarily be directed to approach the Central Government under S. 19-A. The Legislature has conferred power upon the authorities under S. 7A to determine the amount. It is equally competent for them to decide the question of liability by giving an opportunity to the employer. It may be noted in this connection that there is no express provision in the Act, providing for an enquiry being held with regard to the liability of an employer to contribute. It is presumably for this reason that the Legislature introduced S. 7A."
10. In that judgment itself, reference has been made to the decisions of Madhya Pradesh High Court and Orissa High Court which had taken similar views.
11. The power conferred under S. 7A of the Act can in no way be described as arbitrary; nor can it be said to be excessive delegation. The concerned authority under the Section has no discretion to pick and choose any employer, but is bound to act according to the provisions of the Act and the scheme. He cannot traverse beyond the guidelines provided in the Act itself. The authorities empowered under S. 7A of the Act are high officials; to be appointed in accordance with the provisions of the Act and the rules. There is sufficient safeguard that properly trained officers would be appointed in as much as clear cut guidelines have been given.
12. The Section itself provides for acting in accordance with the principles of natural justice. Sub-S. (3) is mandatory in that no order determining the amount shall be made unless the employer is given a reasonable opportunity to represent his case. It will be fallacious to contend that the party concerned cannot invoke the provisions referred to in sub-S. 2(a) to (d). Sub-S. (2) vests the powers of a Court under the Code of Civil Procedure in the concerned authority for the purposes of the enquiry under the Section. That does not mean that the powers could be invoked only by the Commissioner and they cannot be enforced at the instance of the party. When a Court is conferred with certain powers under the Code of Civil Procedure for trying a suit, any party to the suit can certainly apply to the Court for exercising that power under the circumstances of the case. The section does not prevent the concerned party from applying to the authority, Who is holding the enquiry under S. 7A of the Act to exercise any particular power which is vested in him under the Section, if the facts and circumstances of the case warrant the same. There is nothing in the section which violets the principles of natural justice. We do not agree with the Division Bench of the Delhi High Court that there is no effective hearing under the section. The procedure prescribed in the section is sufficient to make the hearing an effective one. There is no infirmity in the section as such.
13. While considering the vires of legislation vis-a-vis Art. 14 of the Constitution of India, a distinction has to be made between fundamental rights and other rights as laid down by the Supreme Court in Messrs. Pannalal Binjraj and others v. Union of India and others . There is a broad distinction between discretion which has to be exercised with regard to a fundamental right guaranteed by the Constitution and some other right which is given by the statute. It is laid down in that case that if the statute deals with a right which is not fundamental in character, the statute can take it away. But a fundamental right the statute cannot take away. It was pointed out that where a discretion is given in the matter of issuing licences for carrying on trade, profession or business or where restriction are imposed of freedom of speech, etc., by the imposition of censorship, the discretion must be controlled by clear rules so as to come within the category of reasonable restrictions; but discretion of that nature must be differentiated from discretion in respect of matters not involving fundamental rights. The determination of the amount payable by the employer under the provisions of the Act does not affect any fundamental right of the employer. Even if the section can be constructed as one imposing restrictions on the right to carry on trade or profession, it does not impose any unreasonable restriction on the rights guaranteed under Art. 14 of the Constitutions of India. In fact, no such argument was put forward before us.
14. The mere absence of a provision of an appeal or revision does not invalidate the Section. In K. L. Gupte v. The Municipal Corporation of Greater Bombay and others , the Supreme Court had to consider the validity of the provisions of Bombay Town Planing Act. It was held that the fact that no appeal from the decision under S. 13 of the Act was provided for, was a matter of no moment for the authority under S. 13 who was no less than the Municipal Commissioner himself. The Constitutional validity of the section was upheld by the Supreme Court.
15. In Chinta Lingam and others v. The Government of India and others , a question arose whether S. 3(2)(d) of the Essential Commodities Act was ultra vires the provision of the Constitution as there was no appeal or revision against the order under the section. The Supreme Court held that the absence of a provision for appeal or revision can be of no consequence and the power could not be said to be arbitrary.
16. In Organo Chemical Industries and another v. Union of India and others (1979-II-LLJ-416), S. 14-b of the Act now under consideration viz. Employees Provident Funds and Miscellaneous Provisions Act was held to be constitutional. The contention that the power under S. 14B of the Act was uncontrolled and, therefore, violative of Art. 14 of the Constitution of India, was negatived. It was held that the guidelines were provided under the Act and its various provisions and there is nothing arbitrary in the section. Negativing the plea that the absence of a provision for appeal or review vitiated the section, the Supreme Court observed as follows (p. 420) :
"Nor is the plea of absence of guidelines or appellate review sound enough to subvert the validity of S. 14B. It is attractive to hear the argument that an order passed by an authority, which becomes infalliably final in the absence of an appeal is a desirable corrective but not an indispensable imperative and while its presence in an extra check on wayward orders, its absence is not a sure index of arbitrary potential. It depends on the nature of the subject-matter, other available correctives, possible harm flowing from wrong orders and a wealth of other factors."
Again it was observed that "in the circumstances, the absence of a provision for appeal or revision can be of no consequence."
17. Obviously, the above ruling of the Supreme Court were not brought to the notice of the Delhi Bench in Messrs. Wire Netting Store's case (supra). With respect to the Judges of the Division Bench of the Delhi High Court, we do not agree with their reasoning.
18. We find that the Patna High Court has taken a different view from that of the Delhi High Court in M/s. Inter State Transport Agency Sitamarhi v. Regional Provident Fund Commissioner, Patna 1983 Lab. I.C. 940. After referring to the aforesaid decisions of the Supreme Court, the Patna Bench observed that the judgment of the Delhi High Court was per incuriam. The provisions of the Act have been fully discussed by the Patna Bench and we find ourselves in agreement with the view expressed by them that S. 7A of the act is not ultra vires Art. 14 of the Constitution and that the said section ensures just and fair enquiry.
19. In the result, all the contentions urged by learned counsel for the petitioners fail and the writ petitions are dismissed. In the circumstances, there will be no order as to costs.