Kerala High Court
Employees' Provident Fund ... vs The Kerala State Civil Supplies ...
Author: K. Vinod Chandran
Bench: K.Vinod Chandran
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:-
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
THURSDAY, THE 2ND DAY OF JUNE 2016/12TH JYAISHTA, 1938
W.P.(C).No.32907 of 2005 (P)
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PETITIONER(S):-
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EMPLOYEES' PROVIDENT FUND ORGANISATION
REP.BY ASSISTANT P.F. COMMISSIONER,
SUB-REGIONAL OFFICE, KALOOR, KOCHI.
BY SENIOR ADVOCATE DR.S.GOPAKUMARAN NAIR.
RESPONDENT(S):
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1. THE KERALA STATE CIVIL SUPPLIES CORPORATION LTD.,
GANDHI NAGAR, KOCHI-20,'
REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR.
* 2. THE PUROGAMANA MAHILA SANGHAM,
ALTHARALANE, CHERUVAIKAL,, TRIVANDRUM-17,
REPRESENTED BY ITS SECRETARY.
* [2ND RESPONDENT IS REMOVED FROM THE PARTY ARRAY AS PER
ORDER DTD.28.11.08 IN I.A.NO.14720/08]
3. EMPLOYEES' PROVIDENT FUND APPELLATE TRIBUNAL,
NEW DELHI, REPRESENTED BY ITS REGISTRAR.
R1 BY STANDING COUNSEL SRI N.D.PREMACHANDRAN.
R1 BY ADV. SRI.JOY GEORGE, SC, SUPPLYCO
R1 BY ADV. SRI.V.J.MATHEW, SC CIVIL SUPPLIES CORPN.
R1 BY ADV. SRI.MILLU DANDAPANI, SC FOR SUPPLYCO
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
02-06-2016, ALONG WITH WPC. 14985/2011-W, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:-
W.P.(C) NO.32907/2005-P
APPENDIX
PETITIONER'S EXHIBITS:-
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EXT.P1 TRUE COPY OF THE COMPLAINT SUBMITTED BY THE
PACKING EMPLOYEE WORKERS TO THE ASST. PROVIDENT
FUND COMMISSIONER.
EXT.P2 TRUE COPY OF THE REPORT OF THE ENFORCEMENT OFFICER
BEFORE THE PETITIONER.
EXT.P3 TRUE COPY OF THE WRITTEN OBJECTION FILED ON BEHALF
OF THE 1ST RESPONDENT BEFORE THE PETITIONER.
EXT.P4 TRUE COPY OF THE ORDER DT.16.10.2001 OF THE PETITIONER.
EXT.P5 TRUE COPY OF THE ORDER DT.17.03.2005 OF THE
3RD RESPONDENT.
RESPONDENT'S EXHIBITS:-
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EXT.R1(a) PHOTOCOPY OF THE AGREEMENT DATED 15.5.89 WITH TYPED
COPY OF THE SAME.
EXT.R1(b) PHOTOCOPY OF THE AGREEMENT DT.9.6.98.
EXT.R1(c) COPY OF THE JUDGMENT DT.5.1.2004 IN O.P.NO.14839/1999.
vku/- [ true copy ]
K. Vinod Chandran, J
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W.P.(C).Nos.32907 of 2005-P & 14985 OF 2011-W
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Dated this, the 02nd day of June, 2016.
JUDGMENT
These writ petitions are inter-related, insofar as the issue being identical for different periods. The question raised is coverage of 18 employees of the contractor under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for brevity "EPF Act"). W.P.(C) No.32907 of 2005 is for the period from 06/1989 to 10/1997 and W.P.(C) No.14985 of 2011 is for the period from 11/1997 to 06/2000.
2. In W.P.(C) No.32907 of 2005, the Employees' Provident Fund Organization [for brevity "EPFO"] challenge the order of the Tribunal produced at Exhibit P5, which set aside the assessment order of the EPFO for the period 06/1989 to 10/1997. In W.P.(C) No.14985 of 2011, the Tribunal upheld the assessment made by the EPFO for the period 11/1997 to 06/2000. It is to be immediately noticed that in the year 1997 since 18 employees WP(C) Nos.32907/2005 & - 2 - 14985/2011 approached the EPFO with a complaint regarding non-enrolment under the EPF Act, the Kerala Civil Supplies Corporation (for brevity "the Corporation") enrolled the said employees and started deducting contributions, under protest. Deductions were made from the amounts payable to the contractor, both of the employers and employees.
3. At the outset W.P.(C) No.32907 of 2005 has to be considered. The assessment order passed on an enquiry under Section 7A of the EPF Act is produced at Exhibit P4. The admitted facts are that the petitioner, dealing with food-grains and other food articles, had entered into a contract with one women's welfare society, the additional 2nd respondent, for packing the articles for sale through the retail outlets of the Corporation. The Civil Supplies Corporation, a statutory Corporation under the Government of Kerala, is engaged in procurement, storage and distribution of food articles, at subsidised rates to the general public. After procuring the food articles for the purpose of selling WP(C) Nos.32907/2005 & - 3 - 14985/2011 it through their retail outlets, the said articles would have to be packed into sale-able packages. It is for such purposes of packing the 2nd respondent was awarded a contract. The employees of the 2nd respondent-contractor were alleged to be employed by the Corporation through the contractor and, hence, on the premise that the Corporation is the principal employer, the proceedings were taken.
4. I have heard the learned Standing Counsel for the Corporation as also both the learned Standing Counsel appearing for the EPFO in the respective writ petitions.
5. The learned Standing Counsel for the Corporation would contend that there is no employer-employee relationship between the Corporation and the employees of the contractor. The employees of the contractor are not under the supervision of the Corporation and the packing work is done under the supervision of the contractor, with the liability alone fixed on the contractor to carry on such packing in clean premises and to WP(C) Nos.32907/2005 & - 4 - 14985/2011 ensure that the products supplied are packed into sale-able packages and supplied to the retail outlets of the Corporation. The contractor has also the further liability to ensure that the quantity of goods entrusted to them for packaging, after removal of any wastage, is entrusted back without any loss caused. In such circumstance, it is contended that the Corporation is not the principal employer and has absolutely no control over the affairs of the 2nd respondent except for the responsibility of the 2nd respondent to comply with the terms of the specific contract.
6. The learned Standing Counsel appearing for the EPFO in the respective writ petitions takes me through Section 8A of the EPF Act, which require a principal employer to ensure deduction of contribution from the contractor, from the wages payable to the employees of the contractor also. Paragraph 30 of the Employees' Provident Fund Scheme, 1952 [for brevity "the Scheme"] is further relied on to contend that the principal employer has a responsibility to pay contribution at the first WP(C) Nos.32907/2005 & - 5 - 14985/2011 instance, both of the employer and the employee and only then could deduct the employees' contribution from the wages payable to the respective employees. Paragraph 36B of the Scheme is pointed out to contend that the contractor too has a duty to furnish, within seven days of the close of every month, to the principal employer a statement showing the recoveries of contributions in respect of employees; employed by or through him under the provisions of the Act and the Scheme. A reading of the aforesaid provisions would indicate that it is the responsibility of the principal employer to deduct EPF contributions and pay it to the EPFO; in the event of which, assessment could be made against the principal employer. The Act and the Scheme also specifically empowers the principal employer to deduct such contributions payable by the contractor from the amounts due to the contractor. In such circumstance, the Corporation, as the principal employer, cannot wriggle out of the provisions of the Act and Scheme, is the contention of the EPFO.
WP(C) Nos.32907/2005 & - 6 - 14985/2011
7. The contentions raised by the EPFO and the assessment made at Exhibit P4 in W.P.(C) No.32907 of 2005 would be sustainable if the employees of the contractor are employed under the Corporation and in its premises. The contention of the Corporation, on the contrary, is that the Corporation had entered into a contract for packing with the 2nd respondent and it does not have any say or control on the number and nature of workmen engaged by the contractor. The number of employees to be engaged by the contractor or the manner in which the packaging had to be carried out, is not specified in the contract.
8. Under the terms of the contract entered into between the contractor and the 2nd respondent, food materials are entrusted to the contractor in bulk and the same is packed into sale-able packets and supplied to the retail outlets of the Corporation, is the contention. But for merely examining the aspect of whether there was in fact a contract between the WP(C) Nos.32907/2005 & - 7 - 14985/2011 respondent-Corporation and the contractor and the number of employees engaged by the contractor, the EPFO failed to look into the specific terms of the contract. The contract is produced at Exhibit P1 in W.P.(C) No.14985 of 2011. The recitals in Exhibit P1 would indicate that it is a contract entered into with the Welfare Society for packing of materials into sale-able packets. The terms of the contract would indicate, as contended by the learned Counsel for the Corporation, that materials are merely entrusted to the 2nd respondent-Society, who has to ensure the packing into sale-able packets and supply to the retail outlets as instructed by the Corporation. But for the fact that the terms also indicate the packing to be carried on in clean premises, there is no actual supervision of the employees by the Corporation.
9. The terms of the contract casts a responsibility on the contractor to maintain registers as to the quantity entrusted to them and supplied back in sale-able packets. The weighing instruments are also supplied by the Corporation. Exhibit P1 WP(C) Nos.32907/2005 & - 8 - 14985/2011 would also indicate that the packing of materials is carried on by the 2nd respondent with its own employees and not under the supervision of the Corporation. Though the 2nd respondent would have responsibility for any defect noticed in the packing, that alone cannot lead to a conclusion that the employees are that of the Corporation. The terms of the contract does not indicate that the employees are supplied by the contractor so as to carry out the work of the Corporation at its supervision.
10. The awarder of a work under a contract would not have any responsibility to ensure the coverage of the employees of the contractor. If at all, they are to be covered, it is for the EPFO to take proceedings against their immediate employer and there could be found no employer-employee relationship on facts and there is also not discernible the status of "principal employer"
from the terms of the agreement as detailed herein above. If the contract was one for supply of workman to carry out packing of goods of the Corporation; then there could have been an WP(C) Nos.32907/2005 & - 9 - 14985/2011 assessment made. Here the contract is for packing and that cannot bring in any liability for coverage of the contract employees under the awarder. In such circumstance, the order of the Tribunal at Exhibit P5 is found to be proper. W.P.(C) No.32907 of 2006 is dismissed.
11. W.P.(C) No.14985 of 2011 is with respect to the very same contract work and this Court would have been persuaded to allow the writ petition but for the fact that the Corporation has enrolled the 18 workers of the contractor as their own employees and had also deducted the employer's and employees' contribution from the amounts due to the contractor. Exhibit P5(a) is the assessment order passed. A reading of the same indicates that the representative who appeared for the contractor had a contention that there could be no deduction of employer's contribution from the contractor. The officers of the EPFO rightly informed the immediate employer, being the contractor, their liability to pay employer's and employees' WP(C) Nos.32907/2005 & - 10 - 14985/2011 contribution. They could only deduct the wages of the employees, for the employees' contribution paid. The Corporation being the principal employer, cannot have any liability to pay the employer's contribution and the liability fixed under the Act and Scheme is to make such payment at the first instance, subject to their right to recover the same from the immediate employer.
12. It is also very evident from a reading of the order that the Corporation admits to have deducted such amounts from the contractor's wages and in such circumstance, it is only proper that the employees be deemed to have been covered under the enactment for the period from 11/1997 to 06/2000. The Corporation shall immediately pay up the amounts as shown in Exhibit P5(a) if not already paid and the same having been retained with the Corporation for all these years, the EPFO shall also have the power to demand interest as permissible under the Act and the Scheme. However, it is declared that no damages need be levied, since there was a bona fide dispute pending WP(C) Nos.32907/2005 & - 11 - 14985/2011 before this Court all these years and the Tribunal had taken contrary stands with respect to the two different periods.
13. In the circumstance of the declaration made by this Court in W.P.(C).No.32907 of 2005, the reasoning of the Tribunal at Exhibits P9 in W.P.(C).14985 of 2011 cannot be sustained; since, otherwise, on the very same issue there will be two contrary orders for two different periods. Exhibits P9 in so far as the reasons stated therein to sustain coverage of the contractor's employees under the EPF Act are set aside. The order sustaining the coverage however is upheld for the reasons stated here. The Corporation shall make payments as directed in Exhibit P5(a). W.P.(C) No.14985 of 2011 is disposed of with the above direction.
Writ petitions are ordered accordingly. Parties are left to suffer their respective costs.
Sd/-
K.Vinod Chandran
vku/- Judge.
[ true copy ]