Delhi High Court
Delhi Press Patra Prakashan Ltd. vs The Regional Provident Fund ... on 11 September, 2009
Author: Kailash Gambhir
Bench: Kailash Gambhir
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WP (C) Nos. 3850/1992 & 3887/1993
Judgment reserved on:16.02.2009
% Judgment delivered on:11.09,2009
Delhi Press Patra Prakashan Ltd. ...... Petitioner
Through: Mr. Rajinder Dhawan, Advocate
versus
The Regional Provident Fund Commissioner & others
..... Respondent
Through: Mr. R.C. Chawla, Advocate for
respondent.
CORAM:
HON'BLE MR. JUSTICE KAILASH GAMBHIR
1. Whether the Reporters of local papers may Yes
be allowed to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
KAILASH GAMBHIR, J.
* WP (C) No. 3850/1992 Page 1 of 41 This order shall dispose of the Writ petitions bearing nos. 3850/1992 and 3887/1993. WPC No. 3850/1992 is taken as the lead case.
By way of these petitions filed under Article 226 of the Constitution, the petitioners are assailing the order dated 28/5/1992 in WPC no. 3850/1992 and order dated 17/5/1993 in WPC No. 3887/1993 passed by the Regional Provident Fund Commissioner, Delhi under Section 14B of the Employee‟s Provident Fund and Miscellaneous Provisions Act, 1952.
The brief conspectus of the facts relevant for deciding the present petitions is as under:
The petitioner were required to pay P.F. and P.P.F. Contributions, Insurance Fund Contributions and Administrative charges payable under Sections 6, 6A and 6C of the Employee‟s Provident Funds and Miscellaneous Provisions Act, 1952 and under the provisions of EPF Scheme, 1952 and EDLI Scheme, 1976. Since the employers failed to pay the said contributions WP (C) No. 3850/1992 Page 2 of 41 and administrative charges due as required by law for the period from 5/1978 to 11/1989 in WPC no. 3850/1992 and for the period 12/1989 to 4/1992 in WPC No. 3887/1993. Pursuant to the default in payment of the said dues the proceedings under Section 14-B of the Employee‟s Provident Fund and Miscellaneous Provisions Act, 1952 were initiated. On failure of the petitioners to show cause why damages for default in payment of dues within time as mentioned under para 38 of the Employee‟s Provident Fund and Miscellaneous Provisions Act, 1952, should not be recovered from them, the Regional Provident Fund Commissioner, Delhi, ordered recovery of the damages from the petitioners. Assailing the said order of the Regional Provident Fund Commissioner, Delhi the present petitions have been preferred by the petitioners.
The counsel for the petitioners, Mr. Rajender Dhawan, contended that the important question which arises for consideration before this Court is the interpretation of the expression "within 15 days of the close of every month" used in WP (C) No. 3850/1992 Page 3 of 41 para 38 of the Employee‟s Provident Fund and Miscellaneous Provisions Act. The counsel contended that the dispute is whether the said expression refers to 15 days of the close of the wage month or within 15 days of the close of the British calendar month. The counsel submitted that as per Section 4 of the Payment of Wages Act, 1936, every employer can fix a wage period and no such wage period shall exceed one month. The counsel also submitted that similar is the position under the Delhi Shops & Establishments Act. The counsel maintained that accordingly, the petitioner company adopted the wage month commencing from the 16th day of each English calendar month ending on the 15th day of the following month. The counsel urged that in accordance with the Employee‟s Provident Fund and Miscellaneous Provisions Act, 1952 and the Scheme framed thereunder, the petitioner company was required to make deductions of the employee‟s contributions at the time of disbursement of wages to the employees and deposit the same within 15 days of the close of the said wage period/wage month. WP (C) No. 3850/1992 Page 4 of 41 The counsel submitted that the petitioner company had been making deductions of employee‟s contributions so as to deposit the same with the Provident Fund authorities within the prescribed period in terms of para 38 of the Act. The counsel further submitted that the petitioner company was also maintaining the records as prescribed by the authorities under the Act, which record for the period 1978-1989 had been regularly inspected by the Officers of the Regional Provident Fund Commissioner‟s Office and at no point it was ever pointed out that by making deposits within 15 days of the close of the wage month, petitioners were committing default in making the deposits. The counsel urged that the petitioner was surprised to receive a notice dated 31/5/1990 from the respondent no. 1 Regional Provident Fund Commissioner, wherein it was stated that the petitioner company defaulted in payment of the dues as required by law for the period from 5/1978 to 11/1989. This was the first time in all these years that the office of the Regional Provident Fund Commissioner had intimated the default to the WP (C) No. 3850/1992 Page 5 of 41 petitioner. Counsel submitted that the petitioner replied the said notice vide written reply dated 18/6/1990, wherein it was clearly stated that the petitioner company adopted the wage month commencing from the 16th day of each English calendar month ending on the 15th day of the following month and therefore, the deposits made by the company were not late and were within time in accordance with the provision enshrined in para 38 of the Scheme. The counsel averred that in the said reply the petitioner also pointed out that the notice dated 31/5/1990 covered period commencing from May 1978, therefore, the same was hopelessly time-barred. The counsel thus urged that the impugned order levying the damages on the ground that the month mentioned in para 38 means the calendar month commencing from 1st day of each British calendar month and not otherwise, is bad in law and in ignorance of the wage month. The counsel submitted that according to the Scheme of the Act the employer is required to deduct employee‟s contributions at the time of making wages, which clearly shows that the contributions WP (C) No. 3850/1992 Page 6 of 41 are required to be deposited, both by the employer and the employee, after the wages have been disbursed and since the wages are disbursed within seven days of the close of the wage month, therefore, the expression „month‟ appearing in para 38 would thus necessarily mean the wage month and not the British calendar month. The counsel also urged that the petitioner had been submitting the contributions and other charges regularly and within time, therefore, the order of the respondent no. 1 is illegal. The counsel submitted that since the expression „month‟ has not been defined under the Employee‟s Provident Fund and Miscellaneous Provisions Act, 1952 and the Scheme framed thereunder, therefore, the same should be understood by keeping in view the intendment of the Act and the Scheme framed thereunder and also the General Clauses Act. The counsel pointed out that Section 2 (35) of the General Clauses Act defines „month‟ to be reckoned as British calendar month. The counsel contended that since according to the Payment of Wages Act, a wage month could be different from the British WP (C) No. 3850/1992 Page 7 of 41 calendar month, therefore, it is not necessary for the wage month to commence on the first day of each British calendar month. The counsel averred that the petitioner has been depositing the contributions and relevant charges by way of cheques being deposited with the banks, who act as agents of the office of the respondent no. 1 and it is the date of deposit of the cheque and not the date of encashment, which is relevant.
Counsel for the petitioner laid much emphasis on the fact that the contribution payable by the employer is linked with the wages earned by an employee and therefore the wage month will be the same for which an employee has earned the wages and not the British Calender month. In support of his submission counsel for the petitioner placed reliance on Section
2 (b) which defines "basic wages" to mean all emoluments which are earned by an employee while on duty or in accordance with the terms of the contract of employment and which are paid or payable in cash to him. Similarly, Section 29 of The Employees‟ Provident Funds Scheme, 1952 which deals with contribution WP (C) No. 3850/1992 Page 8 of 41 also refers to the basic wages and dearness allowance on which the employer has to calculate the contribution to be made towards the Provident Fund and the said basic wages as per the definition of Section 2 (b) of the said Act are the wages as are earned by the employee which cannot include the period when no earning takes place. Citing an example, counsel for the petitioner submitted that if English Calendar month is taken into consideration then from the 1st January to 31st January the employer would be liable to make his contribution although the wage month of the employee may begin from 16th day of January to 15th day of February. This will create anomalous situation as per the counsel for the petitioner as the employers cannot be made liable to pay the wages from the 1st day of January to 15th day of January when no wages were earned by the employee. Similarly, Section 32 of the scheme also clearly exemplifies that the employer cannot make any deduction from any wage other than that which is paid to the employee in WP (C) No. 3850/1992 Page 9 of 41 respect of the period or part of the period in respect of which alone the contribution is payable by the employer.
Counsel for the petitioner also referred to Section 4 of The Payment of Wages Act, 1936 in support of his submission which says that every person responsible for the payment of wages shall fix his own period in respect of which such wages shall be payable. Reference was also made by the counsel for the petitioner to Section 19 of the Delhi Shops and Establishments Act and Section 106 of The Transfer of Property Act, 1882 . Section 19 of the Delhi Shops & Establishments Act, 1954 gives full liberty to the employer to fix any period in respect of which wages to the employees shall be payable and which period so fixed shall not exceed the period of one month. Similarly, Section 106 of The Transfer of Property Act, 1882 does not specifically refer to the British Calendar month but refers to termination of lease by 15 days notice where the lease of a property is on month to month basis.
WP (C) No. 3850/1992 Page 10 of 41
In support of his contentions, the counsel for the petitioners relied on the following judgments:
1. Mistry Bhikhalal Bhovan vs, Sunni Vora Noormamad Abdul Karim & Ors. - AIR 1978 Gujarat 149 (DB);
2. Bank of India vs. T.S. Kelawala & Ors. - 1990 LLJ (II) 39 (SC);
3. Daryodh Singh vs. UOI & Ors. - AIR 1973 Delhi 58 (DB);
4. Hotel Jaipur Ashok and Anr. Vs. Ms. K.P. Sarojni & Ors.
In CW No. 1881/1982 decided on 20/4/2004 (Delhi High Court - Justice Madan B. Lokur);
5. M/s. Rajasthan Prem Krishan Goods Transport Co. vs. Regional Provident Fund Commissioner - 1997 LAB. I.C. 146 (SC); and
6. Order dated 30/10/2006 of the Asst. PF Commissioner, Faridabad - HR/11006/Dmg/xxx in the matter of M/s. Print Craft Press.
Per contra, Mr. R.C. Chawla, counsel for the respondent while refuting the contentions of counsel for the petitioners contended that the interpretation given in the other WP (C) No. 3850/1992 Page 11 of 41 statues are not relevant. For this contention, the counsel drew my attention to the expression "unless there is anything repugnant in the subject or context" which finds place in the opening words of Section 3 of the General Clauses Act. The counsel urged that Form 3 of the PF Scheme gives a chart of month, therefore, the payment of dues has to be month wise. The counsel also averred that Form 3A of the Scheme also talks about the month beginning from 1st and ending with 30th. The counsel also referred to para 35 & Para 43 of the Scheme. Mr. Chawla counsel for the respondent further contended that the interpretation of „wage‟ given in other statutes will be of no assistance to give a different interpretation to the provisions of The Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 and the scheme framed thereunder. Counsel for the respondent also invited attention of this court to Section 2 (h) of the Employees‟ Provident Funds Act, 1952 which clearly defines the financial year to mean the year commencing from the 1st day of April. Similarly, form 3 which is the prescribed form to be WP (C) No. 3850/1992 Page 12 of 41 filled in by the employer, the detail of contribution is required to be filled w.e.f. the month of April till March and same is the position as far as the form 3A is concerned which also refers to the contribution for the currency period w.e.f. 1st April to 31st March. The same is the effect of the other forms i.e. Form 6A dealing with the "Consolidated Annual Contribution Statement"
wherein also there is a reference to the English calendar month starting from the contribution paid in April and the contribution paid in March in the following year. Reference is also invited by the counsel for the respondent to Section 60 and 73 of the said Scheme. Section 60 of the Scheme deals with the interest which is to be credited to the account of each member on monthly running basis in the manner prescribed in the Section while Section 73 deals with the annual statement of account of the member. The contention of the counsel for the respondent is that the scheme of the Act is such that there cannot be different wage periods for different employers and due to this reason alone the wage period has to be British Calendar month WP (C) No. 3850/1992 Page 13 of 41 commencing from the 1st day of each English Calendar month ending with the last day of such English Calendar month. Counsel for the respondent further submitted that if the interpretation of the counsel for the petitioner is accepted then the entire scheme of the Act will be frustrated and there will not be any uniformity in implementing the scheme of the Act.
In support of his contentions, the counsel for the respondent relied on the following judgments:
1. Organo Chemical Industries and Anr. Vs. UOI and ors -
1979 LAB . I.C 1261 (SC);
2. UOI & Anr. Vs. Samrendra Mohan Maitra & Ors. - 1979 LAB.I.C. 1276 (Cal) (DB);
3. M/s. Birla Cotton Spinning and Weaving Mills Ltd. vs. UOI & Ors. - ILR (1984) II Delhi 60 (DB);
4. AIR 1985 SC 323
5. State of Punjab vs. Satpal & Anr. - 1970 LAB I.C. 772 (SC); and WP (C) No. 3850/1992 Page 14 of 41
6. Regional Provident Fund Commissioner, Jaipur vs. Naraini Udyog and Ors. - (1996) 5 SCC 522.
I have heard learned counsel for the parties and perused the record.
The crucial question arising in the present petition is that which period under the Employees‟ Provident Funds Act, 1952 and the scheme thereunder would be considered as the „wage month‟; whether it is the English Calendar month commencing from 1st day and ending with the last day of the same month or the wage month for which the employee has worked to earn the salary to be paid by the employer. Indisputably, wage month has not been defined either in the said Act or scheme framed thereunder and therefore, it has to be seen how much help can be derived from the other statutes to give a correct interpretation to the undefined term "wage month".
WP (C) No. 3850/1992 Page 15 of 41
The comprehensive legislation of The Employees‟ Provident Funds & Misc. Provisions Act and the Scheme framed thereunder was brought on the statute book keeping in view the larger interests of the workers who were motivated to contribute their own money towards the provident fund by giving an incentive that similar amount will also be contributed by their employer. No doubt, the Act has not defined the expression "one month" but Section 2 (b) defines the expression "basic wages" which is referred as under:-
"basic wages" means all emoluments which are earned by an employee while on duty or [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include ---
(i) The cash value of any food concession; (ii) Any dearness allowance (that is to say, all cash payments by
whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) Any presents made by the employer; "
WP (C) No. 3850/1992 Page 16 of 41
Section 2 (l) defines a scheme to mean a scheme under the Employees‟ Provident Fund Scheme to mean a scheme framed under Section 5 of the Act. Section 5 defines the Employees Provident Fund Schemes as under:-
5. Employees' Provident Funds Scheme (1) The Central Government may by notification in the Official Gazette frame a Scheme to be called the Employees' Provident Funds Scheme for the establishment of provident funds under this Act for employees or for any class of employees and specify the establishments or class of establishments to which the said Scheme shall apply and there shall be established as soon as may be after the framing of the Scheme a Fund in accordance with the provisions of this Act and the Scheme.
(1A) The Fund shall vest in and be administered by the Central Board constituted under section 5A.
(1B) Subject to the provisions of this Act a Scheme framed under sub-section (1) may provide for all or any of the matters specified in Sch. II. (2) A Scheme framed under sub-section (1) may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified in this behalf in the Scheme.
Section 6 of the Act deals with the contribution and matters which may be provided for these schemes and the same is read as under:-
6. *Contributions and matters which may be provided for in the Scheme The contribution which shall be paid by the employer to the Fund shall eight and one-third per cent of the basic wages dearness allowances and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor) and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may if any employee so desires and if the Scheme makes provision therefore be an amount not exceeding eight and one-third per cent of his basic wages dearness allowances and retaining allowance (if any) subject to the condition that the employer shall not WP (C) No. 3850/1992 Page 17 of 41 be under an obligation to pay any contribution over and above his contribution payable under this section;
Provided that in its application to any establishment or class of establishments which the Central Government after making such inquiry as it deems fit may by notification in the Official Gazette specify this section shall be subject to the modification that for the words "eight and one-third per cent" at both the places where they occur the words "ten per cent" shall be substituted :
Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee the Scheme may provide for the rounding off of such fraction to the nearest rupee half of a rupee or quarter to a rupee. Explanation 1 : For the purposes of this section dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.
Explanation 2 : For the purposes of this section retaining allowance means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working for retaining his services.
Some of the other provisions of Employees‟ Provident Fund Act, 1952 which are relevant and were referred to by the counsels are reproduced as under :-
2. Definitions
(h) "Fund" means the provident fund established under a Scheme;
38. (1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the WP (C) No. 3850/1992 Page 18 of 41 fund by separate bank drafts or cheques on account of contributions and administrative charge]:
[Provided that if the payment is made by a cheque, it should be drawn only on the local bank of the place in which deposits are made]:
Provided further that where there is no branch of the Reserve Bank or the State Bank of India at the station where the [factory or other establishment] is situated, the employer shall pay to the Fund the amount mentioned above by means of Reserve Bank of India [Governmental Drafts at par] separately on account of contributions and administrative charge.
[(2) The employer shall forward to the Commissioner within twenty-five days of the close of the month, a monthly abstract in such form as the Commissioner may specify showing the aggregate amount of recoveries made from the wages of all the members and the aggregate amount contributed by the employer in respect of all such members for the month :
Provided that an employer shall send a Nil return, if no such recoveries have been made from the employees:
Provided further that in the case of any such employee who has become a member of the pension fund under the Employees' Pension Scheme, 1995, the aforesaid form shall also contain such particulars as are necessary to comply with the requirements of that Scheme.] [(3) The employer shall send to the Commissioner within one month of the close of the period of currency, a consolidated annual contribution statement in Form 6A, showing the total amount of recoveries made during the period of currency from the wages of each member and the total amount contributed by the employer in respect of each such member for the said period. The employer shall maintain on his record duplicate copies of the aforesaid monthly abstract and consolidated annual contribution statement for production at the time of inspection by the Inspector.] Section 29 Contributions. - (1) The contributions payable by the employer under the Scheme shall be at the rate of [ten per cent] of the [basic wages, dearness allowance (including the cash value of any food concessions) and retaining allowance (if any )] payable to each employee to whom the Scheme applies:WP (C) No. 3850/1992 Page 19 of 41
[Provided that the above rate of contribution shall be [twelve per cent] in respect of any establishment or class of establishments which the Central Government may specify in the Official Gazette from time to time under the first proviso to sub-section (1) of Section 6 of the Act.] (2 ) The contribution payable by the employee under the Scheme shall be equal to the contribution payable by the employer in respet of such employer:
[Provided that in respect of any employee to whom the Scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding [ten per cent] or [twelve per cent], as the case may be, of his basic wages, dearness allowance and retaining allowance (if any ) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act.]
32. Recovery of a member's share or contribution. - (1) The amount of a member's contribution paid by the employer *or a contractor+ shall, notwithstanding the provisions in this Scheme or any law for the time being in force or any contract to the contrary, be recoverable by means of deduction from the wages of the member and otherwise:
Provided that no such deduction may be made from any wage other than that which is paid in respect of the period or part of the period in respect of which the contribution is payable:
Provided further that the employer [or a contractor] shall be entitled to recover the employee's share from a wage other than that which is paid in respect of the period for which the contribution has been paid or is payable where the employee has in writing given a false declaration at the time of joining service with the said employer [or a contractor] that he was not already a member of the Fund:
(2) Deduction made from the wages of a member paid on daily, weekly or fortnightly basis should be totaled up to indicate the monthly deductions.
(3) Any sum deducted by an employer or a contractor from the wages of an employee under this Scheme shall be deemed to have been entrusted to him for the purpose of paying the contribution in respect of which it was deducted.
32-A. Recovery of damages for default in payment of any contribution. - (1) Where an employer makes default in the payment of any contribution to the Fund, or in the transfer of accumulations required to be transferred by him under sub-section (2) of Section 15 or sub-section (5) of Section 17 of the Act or in the payment of any charges payable under any other provisions of the Act WP (C) No. 3850/1992 Page 20 of 41 or Scheme or under any of the conditions specified under Section 17 of the Act, the Central Provident Fund Commissioner or such officer as may be authorized by the Central Government, by notification in the Official Gazette in this behalf, may recover from the employer by way of penalty, damages at the rates given below:-
Period of default Rate of damages
(Percentage of arrears per annum)
(a) Less than two months Seventeen
(b) Two months and above Twenty-two
But less than four months
(c ) Four months and above Twenty-seven
But less than six months
(d ) Six months and above Thirty -seven
(2) The damages shall be calculated to the nearest rupee, 50 paise or more to be counted as the nearest higher rupee and fraction of a rupee less than 50 paise to be ignored.] 60 Interest. - (1) The Commissioner shall credit to the account of each member interest at such rate as may be determined by the Central Government in consultation with the Central Board.
73. Annual statement of member's account .--(1) As soon as possible after the close of each period of currency of contribution card the Commissioner shall send to each member through the employer of the [factory or other establishment] in which he was last employed a statement of his account in the Fund showing the opening balance at the beginning of the period, amount contributed during the year, the total amount of interest credited at the end of the period or debited in the period and the closing balance at the end of the period.
(2) Members should satisfy themselves as to the correctness of the annual statement and any error should be brought to the notice of the Commissioner within six months of the receipt of the statement."
Section 2 (vi) and Section 4 of The Payment of Wages Act, 1936, Sections 2 (35) and 3 of the General Clauses Act, 1897, Section 19 of The Delhi Shops and Establishments Act and WP (C) No. 3850/1992 Page 21 of 41 Section 106 of The Transfer of Property Act, 1882 were also referred to by the counsels during the course of their arguments and the same are reproduced as under:-
The Delhi Shops & Establishments Act Section 19: Time and conditions of payment of wages (1) Every employer or his agent or the manager of any establishment shall fix periods in respect of which wages to the employee shall be payable and such person shall be responsible for the payment to persons employed by him of all wages required to be paid under this Act.
(2) No wage period, so fixed, shall exceed one month. (3) The wages of every employee in any shop or establishment shall be paid on a working day before the expiry of the seventh day of the last day of the wage period in respect of which the wages are payable.
(4) All wages shall be paid in cash.
(5) Where the employment of any person is terminated by or on behalf of the employer, the wages earned by him shall be paid before the expiry of the second working day after the day on which his employment is terminated.
106. Duration of certain leases in absence of written contract or local usage.--(1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months' notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice.
WP (C) No. 3850/1992 Page 22 of 41 (2) Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.
(3) A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub- section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.
(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.
Employees' Provident Funds Scheme, 1952 Duties of employers.
36. (1) Every employer shall send to the Commissioner, within fifteen days of the commencement of this Scheme, a consolidated return in such form as the Commissioner may specify, [***] of the employees required or entitled to become members of the Fund showing the [basic wage, retaining allowance (if any) and dearness allowance including the cash value of any food concession] paid to each of such employees:
[Provided that if there is no employee who is required or entitled to become a member of the Fund, the employer shall send a 'NIL' return.+ (2) Every employer shall send to the Commissioner within fifteen days of the close of each month a return--
(a) [***] in Form 5, of the employees qualifying to become members of the Fund for the first time during the preceding month together with the declarations in Form 2 furnished by such qualifying employees [***], and
(b) [***] [in such form as the Commissioner may specify], of the employees leaving service of the employer during the preceding month: WP (C) No. 3850/1992 Page 23 of 41
[Provided that if there is no employee qualifying to become a member of the Fund for the first time or there is no employee leaving service of the employer during the preceding month, the employer shall send a 'NIL' return.+ (3) [***] [(4) Every employer shall maintain an inspection note book in such form as the Commissioner may specify, for an Inspector to record his observation on his visit to the establishment.] (5)] Every employer shall maintain such accounts in relation to the amounts contributed to the Fund by him and by his employees as the [Central Board] may, from time to time, direct, and it shall be the duty of every employer to assist the [Central Board] in making such payments from the Fund to his employees as are sanctioned by or under the authority of the [Central Board].
[(6)] Notwithstanding anything hereinbefore contained in this paragraph, the [Central Board] may issue such directions to employer generally as it may consider necessary or proper for the purpose of implementing the Scheme, and it shall be the duty of every employer to carry out such directions. Pension and gratuity coupled with contributory provident fund are well-recognised retiral benefits. These retiral benefits are now governed by various statutes such as the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, the Payment of Gratuity Act, 1972. These statutes were legislative responses to the developing notions of fair and humane conditions of work, being the promise of Part IV of the Constitution. Article 37 provides that "the provisions contained in Part IV -- Directive Principles of State Policy, shall not be enforceable by any court, but the principles therein laid down are WP (C) No. 3850/1992 Page 24 of 41 nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws". Article 41 provides that "the State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want". Article 43 obligates the State "to secure, by suitable legislation to all workers, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure. The State discharge its obligation by enacting these laws. The Employees' Provident Fund & MP Act,1952 is an important piece of Labour Welfare legislation enacted by the Parliament to provide social security benefits to the workers . At present, the Act and the Schemes framed there under provides for three types of benefits -Contributory Provident Fund , Pensionary benefits to the employees/ family members and the insurance cover to the members of the Provident Fund.
The object of the Employees' Provident Fund & Miscellaneous Provisions Act of 1952 is the institution of the compulsory contributory WP (C) No. 3850/1992 Page 25 of 41 Provident Fund to the employees to which both the employee and the employer would contribute. The Employees' Provident Fund Scheme was accordingly framed under the Act and it came into effect from 1- 11-1952.
The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is applicable to Factories and Establishments engaged in 180 specified industries/classes of establishments. Earlier the Act was applicable to establishments on completion of three years of existence and employing 20 or more persons. This provision was later amended with effect from 22.09.1997 and as such any factory falling in the category of the notified industry/class of establishments employing 20 or more persons from the very date of its set-up is coverable under the Act. Employees' Provident Funds & Miscellaneous Provisions Act, 1952 was enacted with the main object of "making provision for the future of the industrial worker after he retires or for his dependents in case of his early death". It was then felt, after considering the possible alternatives that the most appropriate course for this purpose was the institution of compulsory contributory provident fund to which both the worker and the employer would contribute. It was recognised that such WP (C) No. 3850/1992 Page 26 of 41 a scheme would have apart from others, the obvious advantage of cultivation among the workers the spirit of saving a portion of their earnings regularly and would also encourage the stabilisation of a steady labour force in industrial establishments. The provision of the provident fund scheme is intended to encourage the habit of thrift amongst the employees and to make available to them either at the time of their retirement or earlier, if necessary, substantial amounts for their use from out of the provident fund amount standing to their credit which is made up of the contributions made by the employers as well as the employees concerned.
In Organo Chemical Industries & Anr. Vs. Union of India & ors. (1979 ) 4 SCC 573, the Apex Court while dealing with the question of constitutionality of Section 14-B of the Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 succinctly dealt with the various provisions with the scheme and object of the Act and the same are reproduced as under:-
"7. Before stating the contentions raised by learned counsel for the petitioners, we think it convenient to set out the scheme of the Act and the relevant provisions thereof having a bearing on the question to be determined. It would be relevant to take into account some of the provisions of the Provident Funds Act which have since its inception in 1952, been subjected to various amendments. The Provident Funds Act, 1952 as originally enacted, provides for WP (C) No. 3850/1992 Page 27 of 41 the institution of compulsory provident funds 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 specify in that behalf by notification in the Official Gazette. Under Section 4, the Central Government framed the Employees' Provident Funds Scheme, 1952 by SRO 1509, dated September 2, 1952. Section 6 of the Act enjoins on every employer to make contribution to the Employees' Provident Fund at the rate of 6 1/4 of the basic wages, clearness allowance, retaining allowance, if any, for the time being payable to each of the employees and the employees' contribution shall be equal to the contribution by the employer in respect of him. The employee at his option may, however, increase the contribution to the extent of 81/3 per cent
8. The initial responsibility for making payment of the contribution of the employer as well as of the employee, lies on the employer. Para 30 of the Scheme makes it incumbent on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. Under para 8, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month i.e. a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with the requirements of Section 6 is punishable with various terms of imprisonment which may extend to a period of six months, or with fine which may extend to one thousand to two thousand rupees, under the provisions of Section 14, depending upon the nature of the breach viz. failure to pay the contributions, or failure to submit the necessary returns, or failure to pay administrative charges. Section 14-A provides for offences by companies and other corporate bodies. Para 76 of the scheme provides for punishment for failure to pay contributions etc. and in particular by clause (d), every employer guilty of contravention or of non-compliance with the requirements of the scheme, shall be punishable with imprisonment which may extend to six months or with fine of Rs 1000.
9. Parliament amended the Act by Act 16 of 1971, and it was re-entitled as the "Employees" Provident Funds and Miscellaneous Provisions Act, 1952'. It inserted Section 6-A in the Act for the establishment of the Family Pension Fund. In exercise of the powers conferred by Section 6-A, the Central Government framed the Employees' Family Pension Scheme, 1971 by GSR 315, dated March 4, 1971. Under Para 4 of the Scheme, every employee who is a member of the Employees' WP (C) No. 3850/1992 Page 28 of 41 Provident Fund, is given the option to join the Family Pension Scheme. Para 9 created the Family Pension Fund and provides that from and out of the contributions payable by the employer and employees in each month under Section 6 of the Act, a part of the contribution, representing 11/6% of the employees' pay along with an equivalent amount of 11/6% from out of the employer's contribution, shall be remitted by the employer to the Family Pension Fund.
10. In its working, the authorities were faced with certain administrative difficulties. An employer could delay payment of Provident Fund dues without any additional financial liability. Parliament, accordingly, inserted Section 14-B for recovery of damages on the amount of arrears. The reason for enacting Section 14-B is that employers may be deterred and thwarted from making defaults in carrying out statutory obligations to make payments to the Provident Fund. The object and purpose of the section is to authorise the Regional Provident Fund Commissioner to impose exemplary or punitive damages and thereby to prevent employers from making defaults. Section 14-B, as originally enacted, provided for imposition of such damages, not exceeding 25% of the amount of arrears. This, however, did not prove to be sufficiently deterrent. The employers were still making defaults in making contributions to the Provident Fund, and in the meanwhile utilising both their own contribution as well as the employees' contribution, in their business. The provision contained in Section 14-B for recovery of damages, therefore, proved to be illusory. Accordingly, by Act 40 of 1973, the words "twenty-five per cent of" were omitted from Section 14-B and the words "not exceeding the amount of arrear" were substituted. The intention is to invest the Regional Provident Fund Commissioner with power to impose such damages that the employer would not find it profitable to make defaults in making payments.
The aforesaid judgment makes the position explicitly clear that the initial responsibility for making payment of the contribution lies on the employer.
WP (C) No. 3850/1992 Page 29 of 41
As per Section 2 (b) of The Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 the basic wages means all emoluments which are earned by an employee while on duty and Section 2 (6) of the Payment of Wages Act also refers to the wages to mean all remunerations payable to a person employed in respect of his employment or of work done in such employment. Both these provisions clearly show that basic wage is a remuneration and those emoluments which are earned by an employee for the work done by him in the course of his employment in any particular establishment.
The term "basic wages" has been defined by the Apex Court in AIR 1963 SC 1474 Bridge and Roofs Co. Ltd. v. Union of India, explaining the concept of the basic wages as under:-
3. We may now briefly refer to the relevant provisions of the Act which require consideration. The Act provides by Section 5 for the introduction of the Employees‟ Provident Fund Scheme for certain industries included in Schedule I to the Act. In consequence a Provident Fund Scheme was framed in September 1952 known as the Employees Provident Funds Scheme, 1952, and it is applicable to the Company. Section 6 of the Act provides for contribution by the employer and the employee to the provident fund and that contribution is 6¼ per centum of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable in the case of both. Section 6 further provides for certain increased contribution; but we are not concerned with that in the present case. "Basic wages" have been defined in Section 2 (b) of the Act thus:
"„BASIC WAGES‟ means all emoluments which are earned by an employee while on duty or on leave with wages in accordance with WP (C) No. 3850/1992 Page 30 of 41 the terms of the contract of employment and which are paid or payable in cash to him, but does not include--
(i) the cash value of any food concession;
(ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done, in such employment;
(iii) any presents made by the employer;"
Further, Section 19-A of the Act provides for the removal of difficulties and lays down that if any difficulty arises in giving effect to the provisions of the Act, and in particular, if any doubt arises as to certain matters including "whether the total quantum of benefits to which an employee is entitled has been reduced by the employer", the Central Government may by order, make such provision or give such direction, not inconsistent with the provisions of the Act, as appears to it to be necessary or expedient for the removal of the doubt or difficulty, and the order of the Central Government in such cases shall be final.
Section 4 of the Payment of Wages Act, 1936 gives unfettered discretion to the employer to fix any period as a wage period subject however to the condition that the same shall not exceed one month. This section nowhere says that the wage period should be as per the British or Gregorian Calendar month. Chapter 5 of The Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 deals with the contributions. Section 29 clause (3) as referred above says that the contribution shall be calculated on the basis of basic wages and dearness allowance after calculating the cash value of any food concession and retaining allowance (if any) actually drawn during the WP (C) No. 3850/1992 Page 31 of 41 whole month, whether paid on daily, weekly, fortnightly or monthly basis. The words "actually drawn" refers to the earnings of the employee and the word "whole month" refers to wage month. Nowhere this section says that the month would be the British Calendar month or the Gregorian Calendar month and therefore, rightly the reference was made by the counsel for the petitioner to the definition of the month, given in the General Clauses Act which defines the month to be reckoned according to the British Calendar.
It would be apt to refer here to the interpretation of expression "month" as interpreted by this Court in AIR 1973 Delhi 58 (V 60 C 17) Daryodh Singh Vs. union of India and Others. Relevant para therein dealing with is reproduced as under:-
" The deposit of the amount of Rs. 4500.00 was actually made on May
16. 1960. It has, therefore, to be seen whether the deposit was made "two months prior to 15th July, 1960." In its ordinary accepted sense the expression "month" means a "calendar month" and not a "lunar month." As to how a calendar month is to be counted from a date which is not the first of the month has been described in paragraph 143 of Halsbury's Laws of England Volume 37 (third Edition) in the following words:- "When the period prescribed is a calendar month running from any arbitrary date the period expires with the day in the succeeding month immediately preceding the day corresponding to the date upon which the period starts; save that, if the period starts at the end of a calendar month which contains more days than the next succeeding WP (C) No. 3850/1992 Page 32 of 41 month, the period expires at the end of the latter month." Thus one month counted from July 15, 1960 would be on June 16 and the second month counted from June 16 would be on May 17, 1960. Evidently, thereforee, the deposit made on May 16, 1960 was two months prior to July 15, 1960 Reference is also made to the interpretation of "month" occurring in Section 12 of the Bombay Rent Act where the Gujarat High Court in AIR 1978 Gujarat 149 Ministry Bhikhalal Bhovan Vs. Sunni Vora Noormamad Abdul Karim and Others held as under:-
"In common parlance, the term 'month' is hardly understood as a calendar month according to the Gregorian calendar, but it by and large means "space of time from a day in one month to the corresponding day in the next".
This is the meaning of the term 'month' given in the Concise Oxford Dictionary, 1964 Edition. The term 'month' has been explained also in the Bombay General Clauses Act, 1904. The term 'month' as defined in S. 2 (30) of the Bombay General Clauses Act, means "a month reckoned according to the British Calendar.". The term "reckoned" is equivalent of the term "calculated" or counted." If the legislature wanted the month to mean only a compact unit of a calendar month, the normal definition would have been as a British Calendar month or a calendar month. The elaborate explanation given in the definition of the term 'month' and particularly the reference to calculation clearly and pointedly suggest that what is intended to be referred to by the term is a space of time between the two dates of the two contiguous months."
Mr. Chawla counsel for the respondent strongly placed reliance on the judgment of this court in the case of M/s Birla Cotton Spinning & Weaving Mills Ltd. Vs. union of India and Others decided on 29.8.1983 to support his submission WP (C) No. 3850/1992 Page 33 of 41 that the Provident Fund Scheme requires deposit to be done within 15 days of close of every month and such a month has to be reckoned strictly as per the British Calendar month. However, I do not find that the interpretation which the counsel for the respondent has advanced is the current interpretation as would be seen after going through the said judgment. Para 9 of the same is reproduced as under:-
following" ("Para 10 of the Pension Scheme clearly put a responsibility to pay both the contributions payable to the Family Pension Fund by himself and on behalf of the member of the Pension Fund in the 1st instance (though Para 38 of the Scheme watches the employer's interest by allowing him that before paying the member employee's contribution from his wages). But law does not absolve the employer from depositing both the contributions until the time a deduction has been made from the wages. Para 12 does not provide for any condition precedent before depositing the contributions. All that para 12 does is to limit the right of the employer to recover the contribution made by him on behalf of the employee recoverable only by deduction from his wages and not otherwise. This is meant to protect the employee from having any other funds of theirs excepting their wages being proceeded against. This beneficial purpose has no relevance to the liability of employer in the first instance to deposit the contributions irrespective of whether deduction from wages of employee has been made or not. The initial responsibility for making the payment of the contribution by employer as well as on behlaf of the employee lies on the employer (see organo Chemicals Industries V. Union of India, 1979 SC 1803 para 33 (1). That this interpretation given by us in accordance with object of the Act was also the view of High Court of Kerala in Calicut Modern Spinning and Weaving Mills Ltd. V. Regional Provident Fund Commissioner, 1982 LAB I.C. 1422(2) wherein it held that even a case of lockout and strike failure to make the contribution resulting in default will have to be visited by damages under Section 14-B of the Act. In justifying this view it observed:
"To allow the employer to make the contribution only when he pays the wages would be to stultify the project. To accept the petitioner's contention in this case would be to enable the employer to divert remittances WP (C) No. 3850/1992 Page 34 of 41 to the Fund to suit his convenience putting forward sometimes reasonable grounds, sometimes justifiable grounds and most often unjustifiable grounds."
In that context when Para 38 of the Scheme requires deposit to be made within 15 days of close of every month, and as the contribution is relatable to the percentage of wages payable to the employee, obviously, the close of every month means the month for which wages are payable to the employee in the subsequent month. Thus for the wages payable for the month of January, contribution is to be deposited by the employer within 15 days of the close of the month, i.e. January. Thus deposit for January has to be made by 15th of February. This is the only manner by which some kind of certainty and uniformity can be put in the working of the scheme. As a matter of fact this matter stands concluded by the Organo's case (supra) wherein it was said that the "deposit of such contribution shall be made by the employer within 15 days of the close of every month that is a contribution for a particular month has got to be deposited by the 15th day of the month following"( para 33.
As discussed above, there cannot be any dispute that the initial responsibility for making the contribution lies on the employer and deposit of such contribution is required to be made by the employer within fifteen days of the close of every month i.e. the contribution for a particular month has got to be deposited within fifteen days of the close of the month. It is thus a statutory obligation of the employer in the E.P.F. and Miscellaneous Provisions Act, 1952 and scheme framed thereunder to deposit the said contribution and if the employer makes default in the payment of the Contribution then under S.14-B of the E.P.F. & Miscellaneous Provisions, Act, 1952 WP (C) No. 3850/1992 Page 35 of 41 penalty not exceeding the amount of arrears can be imposed upon such employer.
As far as the facts of the present case go, the petitioner/employer has not disputed its liability to contribute the payment towards the employer‟s share but the entire attack of the petitioner is on the fact that it is the wage month and not the British or Gregorian English Calendar month which would decide the beginning of 15 days period during which the payment of contribution as envisaged under para 38 of the Employees‟ Provident Funds Scheme, 1952 has to be made. As already discussed above in para 29 of the Employees‟ Provident Funds Scheme, 1952, the contribution payable by the employer under the scheme is at the rate of 10% of the basic wages, dearness allowance and retaining allowance, if any, payable to an employee and although, neither in the Act nor in the scheme „one month‟ has been defined but under Section 2 (b) of the Act „basic wages‟ have been defined to mean all emoluments which are earned by an employee while on duty. Para 29 (3) of the Scheme WP (C) No. 3850/1992 Page 36 of 41 states that such contributions shall be calculated on the basis of basic wages, dearness allowance and retaining allowance, if any, actually drawn by the employee during the whole month whether paid on daily, weekly, fortnightly or monthly basis. The emphasis of the counsel for the petitioner was on the basic wages as earned by an employee and actually drawn by him during the period of whole month on which the employer has the responsibility to pay the contribution of E.P.F. and not on the wages not earned by an employee. Under Section 4 of the Payment of Wages Act, 1936 every employer whose responsibility is to pay the wages can fix its own period in respect of which such wages are payable but subject to one condition that no wage period shall exceed one month. Nowhere in the E.P.F. Act or under the Payment of Wages Act definition of „month‟ has been given. In the Webster dictionary , the month has been defined to mean the time from any day of the calendar month to the corresponding day of the next, a period of four weeks or 30 days. In computing a calendar month it is sufficient to go from one day and one month to the numerically corresponding day in the next month and to exclude from the computation the day from which the month is WP (C) No. 3850/1992 Page 37 of 41 calculated. British Calendar month or Gregorian calendar month is meant for a period commencing from the first day of English calendar month and ending on the last day of the same month. Taking an overall view of the scheme of the Act and the harmonious construction of the above referred provisions of the EPF Act and the scheme framed thereunder and the provisions of payment of Wages Act and The General Clauses Act, 1897, I find myself in agreement with the contentions raised by the counsel for the petitioner that the employer in its absolute discretion can fix or adopt any wage month for disbursement of salary to its employees and the same necessarily cannot be the month as per the British or Gregorian English Calendar month commencing from the 1st day of each month to end with the last day of such month and then to pay the contribution under Section 38 of the Scheme within 15 days period from the close of such month. Basic wages are emoluments to be earned by an employee for the job assigned to such an employee and therefore, the emoluments cannot be delinked from the earnings for which every employee puts his required labour, be it unskilled, semi-skilled, skilled or other services as are assigned on a particular job and therefore, no WP (C) No. 3850/1992 Page 38 of 41 employer can be fastened with a liability to contribute under the E.P.F. Act for the wages or the scheme of E.P.F. and Miscellaneous Provisions Act, 1952 without the wages being earned by such an employee. The deposit of such contribution, therefore, is required to be made by the employer within fifteen days of the close of the wage month and not the British English Calendar month under para 36 of the Scheme. I also find support to reach to this conclusion from the judgment of the Apex Court reported in M/s Birla Cotton Spinning and Weaving Mills Ltd. Vs. UOI & Ors. ILR (1984) II Delhi 60 (DB):-
"In that context when para 38 of the Scheme requires deposit to be made within 15 days of close of every month, and as the contribution is relatable to the percentage of wages payable to the employee, obviously, the close of every month means the month for which wages are payable to the employee in the subsequent month. Thus for the wages payable for the month of January, contribution is to be deposited by the employer within 15 days of the close of the month i.e. January. Thus deposit for January has to be made by 15th of February. This is the only manner by which some kind of certainty and uniformity can be put in the working of the scheme. As a matter o fact this matter stands concluded by the Organo's cse (supra) wherein it was said that the "deposit of such contribution shall be made by the employer within 15 days of the close of every month that is a contribution for a particular month has got to be deposited by the 15th day of the month following"
Para 38 of the EPF Scheme specifies that the contributions and administrative charges have to be deposited within 15 days of the close of the month by separate drafts / cheques on account of contributions and administrative charges. The cheque should be on a local branch and deposited with the Reserve Bank or the State Bank of India.
WP (C) No. 3850/1992 Page 39 of 41 In the light of the above discussion, I do not find any force in the pleas raised by the counsel for the respondent that since in the forms 3 and 3A there is categorical mention of English Calendar months from April to March that would necessarily mean the wage to be beginning from 1st of each English Calendar month and to end up with the last day of the English Calendar month. The said forms are merely, in fact, the guiding factors; particularly as to how such contribution are to be reflected so as to keep the correct records. I , therefore, allow the present petition and set aside the impugned order imposing penalty upon the petitioner under Section 14-B of the EPF & Misc. Provisions Act, 1952. However, it is made clear that wherever the default was committed by the petitioner in not making the timely payments even after taking the wage month of the petitioner from 16th day of each English Calendar Month to 15th day of the following month the respondent will have every right to impose and recover the penalty amount from the petitioner.
WP (C) No. 3850/1992 Page 40 of 41
In view of the foregoing discussion, both the petitions are allowed with above directions.
September 11, 2009 KAILASH GAMBHIR, J.
pkv
WP (C) No. 3850/1992 Page 41 of 41