Madras High Court
The Madurai District Central ... vs Employees' Provident Fund ... on 7 September, 2011
Author: Vinod K.Sharma
Bench: Vinod K.Sharma
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 07/09/2011 CORAM THE HONOURABLE MR.JUSTICE VINOD K.SHARMA W.P.(MD)No.3469 of 2009 and M.P.(MD)No.1 of 2009 The Madurai District Central Cooperative Bank Ltd., Rep. by its Special Officer, 187, North Veli Street, Madurai-625 001. ... Petitioner Vs. 1.Employees' Provident Fund Organization, Rep. by its Regional Provident Fund Commissioner, Lady Doak College Road, Chokkikulam, Madurai-625 002. 2.The Recovery Officer, Employees' Provident Fund Organization, Lady Doak College Road, Chokkikulam, Madurai-625 0002. ... Respondents PRAYER Writ Petition is filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorari, to call for the records of the 2nd respondent in his proceedings in the Notice of Demand No.TN/MDU/4169/RECOY 2009103/circle 19/2009, dated 31.03.2009. !For Petitioner ... Mr.R.Sivamanogran ^For Respondents ... Mr.V.S.V.Venkateshwaran :ORDER
The petitioner, being aggrieved by the order, dated 31th March 2009, directing the petitioner to deposit contribution on behalf of security agencies, has invoked the writ jurisdiction of this court, to quash the impugned order.
2.The admitted facts are that the petitioner society is registered under the Tamil Nadu Cooperative Societies Act, 1983, and has its own Provident Fund Scheme and is an exempted establishment, under section 17 of the Employees Provident Fund Scheme & Miscellaneous Provisions Act, 1952 [hereinafter referred to as 'Act'].
3.The petitioner availed the services of three security agencies, i.e., Victory Security service, Loyal Security Service and Jayam/Sward Security Service.
4.All the security agencies are independent establishment, carrying on business of providing security service to various establishments.
5.The Victory Security Service and Loyal Security service are registered under the Act, and allotted code No.TN/42886 and TN/29536 respectively.
6.The case of the petitioner is that the code number is allotted only to an independent establishment, and that petitioner has no legal obligation to pay the contribution qua the employees of independent establishment.
7.It is not disputed that the security agencies engaged by the petitioner, committed default in payment of Provident Fund contribution and that proceedings were initiated against the said Security Agencies, under section 7-A of the Act.
8.The petitioner was also impleaded as one of the parties, by treating it to be principal employer. The order, dated 23rd January 2008 was passed by the authorized officer, under section 7-A of the Act, imposing the liability of each of the security agencies, for payment of contribution. In the order, it was stipulated that in the event of failure of the security agencies to pay the contributions, the amount due will be recovered from the petitioner, being the principal employer.
9.The case of the petitioner is, that after passing of the order, on 23rd June 2008, proceedings were initiated against the security agencies, for recovery of the amount adjudicated, under section 7A of the Act.
10.Thereafter, all of a sudden, the impugned order, dated 31th March 2009 was passed directing the petitioner to pay the contribution, as assessed under section 7-A of the Act, on the ground that the security agencies had failed to deposit the amount.
11.The learned counsel appearing on behalf of the petitioner, fairly conceded that the liability to pay the contribution on behalf of the Jayam/Sward Security Service is not disputed, as under 30 of the Employees Provident Fund Scheme, 1952, it is the duty of the principal employer to recover the contribution, i.e. employer and employees share and deposit it with the Provident Fund Commissioner. In view of the stand taken by the learned counsel for the petitioner, recovery of contribution qua the Jayam/Sward Security Service from the petitioner is upheld, and the petitioner is directed to deposit the contribution within one month of the receipt of certified copy of this order.
12.The learned counsel for the petitioner challenged, the notice of demand with respect to contribution payable by other two security agencies, on the ground that once these contractors were allotted independent code number, the liability could not be fixed, on the petitioner, being an exempted establishment, under section 17 of the Act.
13.In support of this contention, the learned counsel for the petitioner, placed reliance on the judgment of the Hon'ble Division Bench of Patna High Court, in the case of Bata India Ltd., & Ors. Vs. Union of India & Others [2001 IV LLN 536 (Pat.DB], wherein, it has been held as under:-
"....By its notification, dated 8 February 1965, published in the Gazette of India of February 20, 1965 (Annexure 3), Government of India in the department of social security had, in exercise of the powers conferred by C1.(b) of Sub-Sec.(1) of s.17 of the Act, exempted the Mokama unit and other units of the petitioner-company mentioned therein from the operation of the scheme with effect from the dates mentioned in the notification with respect to the different units. The petitioner-company has set up a trust exemption for managing the accounts of provident fund of its employees. It took the stand that in view of the exemption granted by the respondent authorities, the petitioner was completely exempted form the provisions of the Act and the scheme which would mean that the trust shall maintain the accounts of its direct employees only, and is no longer obliged to maintain the provident fund accounts of contractor's labourers......." (Page 537, Para:2) "........On a combined reading of the relevant provisions of the Act and the scheme it is clear that in case exemption from operation of the scheme is allowed to the principal employer, he is out of the net of the scheme. He is then obliged to set up a trust and maintain the accounts of his employees. Such a literal construction, therefore, naturally leads to the conclusion that the contractors are within the mischief of the scheme. Not having obtained any exemption within the meaning of Sec.17 of the Act, they (the Contractors) are still covered by the scheme and obliged to obtain separate code numbers under the Act and the scheme and deposit the contributions with the authorities under the Act." (Page 540 Para;11)"
14.The learned counsel for the respondents, however, contends, that this judgment will not be applicable to the case of the petitioner, as an order passed under section 7A, which has attained finality, the petitioner was held liable to pay the contribution, on the failure of the security agencies to make the payment.
15.Therefore, it is not open to the petitioner now to challenge, the executory order, once the adjudicatory order was allowed to attain finality.
16.It is also the contention of the learned counsel for the respondents, that under clause 30 of the Employees' Provident Fund Scheme, 1952, it is the duty of the principal employer to pay the provident fund contribution, therefore, the order passed under section 7-A, was in consonance with the scheme, which deserves to be upheld, consequently, the executory order can also not be subject to challenge.
17.On consideration, I find force in the contention raised by the learned counsel for the petitioner.
18.It is not in dispute that the petitioner is an exempted establishment, under section 17 of the Act, therefore, is not covered under the Act. The employees of the contractor, by no stretch of imagination can be treated to be employees of the principal employer, but, as rightly conceded by the learned counsel for the petitioner, the liability of unregistered contractors, would fall on the petitioner, in view of clause 30 of the Employees' Provident Fund Scheme, 1952, whereas with respect to the contractors, who are registered with the Provident Fund Department, having independent code number, they are to be treated as 'independent employer'.
19.The petitioner, therefore, cannot be treated to be 'principal employer' for the purposes of those contractors. The impugned part of the order, under section 7-A, is also under challenge before this court and not only the executory order, as contended by the learned counsel for the respondents.
20.In view of the judgment of the Honourable Division Bench of Patna High Court, the contention of the learned counsel for the petitioner, deserves to be accepted. The liability with respect to the contractors registered and having independent code cannot be fastened on the petitioner.
21.The writ petition is partly allowed, and the impugned part of order passed under section 7-A, as also executory order, fixing liability of security agencies having independent code i.e. Victory security service and Loyal security service, on the petitioner is quashed, and the impugned order qua Jayam/Sward security service is upheld.
22.The respondents shall be at liberty to execute the order under section 7-A, against the Victory security service and Loyal security service independently.
23.Consequently, connected Miscellaneous Petition is closed. No costs.
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