Calcutta High Court
Electric Lamp Manufacturers (India) ... vs Regional Provident Fund Commissioner ... on 5 February, 1996
Equivalent citations: (1998)IIILLJ765CAL
Author: Satyabrata Sinha
Bench: Satyabrata Sinha
JUDGMENT Satyabrata Sinha, J.
1. Although this appeal was preferred against a judgment and order dated August 4, 1994 passed by a learned Single Judge of this Court refusing to pass an interim order, in view of the direction given by a Division Bench of this Court a Paper Book was prepared and the Learned Counsel for both the parties agreed that the entire writ application be heard and disposed of by this Bench and thus we have heard the Learned Counsel for the parties and are disposing of the writ application.
2. The petitioner, inter alia, in this application has questioned the orders passed by the Regional Provident Fund Commissioner which are contained in annexures 'E', 'H' & 'N'.
3. The fact of the matter lies in a very narrow compass. The writ petitioner is private limited company. It applied for and was granted exemption in terms of the provision of the Employees' Provident Funds & Miscellaneous Provisions Act 1952 (here-in-after referred to as the said 'Act') by reason of a Notification dated August 5, 1963 with effect from October 31, 1952. The said Notification contains a Schedule laying down the terms and conditions for grant of such exemption; Clauses 15 and 16 whereof read thus:
"15. Exemption granted by this notification is liable to be withdrawn by the Central Provident Fund Commissioner for breach of any of the aforesaid conditions or for any other sufficient cause which may be considered appropriate.
16. The Central Government reserve the right to impose such further conditions as may be deemed necessary in the interests of the employees in the establishment".
4. It is not in dispute that pursuant to the aforementioned exemption, the matters relating to provident fund payable to the employees were being managed by the Board of Trustees appointed for that purpose. According to the petitioner, the Trustees invested the amount in securities approved by the Reserve Bank of India and the authorities of the Income-tax Department and in terms of the provisions of the Income-tax Act some of the securities were fetching interest @ 5 to 6%p.a. However on their maturity they were reinvested. Admittedly the Board of Trustees had been paying interest on the amount of the provident fund at a rate less than 12%. By a letter dated May 2, 1991 the Central Government approved 12% interest in terms of paragraph 60(1) of the Employees' Provident Fund Scheme 1952 for the year 1991-1992. It however appears that the petitioner had been facing some difficulties and the petitioner in terms of letter dated April 2, 1991 addressed to the Regional Provident Fund Commissioner brought to his notice his difficulties as regards payment of minimum rate of interest as announced by the Central Government periodically for the reasons stated therein. It was inter alia stated as follows :
"May we request you to kindly consider the above in particular the conditions imposed by the Government of India in 1963 while granting exemption and confirm whether our Company is liable to pay the short-fall interest to the members of the Fund".
5. The Regional Provident Fund Commissioner in terms of letter dated Junel2, 1990 conveyed the decision arrived at by the Central authority to overcome the situation expressed by some establishments in the matter of extending provident fund benefit to such employees and stated that the petitioner was advised to surrender the exemption granted under Section 17(1) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 relaxation granted under para 79 of the E.P.F. Scheme, 1952 and to seek exemption under Section 27-A of the Employees' Provident Fund Scheme, 1952 treating all the employees on the rolls, of his establishment as a class. Such exemption under para 27-A of the E.P.F. Scheme 1952 was to be granted subject to the conditions as contained in the Schedule appended thereto,
6. In terms of Clause 20 the Schedule appended thereto the employer was to make good deficiency if the Board of Trustees are unable to pay interest at the rate declared by the Central Government for the reason that the return on investment is less or for any other reasons. A draft copy of the Notification was also annexed thereto but it is contended by the petitioner that no such notification had been published in the Gazette. Various correspondence appears to have been made between the parties resulting issuance of the impugned letters as contained in the said notification. It appears that by a letter dated July 28, 1992 as contained in annexure 'F' to the writ petition the petitioner was threatened that in the event the rate of interest payable to the employee is less than 12% for the year 1990-1991, steps for cancellation of exemption may be considered. By another letter dated June 22, 1993 as contained in annexure 'H' to the writ application the Regional Provident Fund Commissioner asked the petitioner to take action as regard payment of 12% interest in order to avoid cancellation of exemption on the ground that the benefit of the fund in terms of the exempted scheme is less beneficial than that available under the E.P.F. Scheme, 1952 and thus cancellation of exemption is warranted. The petitioner, therefore, was directed to declare the rate of interest of the fund at par with the statutory rate by making good the deficiency. The petitioner, inter alia, stated as follows in terms of a letter dated August 10, 1993 as contained in annexure '1'.
"Meanwhile, we have also made personal enquiries at your office for satisfaction of our queries as to the Publication in the Official Gazette the notification of the amended schedule of conditions for granting exemption. We notice that the Government Notification No. G200015(1)/91-SS issued by the Union Ministry of Labour on May 2, 1991 talks of the Central Government declaring 12% interest for the accounts for the year 1991/92. At the same time this notification does not direct exempted funds to seek shortfall reimbursements from employers".
7. The petitioner further stated as follows :
"We therefore hold although notification dated July 9, 1963 and the condition No. 16 in the schedule mentioned thereto authorises the Central Government to impose additional conditions in the interest of the employees such condition we understood has to be specified in a notification to be published in the official Gazette pertaining to this establishment as provided in Section 17(1) of the EPF Act, 1952. We may mention again that the additional conditions purported to have been made, have not been made with reference to this establishment, but is under a general notification, the publication of which in the official Gazette has yet not been made available to the fund".
8. By another letter dated April 14, 1994 the petitioner reiterated its earlier stand. In its letter dated January 3, 1994 it was noticed that some of the points raised therein were not at all dealt with by the said authority as regard declaration of: interest at the statutory rate. In the said letter the petitioner, inter alia, contended that the general notification issued by the Central Government specifying the higher rate of interest is not binding on the exempted trust fund. The Regional Provident Fund Commissioner however in terms of his letter dated July 19, 1994 as contained in annexure 'N' to the writ application rejected the said contention. The said authority opined as follows:
"Having considered your views stated in your letter dated April 14, 1994, we are of the opinion that in no circumstances the members of the Fund shall be subject to suffer any monetary loss to their life savings. I, therefore, direct you to declare the interest at least at par with the rate declared by the Government and any shortfall in this regard may be made good by the employer failing which this office will take legal action under Section 14(2A) of the E.P.F. & M.P. Act in addition to cancellation of Exemption".
9. As the question raised in this appeal is a pure question of law, it is not necessary to consider the statements made in the affidavit-in-opposition in detail. Suffice it to say that the contention of the respondents appears to be that keeping in view the fact that the Central Government had approved the rate of interest at 12% in terms of para 60 of the Scheme, the same ipso facto applies also to the Scheme under the exempted category.
10. Dr. Monotosh Mukherjee, learned senior Counsel appearing on behalf of the appellant/writ petitioner took us through various documents and raised the following contentions:
(1) The exemption granted to the petitioner having been made by reason of publication in the Gazette, the same could not have been withdrawn merely by a letter.
(2) In any event only the Central Government could issue a specific order in terms of Clause 16 of the Scheme as quoted hereinbefore and the Regional Provident Fund Commissioner had no jurisdiction in relation thereto.
(3) The said orders have been passed without giving a notice to the Board of Trustees.
(4) In any view of the matter the liability of the petitioner being only to pay its share of contribution, the question of its being further liable pursuant to the impugned order does not arise.
11. The Learned Counsel however submits that the petitioner will have no objection if the respondents take over the Trust together with the securities and take necessary action in the matter.
12. Mr. Arun Prakash Chatterjee, Learned Senior Counsel appearing on behalf of the respondents, however, submits that the conditions attached to the first exemption notification are subject to such other conditions as may be deemed necessary in the interest of the employees and in view of the fact that the Central Government has declared that all the establishments will have to pay interest at the rate of 12% per annum, the same applies to the case of the petitioner also. The Learned Counsel has also submitted that as in terms of Clauses 20 and 21 of the Schedule appended to the Government's letter dated June 12, 1990 the employer was to make good deficiency, it cannot now take a different stand. It was submitted that in terms of Section 17 of the Act the benefit declared in favour of the employees would ipso facto apply to all categories of establishments, inasmuch as, the Board of Trustees is required to perform its statutory duties specified therein which would include making up of the shortfall by the employee. The learned counsel in support of the aforementioned contention has relied upon a Full Bench decision of the Patna High Court Tata Iron & Steel Co. Ltd. v. Bir Singh. It was however submitted that the provision of the Companies Act and /or the Trust Act or any other Act have no application in relation to the matter governed under the said Act and in support of the aforementioned condition reliance has been placed on Rabindra Chamna v. Registrar of Companies, W.B. reported in (1992-I-LLJ-313)(SC).
13. In view of the rival contentions as noticed hereinbefore in our opinion, the only question which falls for consideration is as to whether the petitioner is liable to make good the deficiency as regards payment of interest in terms of the notification issued by the Central Government.
14. The said Act was enacted to provide inter alia to the institution of the Employees' Provident Fund Scheme and Employees' Deposit linked Insurance Scheme, Section 2(e) defines "Scheme" means the Employees' Provident Fund Scheme framed under Section 5 of the Act. It is admitted that the establishment of the petitioner comes within the provisions of the said Act. Section 5 of the said Act provides for constitution of the scheme pursuant thereto, as noticed hereinbefore, the said scheme was framed. Section 6 provides that the matter relating to contribution and other matters may be provided for in the scheme.
15. In terms of Section 6 of the said Act the contribution which shall be paid by the employer to the fund shall be 8 1/3% of the basic wages, dearness allowances and retaining allowances, if any, and the employees' contribution shall be equal to the contribution payable by the employer in respect of him.
16. Section 8 provides mode of recovery of money due from the employers.
17. Section 17 which is relevant for the purpose of this application empowers the appropriate Government to exempt prospectively or retrospectively from the operation of all or any other provisions of the scheme by a notification in the official Gazette and subject to such conditions mentioned therein. Such exemption is to be granted to any establishment to which the said Act applies if, in the opinion of the appropriate Government, the rules of its provident fund with respect to the rates of contribution are not less favourable than those specified in Section 6 and the employees are also in enjoyment of other provident fund benefits which on the whole are not less favourable to the employees than the benefits provided under the said Act or any scheme in relation to the employees in any other establishment of a similar character. Sub-clause V of Clause D of Sub-section A of Section 17 provides that whether an exemption has been granted under Section Clause A of Sub-section (1) the Board of Trustees constituted under Clause (b) shall perform such other duties as may be specified in the scheme. It is not disputed that in terms of Clause (b) Sub-section 1-A of Section 17 of the said Act the petitioner has established a Board of Trustees for the administration of the provident fund in terms of the afore-mentioned scheme framed in terms of the afore-mentioned notification of exemption dated July 9, 1963. It is also not in dispute that as in terms of the said scheme a pattern of investment has been fixed and such investment had been made in accordance with the investment pattern prescribed in the notification dated January 18, 1993. Such investment has also received recognition under Rule 3(1) of Part A of the Schedule of the Income-tax Act, 1961 in terms of the order dated August 5, 1963. Although Mr. Chatterjee appearing on behalf of the petitioner, as noticed hereinbefore, submitted that the petitioner is liable in terms of the scheme appended that the letter dated June 12, 1990, the respondents have neither annexed nor have been able to produce a copy of the said notification. It appears that the letter dated June 12, 1990 was issued in relation to grant of exemption under Section 27-A of the Scheme vis-a-vis compliance in respect of the employees employed by or through contractors. The petitioner has categorically contended that the said Scheme has not come into being as it has not acceded to the advice of the Regional Provident Fund Commissioner purported to be conveyed to it in terms of the decision arrived at by the Central Authority. The only question which, therefore, falls for our consideration is as to whether the employer has any liability to make good the deficiencies in terms of the impugned orders or not.
18. Before we consider the said question, we may mention that it is conceded at the Bar that apart from the notification dated May 2, 1991 bearing notification No. G200015(1)/91-SS 22, no other notification has been issued by the Central Government in terms of Clause 16 of the Schedule appended to the exemption notification dated July 9, 1963.
19. We, therefore, have to proceed on the basis that the aforementioned notification dated July 9, 1963 exists and has not been cancelled will also have to proceed on the basis that the Central Government has not issued any notification imposing such other or further conditions upon the petitioner in terms of the aforementioned notification dated July 9, 1963. There cannot be any doubt that as a notification under Section 17(1-A) is required to be issued by notification in the Official Gazette, any amendment thereto is also required to be issued in the same manner. As noticed hereinbefore, the liability of an employer is contained in Section 6 of the said Act. Section 14 of the Act provides for a penal provision and in terms of Sub-section 1-A thereof an employer who contravenes or makes default in complying with the provisions of Section 6 or Clause (a) of Subsection (3) of Section 17 in so far as it relates to the payment of inspection charged or paragraph 38 of the Scheme or so far as it relates to the payment of administrative charges, shall be punishable for the terms specified therein. By reason of the aforementioned notification dated July 9, 1963 the establishment of the petitioner has been exempted from the operation of all the provisions of the said Scheme subject to the conditions specified in the schedule thereto annexed. Subsection (3) of Section 17 reads thus :
"Wherein respect of any person or class of persons employed in an establishment an exemption is granted under this Section from the operation of all or any of the provisions of any Scheme (whether such exemption has been granted to the establishment wherein such person or class of persons is employed or to the person or class of persons as such), the employer in relation to such establishment-
(a) shall, in relation to the provident fund, pension and gratuity to which any such person or class of persons is entitled, maintain such accounts, submit such returns, make such investment, provide for such facilities for inspection and pay such inspection charges as the Central Government may direct;
(b) shall not at any time after the exemption, without the leave of the Central Government, reduce the total quantum of benefits, in the nature of pension, gratuity or provident fund to which any such person or class of persons was entitled at the time of the exemption; and
(c) shall, where any such person leaves his employment and obtains re-employment in another establishment to which this Act applles, transfer within such time as may be specified in this behalf by the Central Government, the amount of accumulations, to the credit of that person in the provident fund of the establishment left by him to the credit of that person's account in the provident fund of the establishment in which he is re-employed or, as the case may be, in the fund established under the Scheme applicable to the establishment."
20, The liability of the petitioner, if any, is limited in terms of Section 6 or Clause (a) of Subsection (3) of the Section 17 of the Act. He has no other liability once a notification is issued under Section 17 of the Act. As indicated hereinbefore, in terms of Clause (b) of Sub-section (1-A) of Section 17, the liability of the employer is to constitute a Board; the terms and conditions of service of the member of the Board being as specified in the Scheme. Clause (d) of the said provision imposes the duties upon the Board of Trustees so constituted Sub-section (1-B) of Section 17 makes the Board of trustees liable for punishment in the event any contravention or default is made by them in complying with the provision of Clause (d) thereof as if an offence has been committed under Sub-section (2-A) of Section 14 of the said Act.
21. From what has been stated hereinbefore it is evident that after the Board of Trustees is constituted all matters governing the management of Trust remains with the Trustees except what has been laid down under Clause (a) of Sub-section (3) of Section 17.
22. Thus once a Trust is constituted the petitioner has no say in the matter, in the event any violation of the terms of the conditions of the Scheme takes place, the remedy of the respondents is to withdraw the exemption for breach of any of the conditions referred to in the Schedule appended to the said notification dated July 5, 1963 or proceed as against the trustees in terms of Section 14(2-A) of the Act if any occasion arises therefor. There cannot be doubt whatsoever that the said Act is a beneficient Act but as is well known a beneficient Statute should not be so construed so as to operate in a different field and make a person liable to which it is not under the said Act or the Scheme framed thereunder, It is true that paragraph 60 of the Scheme framed under Section 5 of the Act provides for a declaration as regards interest, but the said provision imposes a duty upon the Commissioner and not upon the Trustees. Our attention has not been drawn to any provision of the Scheme in terms whereof while performing any duties thereunder the Board of Trustees is required to pay the same interest which may be declared by the Central Government in terms of paragraph 60 of the said Scheme. It is, however, not necessary for us to consider the matter any further as admittedly the Board of Trustees is not being proceeded with by the respondents. Sufficient it is to say that when a scheme is framed, the appropriate Government has to satisfy itself as to whether exemption if granted shall fulfil the conditions specified under Section 17 or not such satisfaction must be arrived at by the appropriate Government at the time of grant of such an exemption and the same is not a continuous process. The Scheme framed in terms of Section 17 of the Act has also a statutory force in Tata Iron and Steel Company Limited (supra), upon which strong reliance has been placed by Mr. Chatterjee indicates three things:
(1) The exemption under Section 17 is incorporated in the Act for getting better benefits for the employees of an establishment;
(2) The exemption is granted with a view to avoiding duplication that is to say, for framing a scheme by the appropriate Government on the line as framed by the establishment itself; and (3) That the exemption is not meant to deprive the employees concerned of the benefit of a provident fund, but to ensure to them the continuance of the benefit.
23. The Full Bench of the Patna High Court categorically held that the purpose of Section 17 is the same as that of a scheme under the said Act. The Full Bench clearly held that notwithstanding the exemption granted under Section 17 of the Act appropriate Government does not lose its hold as there are built-in-safeguards provided therein once such a scheme granted in terms of Section 17 of the Act is considered to be a scheme under the Act itself. Any direction upon the Board of Trustees could be made only in terms thereof and not in any other manner.
24. It is now well known that a Statutory Authority must act within the four corners of the Act, unlike a natural person can perform only such acts what are contemplated under the statute and cannot do anything which is not provided for therein. In terms of Clause 16 of the Scheme framed under Section 17 of the Act, the Central Government could have issued a notification imposing additional condition but unless the same is done, the Board of Trustees, far less the petitioner, can be saddled with any additional liability to which is not contemplated therein. Submissions of Mr. Chatterjee to the effect that the terminologies used in Sub-section (1) of Section 17 should be construed in such a manner so as to provide for the same facilities as would be conferred by the Central Government upon employees of the other establishment by way of continuous process cannot be accepted. There cannot be any doubt that the rate of interest is one of the facilities which can be conferred upon under the said Act but such other benefits may include:
a) Quicker and speedier payment of refundable loan.
b) Quicker and speedier payment of non-refundable loans.
c) Quicker and speedier settlement of the outgoing member's account.
d) Quicker and speedier settlement of the members account who dies in harness.
e) Quicker and speedier settlement of transferred member's account.
25. If the construction of Section 17(1) as submitted by Mr. Chatterjee is accepted, the same would give rise to various difficulties, particularly in view of the fact that the investment being a long term process, the rate of enhanced interest cannot be paid by the Board of Trustees which they may not earn from their sources of investment. If any other construction is made, the exempted scheme would be at peril. The Board of Trustees and/or the employer in our considered opinion cannot be saddled with any other or further monetary liability unless such condition is specifically imposed upon them. Had it not been so, it was not necessary for the respondents to specifically provide such a clause by way of Clauses 20 and 21 in the Schedule appended to its letter dated June 12, 1990. Had such clauses been incorporated in the notification dated July 9, 1963, the employer and/or employee of the Board of Trustees could have been made liable or making good the deficiencies. If the Board of Trustees were unable to pay the interest at the rate declared by the Central Government or to make good any other loss that might be caused to the provident; fund due to theft, burglary, defalcation, misappropriation or any other reason, the condition of exemption of notification being statutory in nature, any pecuniary liability or penalty cannot be thrust upon an employer dehors the same. The said Act apart from being a beneficient Statute, is also a penal Statute. By reason of the impugned orders, the petitioner has been asked to incur some financial liabilities and in fact had been threatened that on its failure to do so, action may be taken against it in terms of penal provisions, apart from them threatening that the exemption notification may be cancelled. In any event as indicated hereinbefore, the penal provision sought to betaken being under Section 14(2-A), even according to the Respondents it must be held that action could only be held against the Trustees and not against the petitioner. In fairness to Mr. Chatterjee we may notice an order dated September 26, 1993 passed by a learned single Judge of this Court in Matter No. 3557 of 1993 (G.E.C. Alsthom India Ltd. v. The Regional Provident Fund Commissioner) wherein a learned single Judge directed the petitioner thereof to pay the difference of 3% interest in the said order is not a speaking one. The said order is a cryptic one. It does not contain any reason and therefrom it cannot be deciphered as to under what circumstances such orders have been passed. The fact involved in the said writ application as also the questions raised therein are also not decipherable.
26. Before we part with this case we may observe that the Regional Provident Fund Commissioner or other competent authorities may pass an appropriate order as regards the offer of the petitioner that the Board of Trustees shall surrender the entire trust and the securities in their favour so as to enable them to take over the same and they may manage the trust or take such other action or actions in relation thereto in terms of the provisions of the Act and the Scheme framed thereunder.
27. We may further notice that in fact the Regional Provident Fund Commissioner-I in its letter dated July 19, 1994 as contained in annexure 'N' to the writ application already directed the petitioner to surrender the fund to the Regional Provident Fund Commissioner if they are not able to pay interest at the Statutory rate. We hope and trust that appropriate action in accordance with law would be taken by the respondents at an early date so that the concerned employees may get the benefits.
28. The petitioner in terms of its offer, is expected to see that the Board of Trustees may surrender the trust, all its assets and liabilities together with all Books of Accounts etc. at an early date and preferably within a period of four weeks from the date of receipt of the operative portion of this order.
29. For the reasons aforementioned this writ application and the appeals are allowed and the respondents are hereby directed to forbear from giving effect to or acting pursuant to the impugned orders as contained in Annexures 'H' & 'N' to the writ application and also not to realise the difference of interest from the petitioner in terms of the notification dated May 2, 1991 as contained in Annexure 'E' to the writ application. However, it goes without saying that it will be open to the respondents to take such action or actions as it may think fit in terms of the Scheme and/or in terms of the provisions of the said Act as against the petitioner or the Board of Trustees as in accordance with law. There will he no order as to costs.
30. Let plain copy of the operative part of the judgment counter-signed by the Assistant Registrar (Court) be supplied to the learned counsel for the parties on usual undertaking.
Satyanarayan Chakrabarty, J.
31. I agree.