Telangana High Court
M/S. Cherukuri Group, vs The Employees Provident Fund Appellate ... on 5 June, 2023
Author: K. Lakshman
Bench: K.Lakshman
THE HON'BLE SRI JUSTICE K. LAXMAN
WRIT PETITION No.23523 OF 2011
ORDER:
Heard Sri Pillada Satyanarayana, learned counsel appearing for the petitioner and Sri G. Venkateshwarlu, learned Standing Counsel appearing for respondent No.2 - Corporation. Perused the record.
2. This writ petition is filed to call for the records pertaining to impugned order dated 12.07.2011 in ATA No.61 (1)/2008 passed by first respondent, set aside the same by declaring that the consultant are not covered by the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act', for brevity).
3. The second respondent had passed an order dated 03.07.2007 under Section 7-A of the Act determining an amount of Rs.39,47,618/- towards contribution for the period from 05/2005 to 03/2007. Petitioner herein had 2 filed a review and the same was also rejected by the second respondent vide order dated 28.09.2007. Thereafter, petitioner herein filed an appeal under Section 7-I of Act vide ATA No.61 (1)/2008 before the first respondent and the said appeal was dismissed on 12.07.2011. Challenging the said order petitioner herein filed the present Writ petition. Vide the aforesaid order dated 03.07.2007 passed by second respondent under Section 7-A of the Act, second respondent has determined an amount of Rs.39,47,618/- for the period from 05/2005 to 03/2007 and he has specifically mentioned the month wise details of the wages and provident fund dues. He has conducted the enquiry by affording opportunity to the petitioner herein.
4. Sri K. Raghuramam, Senior Consultant of the petitioner establishment was present before second respondent during the enquiry under Section 7-A of the Act. He has produced certain documents. Thus, opportunity was provided to the petitioner establishment during the enquiry under Section 7-A of the Act. In the 3 order dated 03.07.2007 there is specific mention about the dates of hearing and participation of representatives of petitioner establishment during the enquiry.
5. Second respondent directed Sri T.N. Nandan Singh, Enforcement Officer of the petitioner establishment to submit dues/ compliance position. He has submitted dues position vide order dated 14.05.2007. On receipt of Enforcement Officer's report, fresh notice was issued to the petitioner and second respondent has conducted enquiry. He has considered rival submissions of the parties.
6. The Enforcement Officer had submitted his report on 14.05.2007, wherein it is stated that from 06/2005, the petitioner establishment is enjoying consultants for work, who were used to be done by the employees prior to 06/2005. The said consultants are being paid monthly consultation fee against employees getting their salary up to 05/2005. In the books of accounts also the petitioner is showing expenses under the head 'Consultancy Fee' and 4 these are nothing but a salary to avoid P.F. as the establishment is having different activities such as Real Estate, Jewellery Show Room and Schools etc. The petitioner establishment cannot run the said organizations and cannot conduct the aforesaid activities without employees and only with the Consultants. Therefore, according to the Enforcement Officer, the petitioner establishment has renamed its employees as 'Consultants' and salary as 'consultant fee' only to avoid Provident Fund Contributions. He has also produced the documents such as statement of establishment showing consultancy fee in respect of individual consultants month-wise from 06/2005 to 03/2007, list of branches, Copy of the ledger for the year 05/2006 to 03/2007, month-wise ledger of Swarnanjali (Jewels Division), Ledger account for the period from 04/2006 to 03/2007 and trial balance as on 31.03.2007.
7. Considering the said facts, second respondent in his order dated 03.07.2007 passed under Section 7-A of the 5 Act, further observed that from the employer's own admission and Enforcement Officer Report including details of consultant fee payments, it is obvious that all the regular work / functions which were being discharged by the employees up to 05/2005 as are being discharged by Consultants from 06/2005 onwards. Hence, the term 'Consultant' is nothing but employee only as they are getting monthly payments and even that appears to be fixed. The details of Consultants, month and amount fixed etc., are also specifically mentioned in the said order.
8. Referring to the ledger account, the second respondent further held that the so called Consultants and agents are nothing but employees of the establishment since they are engaged on long term employment are getting monthly remuneration and in case of absence of duty, their remuneration is reduced accordingly. They do all the regular work of a normal employee of any institution which work was being done earlier by regular employees only. Thus, the employer deliberately renamed his 6 employees as Consultants and their wages as Consultant Fee, but not as consultation fee which is normally paid to experts in any area for expert advice like doctors, advocates, which cannot be said of regular employees of the establishments like salesmen, teachers, drivers, office boy etc. It was further held that even otherwise, the so called consultants and agents are working for the establishment in connection with its business and for wages / remuneration and hence fit into the definition of employees as defined in Section 2 (f) of the Act. Hence, they are eligible for membership under the scheme otherwise also the persons allegedly engaged as a consultants by the petitioner establishment does not fit into the definition of consultant who is an expert in a particular field and offers expert opinion / advise on issues in his area of specialization.
9. Whereas in the present case the so called consultants are not experts in any area nor charge consultant fee but get consultant fee. It was further held that the most 7 important and starting fact in entire episode is that petitioner establishment has remitted Provident Fund up to 05/2005 as they were having employees up to 05/2005 and from 06/2005 having only consultants, but as per ledger copies enclosed with the Enforcement Officer's report, dated 14.05.2007, meaning that in hurry to manipulate their records employer has shown consultants from 05/2005 instead of 06/2005. With the said findings, second respondent rejected the contention of the petitioner establishment regarding status of his employees. Thus, the second respondent has considered the submissions made by petitioner establishment and also the report and documents submitted by the Enforcement Officer. It is a reasoned order.
10. Petitioner had filed a Review Application in terms of Section 7-B of the Act and the same was rejected by second respondent vide order dated 28.09.2007 for the following reasons:
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1. The date of receipt of 7-A order is mentioned differently in the letters, dated 08.08.2007 and 09.08.2007. Even considering the date of receipt as 09.08.2007, the prescribed time limit of 45 days elapsed on 22.09.2007 itself. The rule does not provide any option for submission of the application of review on the next day if 45th day falls on a public day.
2. The reasons furnished in the application for review are not new and the same were already discussed in the order passed under Section 7A of the Act.
3. No new or important matter of evidence in support of the allegations of the petitioner for review was enclosed to the petition.
11. Thereafter petitioner herein had preferred an appeal under Section 7-I of the Act vide ATA No.61 (1) of 2008 before the first respondent Tribunal. Vide order dated 12.07.2011, first respondent dismissed the said appeal referring to the definition of employee under Section 2 (f) of the Act and holding that the dominant feature in the definition is that the person must be working in or in 9 connection with the work of establishment and receiving the wages. In the present case, it is not disputed that the consultants and the CAs were working in connection with the work of the establishment and they are paid for it. In the definition of word employee the word wage is used but not the word basic wages. It was further held that the petitioner has not exclusive control over the accountants. Exclusive control is not necessary criteria to establish master and servant relationship. The second respondent has also placed reliance on the Judgment of Andhra Pradesh High Court in South India Research Institution v. RPFC1, wherein it was held that the test of being served is not submitted to order, being a part and person of the organization. With the said findings first respondent dismissed the appeal filed by the petitioner.
12. Challenging the said order, petitioner herein filed the present Writ Petition.
1982 1 LLN page 53 1 10
13. Learned Counsel for the petitioner would submit that both the second and first respondents failed to consider that the 'consultants' including 'Charted Accountant' are not employees within the definition of Section 2 (f) of the Act and the remuneration / consultation fee paid to them is not a basic wage in terms of Section 2 (b) of the Act. Second respondent is not provided proper opportunity to the petitioner while conducting enquiry under Section 7-A of the Act. The first respondent ought to have consider the contention of the petitioner that the consultants are engaged by the petitioner exclusively, in as much as they are also working for other companies like LIC, Sahara, Sri Ram Chits, Margadarshi, etc., and as such multiple contribution to provident fund by such organization treating the consultants as employees is virtually impossible and contrary to the very provisions of the Act itself.
14. Learned counsel for the petitioner also filed written arguments in the same lines. In paragraph No.6 of the 11 written arguments learned counsel for the petitioner gave certain examples and the same are extracted below:
"1. For example a rich businessman may engage the services of a doctor for himself and his family members consisting of sugar patients, blood pressures and heart patients etc., this particular doctor comes to his office or house regularly every day for check-up. He is paid a monthly fee for his services.
2. For example a rich businessman and his family members may not have time to do their personal work like saving, washing clothes, Ironing etc., he engages the services of these people to do all these works on daily basis in his home at his doorstep for which a monthly amount is fixed and a calculated as per his presence in the month and is paid at the end of the month. In case of his absent for any particular day, the amount for the day is deducted.
3. Similarly we can give many examples of this kind. The actual point is, is it possible for us to engage services of these people on full time basis even though when there is no work for the whole day and pay him huge amounts of remunerations. Like us, like many. These people render the services to many other people like us to complete their total income requirement to maintain his family.
4. It is practically possible for accepting your version of qualifying a person like Dubai servant- Maid, Washer man, Dry Cleaer, Cooks etc., who are rendering their services to us on particular time to be treated as employee and all applicable acts applied upon. In that case every self-employed 12 person for that matter each and every one rendering various services should be brought under the purview of the Act.
5. Now let us come to definition of the word "Expert". As per the Oxford Dictionary the meaning of the "Expert" is "having skill at a task or knowledge in the subject". As mentioned in the order consultation fees are paid to experts like Doctors and Advocates. That means the term "Expert" is applicable to only those two type of professions and all other professionals are not experts.
6. One who studies MBBS becomes a Doctor. One who studies LLB becomes Advocates, one who studies B.Com becomes an Accountant one who study MBA becomes a Professional Manager. One who studies B.Ed becomes a Teacher etc., and so on.
7. For that matter every educational course given a graduation level to a person is to make him expert in that particular subject. The term Expert cannot be confined to only Doctors and Advocates as cited by the respondents. Taking respondents version in to make him expert in that particular subject. The term expert cannot be confined to only doctors and advocates as cited by you. Taking respondents version into consideration means nothing but insulting and degrading all other professions and professionals and amounts to Breach of social justice.
8. In today's world every particular work is skilled upon, expertise upon and then only rendering their services to general public. For example physical Fitness Centres, Beauty Parlours, 13 Massage Parlour etc., They are giving unique services ultimately becoming a big industry by itself. To know all these kinds of latest developments we need have good views of the current changes and happenings of the society."
15. The said arguments of learned counsel for the petitioner are absurd and they are against the object of the Act. It is relevant to note that the EPF and MP Act is a piece of Welfare Legislation intended to extend some social security benefit of the employees / workmen engaged in the factory or establishment. It is a beneficial piece of legislation and amply be described as a social security status. The object of which is to ensure better future of employee of his retirement and the benefits of the retirement and in case of his earlier death. The amount is payable in one lump sum and as a matter of fact it has payable in retirement or death of an employee. Thus, the Act is aimed at improving the conditions services of employees in factories and other establishments. Therefore, the aforesaid submissions made by learned counsel appearing for the petitioner in the written arguments are 14 contrary to the very object of the Act. Therefore, the contentions of learned counsel appearing for the petitioner are unsustainable.
16. Learned counsel for the petitioner further contended that the second respondent has initiated enquiry under Section 7-A of the Act without identification of actual beneficiaries. He has placed reliance on the principle laid down by the Hon'ble Apex Court in H.P. State Forest Corporation v/s Regional Provident Fund Commissioner2. The said contention of the petitioner is unsustainable since opportunity was given to the petitioner establishment by second respondent during the enquiry under Section 7-A of the Act. But the petitioner failed to provide the details of the beneficiaries and however, second respondent has directed the Enforcement Officer to conduct inspection, who in turn, conducted inspection and submitted report on 14.05.2007. The second respondent has considered the said report in the order passed under 2 (2008) 5 SCC 756 15 Section 7-A of the Act. He has also mentioned the details of the employees, period, basic wages paid and the same are specifically mentioned in a Tabular form. Therefore, the said contention of the petitioner is unsustainable. The facts of the case in HP State Forest Corporation supra are different to the facts of the present case.
17. It is further contended by learned counsel for the petitioner that second respondent has conducted enquiry without application of mind. The said contention of the learned counsel for the petitioner is contrary to the record and also the order passed by second respondent under Section 7-A of the Act.
18. As discussed supra, second respondent has considered contentions of petitioner establishment as well as the report of the Enforcement Officer. Reasons were assigned. Therefore, the petitioner cannot contend that the second respondent passed order under Section 7-A of the 16 Act without application of mind. The said contention of learned counsel for the petitioner is unsustainable.
19. It is further contended by learned counsel for the petitioner that second respondent intended enquiry without establishing an employer and employee relationship between the petitioner and consultants. As discussed supra, the second respondent has considered the report submitted by the Enquiry Officer and also the fact that the petitioner establishment named the employees as Consultants / Agents to avoid Provident Fund contribution. The second respondent also categorically held that it is not the nomenclature to be considered and it is the nature of duty performed by that person engaged by the petitioner to be considered for the purpose of coming to a conclusion with regard to employee and employer relationship.
20. On consideration of said facts, second respondent gave a specific finding that all the persons engaged by 17 petitioners are working on regular basis and they are not providing any expert opinion like Doctors, Advocates etc.,. They are regular employees. Petitioner named them as Consultants only to avoid Provident Fund Contribution. Thereafter the learned counsel for the petitioner cannot contend that second respondent conducted enquiry under Section 7-A of the Act without establishing employee- employer relationship. He has placed reliance on the Judgment in Karachi Bakery, Hyderabad v/s Regional Provident Commissioner, Hyderabad3.
21. It is relevant to mention that in the said Judgment two firms apart from the petitioner firm were treated as independent units and so treated employees of those independent units engaging their own labour for their purpose of manufacturing of separate products cannot be brought under Section 2 of the Act. Therefore, the facts of the said case are different to the facts of the present case. 3 1991 (62) FLR 627 18
22. It is further contended by learned counsel for the petitioner that second respondent is not having jurisdiction to pass under Order 7-A of the Act. The said contention of the learned counsel for the petitioner is unsustainable since Section 7-A of the Act deals with determination of amounts due from the employer and the second respondent is having power to determine the said money due from employer. Therefore, petitioner cannot contend that the second respondent is not having jurisdiction.
23. It is relevant to note that petitioner has taken said contention for the first time. He has not taken the said contention during the course of enquiry under Section 7-A of the Act and also while filing the application under Section 7-B of the Act. It has not raised the said ground in the appeal filed by under Section 7-I of the Act and it is also relevant to note that the petitioner herein has filed a writ petition vide WP.No.23043 of 2007 challenging the notice dated 28.09.2007 and in the said Writ petition also 19 petitioner never raised the said ground. Therefore, the said contention of the petitioner is unsustainable.
24. In the Judgment, dated 06.06.2002 in WP No.1121 of 2022 between M/s. the AGA Khan Academy, Hyderabad Vs Assistant PF Commissioner, (C-IV), Regional Office-I, Hyderabad and another, challenge was to the order passed under Section 7-C of the Act. Considering the language used in Section 7-C of the Act, this Court held that the employer shall be given reasonable opportunity of representing his case before re-determining the amount due from him. Whereas in the present case, second respondent gave ample / fair and reasonable opportunity to the petitioner to submit its contentions and also documents. The petitioner herein has availed the said opportunity. Therefore, the facts of the said case are different to the facts of the present case.
25. In case of HP State Forest Corporation (supra), considering the period of coverage and that opportunity 20 was given, matter was remanded to the authority under Section 7-A of the Act for redetermination of the dues. Whereas in the present case, second respondent gave opportunity to the petitioner and therefore, the facts of the said case are different to the facts of the present case.
26. Likewise, the facts of the case in Regional Provident Fund Commissioner vs Faridabad Thermal Power Station and another4, relied upon by the petitioner are also different to the facts of the present case. In the said case respondent-corporation made a submission that it will furnish list of contractors afresh within one month and therefore the Court has considered the said fact.
27. In Assistant Provident Fund Commissioner v. Nand Lal and Company5, a Division Bench of Patna High Court held that the procedure for assessment under Section 7-A of the Act is for assessing the dues payable under the Act which is for the benefit of identified 4 Vide order, dated 15.01.2015 in CWP No.3807 of 2013 5 Letter Patent Appeal No.391/2013, dated 28.03.2016 21 individuals. Therefore, the facts of the said case are contrary to the facts of the present case.
28. It is relevant to note that Section 2 (b) of the Act deals with definition of basic wages. It is extracted below:
Section 2(b): In The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
(b) "basic wages" means all emoluments which are earned by an employee while on duty or 4[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;
29. Likewise Section 2 (f) of the Act deals with the definition of the 'employee' and it is also extracted below:
Section 2(f): In The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
(f) "employee" means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of 7[an establishment], and who gets, his wages 22 directly or indirectly from the employer, 8[and includes any person,--
(i) employed by or through a contractor in or in connection with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment;] 9[(ff) "exempted employee"
means an employee to whom a Scheme 5[or the Insurance Scheme, as the case may be,] would, but for the exemption granted under 10[***] section 17, have applied;
30. Perusal of the aforesaid definitions would reveal that any person who is employed for wages in any kind of work, manual or otherwise is entitled for and his remuneration will be treated as 'basic wage' and employer has to pay contributions under Provident Fund. Therefore, the petitioner herein cannot contend that both 2nd and 1st respondents have not considered the contentions of the petitioner that consultants are not employees and consultation fee paid to them cannot be considered as basic wages. At the cost of repetition, as discussed supra, second respondent considered the Enforcement Officers report, dated 14.05.2007 and also on verification of the 23 documents and on consideration of the contentions of the parties gave a specific finding that all of them are engaged by the petitioner establishment as regular employees and they are doing regular work. Petitioner establishment renamed them as consultants only to avoid Provident Fund dues. In fact they were employees of the petitioner.
31. It is relevant to note that learned counsel for the petitioner has filed self-declarations said to have been given by the agents / consultants at the time of their joining (137) along with memo, dated 11.10.2022 vide USR No.89563 of 2022.
32. It is also relevant to note that petitioner establishment did not produce the self-declarations before the second respondent / Enquiry Officer under Section 7-A of the Act. The said self-declarations are of 2005 ad 2006. In all the aforesaid self-declarations it is mentioned that they are self-employed individuals rendering their services as a Accounting Consultant etc. They are not the 24 employees of the organization. Therefore, they have requested not to apply provident fund provisions or any other provisions that are applicable to regular employee. The said self-declarations are almost same. The said self declarations filed by the petitioner are manipulated / created and no prudent person will submit such a declaration ignoring the benefits provided to them under the aforesaid Act, which is social piece of legislation.
33. Moreover, any organization cannot engage 137 agents/consultants. The said fact itself would prove that the said self-declarations were created / manipulated for the purpose of the present case. Therefore, the same cannot be considered.
34. As stated above, despite granting an opportunity petitioner failed to file the said self-declarations and failed to produce some of executants of the said alleged self- declarations before the authority under Sec.7-A of the Act 25 during enquiry. The said fact also would reveal that they are created for the purpose of the present case.
35. As discussed supra, the order passed by the second respondent dated 03.07.2007 under Section 7-A of the Act is a reasoned order and well founded, which was confirmed by first respondent in the order dated 12.07.2011 in ATA No.61 (1)/2008. In both the orders findings are con- current. Petitioner herein failed to make out any case to interfere with the said concurrent findings which are reasoned and well founded.
36. Viewed from any angle, the present writ petition is liable to be dismissed and accordingly dismissed. There shall be no order as to costs.
Miscellaneous Petitions, if any, pending in this writ petition shall stand closed.
__________________ K. LAKSHMAN, J June 05th, 2023 MMR/PN