Patna High Court
Indian Mica And Micanite Industries ... vs Union Of India (Uoi) And Anr. on 13 December, 1966
Equivalent citations: AIR1967PAT369, (1969)ILLJ436PAT, AIR 1967 PATNA 369, ILR 46 PAT 370 (1969) 1 LABLJ 436, (1969) 1 LABLJ 436
JUDGMENT A.B.N. Sinha, J.
1. The petitioners, the Indian Mica and Micanite Industries Limited, have obtained a rule under Articles 226 and 227 of the Constitution of India calling upon the opposite parties, the Union of India and the Regional Provident Fund Commissioner, Patna, to show cause why the decision of the Government of India (Annexure B) purported to have been given under Section 19A of the Employees' Provident Funds Act, 1952, hereinafter referred to as 'Act', holding that in so far as the petitioners' factory was engaged in the manufacture of various micanite products which were electrical insulating materials and thus came within the scope of electrical, mechanical or general engineering products, one of the items under Schedule 1 of the said Act, and the letter, dated the 12th February, 1986 (Annexure C), addressed to the petitioners by the Regional Provident Fund Commissioner. Bihar, demanding provident fund deposits with effect from November, 1960, be not quashed and for directions to be issued to the opposite parties not to give effect to the impugned decision and the demand mentioned therein. Cause has been shown on behalf of the opposite parties and reply thereto has also been filed by the Director of the petitioner company.
2. It is not disputed that the petitioner company manufactures the following articles:
(1) Heat resisting micanite sheets.
(2) Commutator micanite sheets.
(3) Moulding micanite sheets.
(4) Flexible micanite sheets.
(5) Micafolium.
The processes employed in the manufacturing of the aforesaid articles are given in Annexure A to the writ petition.
3. As early as the 12th September, 1960, the Regional Provident Fund Commissioner, Bihar, appears to have informed the petitioners that the petitioners' factory was covered by the Employees' Provident Funds Act, 1952, with effect from the 30th September, 1960. The petitioners, however, took the stand that their factory was not covered under the Act; and, al one stage it appears that the view entertained was that the petitioners' factory was covered because it came under 'mica Indus try', which was also one of the items included in Schedule I to the Act. Later, on a close examination of the various products manufactured by the petitioners' factory, the Government of India decided that the petitioners' factory was engaged in the production of electrical insulating materials and as such was covered under the electrical, mechanical or general engineering products, another item of Schedule f to the Act and, the petitioners were informed of the said decision under Annexure B, dated the 20th January, 1965. Thereupon, under Annexure C, dated 12th February, 1965, the petitioners were required by the Regional Provident Fund Commissioner, Bihar, Patna, to take immediate steps "to clear all the past provident fund dues from November, 1960, to date to avoid any legal complications". The above mentioned decision of the Government of India contained in Annexure B and the order of the Regional Provident Fund Commissioner contained in Annexure C. as mentioned above, are sought to be quashed as ultra vires, void and illegal.
4. Mr. Basudeva Prasad, appearing for the petitioner company, has raised two contentions in support of this application: (1) that the company was not engaged in manufacturing any electrical engineering products and, as such, the Act was not applicable to them, and (2) that at any rate the demand for provident fund contribution with retrospective effect from November, 1960, was wholly illegal.
5. Section 1, Sub-section (3) of the Act as amended by Act 46 of 1980 provides that subject to the provisions contained in Section 16, the Act would apply (a) 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 (b) to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette specify in this behalf. Section 2(1) defines 'industry' as meaning any industry specified in Schedule I and includes any other industry added to the Schedule I and refers to any industry engaged in the manufacture of the several items mentioned therein. In the said list the very third item is "Electrical, mechanical or general engineering products". An explanation having four Clauses (a), (b), (c) and (d) was added to the said Schedule I by Act 37 of 1953 Clause (a), which is relevant for our present purpose, of the Explanation says that in this Schedule, without prejudice to the ordinary meaning of the expressions used therein, the expression "electrical, mechanical or general engineering products" includes amongst other things electrical lamps (not including glass bulbs) and electric fans and electrical domestic appliances, storage and dry batteries. The twenty-fifth item under Clause (a) of the Explanation speaks of parts and accessories of products specified in items 1 to 24. It follows that parts and accessories of electric lamps or of electric fans and electrical domestic appliances will be included in accordance with the Explanation itself under the item 'electrical products' As the word 'accessory' has not been defined in the Act anywhere, the dictionary meaning of that word will have to be accepted 'Accessory' is defined in the Oxford Dictionary as 'something contributing in subordinate degree to a general result or effect; an adjunct or accompaniment'. Admittedly, the petitioner-company is engaged in the manufacture of different types of micanite sheets and micafolium in my 'opinion, if any or all of these products manufactured by the petitioner-company are used as parts and accessories of either electric lamps or electric fans or electrical domestic appliances, etc., there can be no doubt that the petitioners' establishment would be an industry within the meaning of Schedule T of the Act and will be covered by the same In Chemical Synonyms and Trade Names, a dictionary of commercial hand-book by William Gardner (Fifth Edition) by Edward I. Cooke (1948) at page 337, micanite is described as "a mica material built up of small plates of mica with an insulating material such as shellac or on a foundation of paper or cloth, and. used as an electrical insulating material". In the same book at page 336. 'micafolium' is described as "a general name for electrical insulators made from mica splittings and paper" The learned Counsel produced before us at the hearing a printed hand-out sheet issued by the Mica Export Promotion Council. Calcutta, a registered company under the Indian Companies Act, 1956, and sponsored by the Government of India Amongst other details about the various uses of mica, this hand-out mentions one of the uses of mica as under:
"As an insulation for heating elements in electrical household appliances such at Flat-irons. Toasters. Coffee Percolators. Kettles, Ovens. Soldering Irons, etc."
It appears from Annexure A to the writ petition that in the main the materials required for producing several types of micanite sheets as well as micafolium are mica splitings, shellac, paper, etc. It follows from the aforesaid discussions that though it may not be said that the petitioner-company was engaged in the manufacture of electrical goods as such, it is certainly engaged in the manufacture of parts or accessories which are used as adjunct or accompaniment to electrical goods. In this view of the matter. I find that there is no substance in the first contention of the learned Counsel that the Act had no application to the petitioner-company
6. The petitioner under Annexure C has been required to take immediate action to clear all the past provident fund dues from November, 1960. This letter of the Regional Provident Fund Commissioner, Bihar, Patna, is dated the 12th February, 1965. The contention of the learned Counsel, appearing for the petitioner-company, is that the demand for provident fund contribution with retrospective effect from November, 1960, was wholly illegal and should be quashed This contention as well, in my opinion, is wholly unsustainable.
7. It appears that when pursuant to Notification No GSR 312, dated the 5th March, 1960, issued under Section 4(1) of the Act by the Government of India, 'mica industry" was added to Schedule I of the Act, respondent No. 2 sent a copy of the said notification to the petitioner-company under his letter, dated the 12th September, 1960 (Annexure A to the counter affidavit) informing the petitioner-company that it was covered on account of the said notification by the Act. Thereupon, the petitioners took the stand that their industry could not be called 'Mica Industry', because in their factory they were manufacturing various insulating materials, like micanite, etc.. of which mica formed only one of the raw materials The petitioners, in their letter, dated the 30th January, 1961, to the Regional Provident Fund Commissioner, Bihar (Annexure B to the counter-affidavit) and in another letter, dated the 4th February, 1968, to the Government of India. Ministry of Labour and Employment (Annexure C to the counter-affidavit) categorically stated that they had started manufacturing electrical insulating materials from October, 1957. The Government of India, after re-examining the question in the light of the information given by the petitioner-company that they were manufacturing various insulating materials, like micanite, etc., informed the petitioners that if not under 'mica industry' they would be covered by another scheduled industry, namely, 'Electrical, Mechanical or General Engineering products'. The last letter in this connection is dated the 20th of January, 1965 (Annexure B to the writ petition). Learned Counsel has urged that on the facts of this case the demand upon the employers to put in the provident fund contribution and other charges from November, 1960, was oppressive and illegal and in support of this contention, has relied on a decision of the Calcutta High Court of a learned Single Judge reported in Aluminium Corporation of India Ltd. v. Regional Provident Fund Commissioner, AIR 1968 Cal 570, and on a decision of another learned Single Judge of the Madras High Court in Subbaier (K. R.) v. Regional Provident Fund Commissioner, 1963 (1) Lab LJ 23=(AIR 1968 Mad 112). I am. however, of the opinion that none of these cases are of assistance to the petitioners in the present case. I will briefly refer to the facts of the Calcutta case. The firm in that case had a provident fund scheme already in existence. It objected to the applicability of the Act and this led to an order, dated the 23rd October, 1957, of the Government of India under Section 19A of the Act, which directed the firm to pay the employers' share of contribution from the 1st November, 1952 to the 31st October, 1956, and administrative charges on both the employers' and employees' shares and damages and also the employers' and employees' share of contributions from the 1st November, 1956, with administrative charges thereon, leaving to the employees to pay their share of the contribution for the former period if they so desired. The learned Judge pointed out as many as seven objections to the validity of the directions for payment of the demands under the various heads mentioned above for the back period. He stressed in particular that (1) it was impossible to make the required payment in respect of employees who had left the service during the five years that elapsed between the 1st November, 1952, and the date of the Government's order, (2) that such persons would have drawn the accumulations in the existing provident fund and left the employment, and (3) that no purpose would be served by asking the employers to pay their contribution to the provident fund. Equally, it would be Impossible to apply Clause 32 of the scheme for recovering from such persons who had left the employers. The retrospective application of several other provisions of the scheme relating to the contribution cards and submission of returns would be quite impossible. He also held that the claim for the employers' share of the administrative charges would be clearly illegal and inconsistent with the Act, because the administrative charges were intended to meet the cost of administering the fund and for five years retrospectively there was no fund, and, therefore, no cost of administration was incurred therefor. Coming to the damages, the learned Judge observed that on earlier stages, the Government had told the employers that the Act did not apply to them, that only after the 23rd October, 1957, the difficulty whether the establishment was a factory or not was removed and that consequently no question of payment of damages under Section 14B of the Act arose. The facts of the instant case are quite obviously dissimilar to the facts of the Calcutta case. Unlike in the Calcutta case, there was no provident fund scheme existing in the petitioner-company prior to the coming into existence of the Act, and there can be no question of any employee drawing his accumulations and leaving the employment. In my opinion, therefore, the Calcutta decision is clearly distinguishable on facts. Coming to the decision of the learned Single Judge of the Madras High Court In 1968 (1) Lab LJ 23=(AIR 1963 Mad 112), the facts were as follows. The petitioner-firm in that case ran a factory from 1942 for manufacturing tapes, lamp-wicks, etc with more than fifty persons in its employment. At an anterior stage, the firm disputed the fact that the Act would apply to the firm and the question was settled only when the Central Government passed an order on the 29th September, 1968, under Section 19A of the Act, holding that the Act applied. This decision was challenged by the petitioner in a writ application, but that application was decided against the petitioner Thereafter, there being no dispute that the petitioner firm was covered by the Act, the Regional Provident Fund Commissioner, Madras, by an order, dated the 1st September, 1969, called upon the petitioner-firm to pay (1) the employer's share of contribution to the provident fund from the 1st November, 1952 (the date on which the provident fund scheme framed under the Act became applicable to the firm) up to the 30th April, 1957 (the date when the petitioner was called upon to pay the contribution by a notice) (2) administrative charges in full calculated on both the employees' and employer's share of contribution to the provident fund under Clause 39 of the Provident Funds Scheme read with the notification of the Government, dated 31st October, 1952, and (3) damages for default calculated at 81/4 per cent per annum from the date on which the arrears fell due up to the date of remittance. The petitioner urged in the writ petition that these claims for back period were unsustainable. The learned Single Judge. Jagadisan, J., following the decision of the Calcutta High Court, referred to above, namely, AIR 1958 Cal 670, upheld the contentions of the petitioner and directed the issue of a writ of mandamus against the Regional Provident Fund Commissioner. Madras, to forbear from making collections from the petitioner for the period 1st of November 1952 to the 30th April, 1957 In regard to the claim for damages, the learned Judge accepted the contention of the Regional Provident Fund Commissioner that the claim for damages had not yet been settled but was under investigation and. therefore, did not grant any relief in regard to if it will be seen that the demand upon the petitioner firm to pay the employer's share of the contribution or the administrative charges for the period commencing the 1st of May, 1957 to the 1st of September, 1969, on which date the Regional Provident Fund Commissioner, Madras, had called upon the petitioner to pay this amount, was not struck down, and, in substance, therefore, claims for a period anterior to the date on which the petitioner-firm had been called upon to pay in the amounts were allowed. In my opinion, to that extent the Madras decision is against the contention of the petitioner-firm in the instant case.
8. Apart from the above considerations an examination of the purposes and the scheme of the Act and the provisions of the Employees' Provident Funds Scheme, 1952, framed under Section 5 of the Act will show that the claim for arrears of contribution for back period is fully sustainable in law.
9. Section 6(1) of the Act empowers the Central Government by notification to trams a Scheme called the Employees' Provident Fund Scheme for the establishment of provident funds under the Act, and Section 5(2) indicates that the Scheme framed under Sub-section (1) may provide that any of its provisions shall take effect either prospectively or retrospectively as may be specified in this behalf in the Scheme Clause 1 of the Scheme provides that Chapters I to III shall come into force at once and the remaining provisions shall come into force on such date or dates as the Central Government may prescribe by a notification. Chapter IV, in which Clause 20 occurs, and Chapter V. in which Clause 30 occurs came into force from the 1st November, 1952. Clause 26(1) of the Scheme framed under the Ac) provides:
"26 (1)(a) Every employee employed in or in connection with the work of a factory or other establishment to which this Scheme applies, other than an excluded employee shall be entitled and required to become a member of the fund from the beginning of the month following that in which, this paragraph comes into force in such factory or other establishment if on the date of such coming into force he has completed one year's continuous service or has actually worked for not less than 240 days during a period of twelve months or less than in that factory or other establishment or in any other factory or other establishment to which the Act applies under the same employer, or partly in one and partly in the other (b) Every employee employed in or in connection with the work of a factory or other establishment to which this Scheme applies, other than an excluded employee shall also be entitled and required to become a member of the fund from the beginning of the month following that in which this paragraph comes into force in such factory or other establishment if on the date of such coming into force such employee is a subscriber to provident fund maintained in respect of the factory or other establishment or in respect of any other factory or establishment to which the Act applies under the same employer.
Provided that where the Scheme applies to a factory or other establishment on the expiry or cancellation of an order of exemption under Section 17 of the Act. every employee who but for the exemption would have become and continued as a member of the fund, shall become a member of the fund forthwith."
Clause 30 provides that in the first instance the employer shall pay both the contribution payable by himself and also, on behalf of the member employed by him directly or by or through a contractor, the contribution pay-able by such member Clause 30(3) says that it shall be the responsibility of the principal employer to pay both the contribution payable by himself in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor and also the administrative charges Sub-section 3(a) of Section 1 of the Act provides that subject to the provisions contained in Section 16 of the Act the Act applies to every establishment which is a factory engaged in any industry specified in Schedule I. Section 16(1)(b), which is relevant for our present purpose, reads as under:
"This Act shall not apply to any other establishment employing fifty or more persons or twenty or more, but less than fifty, persons until the expiry of three years in the case of the former and five years in the case of the latter, from the date on which the establishment is or has been set up."
In the instant case, as already pointed out the establishment can be said to have been set up in October, 1957 and it is not denied that at the relevant time and even afterwards the petitioner's establishment had been and is employing fifty or more persons Calculating three years from October, 1957, it is quite clear that the Act became applicable to the petitioner-company from November, 1960. The main purport of the Act and Scheme framed thereunder obviously to bring into existence a compulsory provident fund applicable to all industries to which the Act applies with effect from the date when the Scheme has been declared applicable to them The principal duties laid upon the employer are to put the Scheme into operation forthwith and to make the contributions of both the employer's and the employees' share then and there and deduct the latter's share from the salary of the employees for the purpose of adjusting it against the amount which they had paid to the fund in advance In Clause 26 of the Scheme, quoted earlier, the words used are: "Every employee shall be entitled and required to be come a member of the fund" In the context of the Act, the word 'entitled' means that the employee has got an absolute right to get the benefits of the Act. The word "required"
implies an obligation on the employer to treat all the employees, who are qualified and who are not exempted as members of the fund, and to pay the contribution to the fund (both the employer's and the employees') from the date of the coming into force of the Scheme without allowing any interval to lapse either for the awaiting of a notice of demand from the Provident Fund Commissioner or for clearing a point of doubt or difficulty. If any, by getting an order from the Central Government under Section 19A. of the Act. The word "required" has come in repeatedly for judicial interpretation. In the law Lexicon of British India by Ramanatha Aiyar, the word "required" has the meaning of "to make necessary; to demand, to ask as of right; to claim, to render necessary as a duty". It is clear that the word "required" in the above uses means "a mandate or a command". In view of the obligatory nature of the provisions of the Act and the Scheme framed thereunder, giving no choice to the employer to postpone the application of its provisions, it appears that the word "required" in Clause 26 of the Scheme has to be given a mandatory and not merely a directory meaning and that it Implies an obligation whose effect is that every employee who is not exempted and who satisfies the required qualification of service automatically becomes a member of the fund from the date of the coming into force of the Scheme. The argument of hardship or injustice on which stress was laid in the two decisions referred to and relied upon by the petitioners' Counsel has, in my opinion lost much of its substance subsequent to the insertion of Section 7A into the Act in 1963 That section gives an opportunity to the employer to press his objections before the authorities mentioned therein to any claim for payment made against them, and this will include the ground that the claim was oppressive and unjust in nature. After this amendment, the authorities are now obliged to decide the matter judicially after giving a proper hearing to n employer. I think cases of hardship may be pleaded and relief obtained, for example regarding the employees who have left service during the pre-discovery period, employees who have been dismissed, employees who an-dead, and employees in whose cases the employer did not have an adequate opportunity to recover their contribution, if necessary even for reasons other than those mentioned specifically in the proviso to Clause 30. I will be also open to the employer to present such an enquiry, for the waiver of the employees' share of the contribution for the pre-discovery period, or even for a period anterior to the order under Section 19-A of the Act, in a proper case I have no compelling reason to hold that merely because the employer has been agitating that his establishment or factory was not covered under this Act. the application of the Act would be postponed to his case, nor is there anything in the provisions of the Act which says that the Act should not be applied to a factory in the event of a dispute till a decision under Section 19A is given settling the dispute In the instant case, the decision under Section 19 is in favour of the department. The effect of that decision is that the petitioners' establishment or factory was covered under the Act from the very inception. In such circumstances, a demand for contribution made after the decision under Section 19A for the back period can be legally enforced. If there is a rule which casts automatically upon the employer, as the Act does, the obligation to make the contribution, there appears to be no logic in fixing the date of the notice by the Provident fund Commissioner as the starting point for making a valid claim. On the other hand, it is not inconceivable that there may be more than one reason for the Provident Fund Commissioner for delay in the issue of the notice. He might not have an adequate staff to make a speedy investigation in respect of every factory in his jurisdiction, or the investigation might have taken a long time. In such circumstances, an indifferent or recalcitrant employer, who deliberately ignores the provisions of the Act, cannot urge that he was awaiting the issue of a notice from the Provident Fund Commissioner or for a decision under Section 19A of the Act for the purpose of implementing the Act and the Scheme in his establishment, and, should, therefore, be given relief for the period prior to the issue of the notice. There is an authority as well in support of the above view. In Sri Andal & Co. v. Regional Provident Fund Commissioner. ILR (1965) 2 Mad 302. It was held that the Act takes effect at once and the provisions of the Act become enforceable against the employer of a factory or an establishment with effect from the date on which the relevant clause of the Scheme comes into force, and that it does not depend upon the discovery made by the authorities of the department and the issue of the notice calling upon the employer to make the contribution according to the Act. Similar view was taken by a Bench of the Punjab High Court in Kapur Bhimber Union v. Regional Provident Fund Commissioner. Punjab, (1966-66) 29 FJR 232 (Punj); a Bench of the Andhra Pradesh High Court in Nazeena Traders (Private) Ltd. v. Regional Provident Fund Commissioner, (1965-66) 29 FJR 277=(AIR 1965 Andh Pra 200); a Full Bench of the Kerala High Court in Kokkalai Rice & Oil Mill Foundary v Regional Provident Fund Commissioner, (1960-61) 19 FJR 362=(AIR 1961 Ker 57) (FB). and the Allahabad High Court in N.K. Industries (Private) Ltd. v. Regional Provident Fund Commissioner, U.P.. (1958-59) 15 FJR 249=(AIR 1958 All 474)
10. It follows that the claim upon the petitioner-company to take immediate action to clear off all the past provident fund dues from November, 1960, to date is legal and warranted.
11. No other ground was urged in sup-port of this petition The two contentions raised having failed, the result is that this application must fail and is dismissed with cost: hearing fee Rs 200 payable to the respondents Narasimham, C. J.
12. I agree