The Supreme Court in the case of Regional Provident Fund Commissioner vs. Hooghly Mills ( CIVIL APPEAL NO_655 OF 2012 (Arising out of SLP(C) No.17298/2009) ) has held that an employer of an ‘exempted establishment’ would be liable for legal action in case of default of Provident Fund contribution. The Calcutta High Court had earlier ruled that Sections 6, 7A, 8 and 14B of the Act would not be attracted to the defaulting 'exempted establishment’.
Overruling the HC judgment, the SC stated that since Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is a social welfare law, courts should interpret the provisions in favour of the beneficiaries. The SC held that the interpretation of the Act must not only be liberal but it must be informed by the values of Directive Principles of State Policy in the Constitution.
The entire judgment copy is as follows:
Regional Provident Fund Commissioner Vs. The Hooghly Mills Co. Ltd. & Ors.
Employees’ Provident Fundsand Miscellaneous Provisions Act, 1952 - Section 14B - In cases of default in the payment of contribution to the provident fund, proceedings for recovery of damages can be initiated against the employer of exempted establishment.Chronological List of Cases Cited:-
- Regional Provident Fund Commissioner v. S.D. College, (1997) 1 SCC 241
- Dr. M. Ismail Faruqui v. Union of India, AIR 1995 SC 605
- Advocates-on-Record Association v. Union of India, 1993 (4) SCC 441
- Dr. Pratap Singh v. Director of Enforcement, AIR 1985 SC 989
- Jones v. Wrotham Park Settled Estates, (1980) AC 74
- National Buildings Construction Corporation v. Pritam Singh Gill, (1972) 2 SCC 1
- State of West Bengal v. Union of India, AIR 1963 SC 1241
- Prakash Cotton Mills v. State of Bombay, (1957) 2 LLJ 490
- I.R. Commissioner v. Dowdall O’Mahoney & Co., (1952) 1 All E.R. 531
- Seaford Court Estates Ltd. v. Asher, (1949) 2 All ER 155
- Re Bidie, (1948) 2 All ER 995
- Knightsbridge Estates Trust Ltd. v. Byrne, (1940) 2 All ER 401
- Justice Holmes in Towne v. Eisner, 245 US 418
“S.O. Whereas, in the opinion of the Central Government: (1) The Rules of the provident fund of the establishment mentioned in Schedule I (hereto annexed and (hereinafter referred to as the said establishments), with the respect to the employees therein then those specified in section 6 of the employees' Provident Fund Act, 1952 (10 of 1952); and
(2) The Employees in the said establishments 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 Employees' Provident Funds Scheme 1952 (hereinafter referred to as the said School) in relation to the employees in any other establishment of a similar character. Now, thereafter, in exercise of the powers conferred by clause (a) of sub-section (i) of section 17 of the Employees' Provident Fund Act 1952 (19 of 1952), the Central Government,hereby exempt the said establishments with effect from dates mentioned against each of them, respectively from the operation of all the provisions of the said scheme, subject to the conditions specified in scheme hereto annexed, which are in addition to the conditions mentioned in the explanation to subsection (1) of the said section 17.”
“Under such circumstances, this court holds that the impugned order cannot be sustained in law as the concerned authority demanded damages from the petitioners not only on account of delayed payment of contribution to the trust fund but also on account of delayed payment of the contribution to the pension fund and insurance fund. The impugned order, thus, stands set aside. The Provident Fund Authority may, however, ascertain damages under Section 14B of the said Act afresh for delayed payment of contribution to the pension fund as well as the insurance fund. The writ petition, thus, stands allowed with the above observation.”
“2 (e) "employer" means-- (i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of section 7 of the Factories Act, 1948 ( 63 of 1948), the person so named; and (ii) in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managingdirector or managing agent, such manager, managing director or managing agent;”
“2 (fff) “exempted establishment” means an establishment in respect of which an exemption has been granted under section 17 from the operation of all or any of the provisions of any Scheme or the Insurance Scheme, as the case may be, whether such exemption has been granted to the establishment as such or to any person or class of persons employed therein.”
“Section 14B - Power to recover damages - Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf] may recover from the employer such damages, not exceedings the amount of arrears, as it may thinks fit to impose:
Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:
Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.”
“17 Power to exempt - (1) The appropriate Government may, by notification in the Official Gazette, and subject to such conditions as may be specified in the notification, exempt, whether prospectively or retrospectively, from the operation of all or any of the provisions of any Scheme.
(a) any establishment to which this 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 this Act or any Scheme in relation to the employees in any other establishment of a similar character; or
(b) any establishment if the employees of such establishment are in enjoyment of benefits in the nature of provident fund, pension or gratuity and the appropriate Government is of opinion that such benefits, separately or jointly, are on the whole not less favourable to suchemployees than the benefits provided under this Act or any Scheme in relation to employees in any other establishment of a similar character. Provided that no such exemption shall be made except after consultation with the Central Board which on such consultation shall forward its views on exemptions to the appropriate Government within such time limit as may be specified in the Scheme.
(1A) Where an exemption has been granted to an establishment under Clause (a) of Sub-section (1), (a) the provisions of Section 6, Section 7A, Section 8 and 14B shall, so far as may be, apply to the employer of the exempted establishment in addition to such other conditions as may be specified in the notification granting such exemption, and where such employer contravenes, or makes default in complying with any of the said provisions or conditions or any other provision of this Act, he shall be punishable under Section 14 as if the said establishment had not been exempted under the said Clause (a);
(b) the employer shall establish a Board of Trustees for the administration of the provident fund consisting of such number of members as may be specified in the Scheme;
(c) the terms and conditions of service of members of the Board of Trustees shall be such as may be specified in the Scheme;
(d) the Board of Trustees constituted under Clause (b) shall -
(i) maintain detailed accounts to show the contributions credited, withdrawals made and interest accrued in respect of each employee;
(ii) submit such returns to the Regional Provident Fund Commissioner or any other officer as the Central Government may direct from time to time;
(iii) invest the provident fund monies in accordance with the directions issued by the Central Government from time to time;
(iv) transfer, where necessary, the provident fund account of any employee; and
(v) perform such other duties as may be specified in the Scheme.
“There are also certain administrative difficulties to be set right. There is no provision for inspection of exempted factories; nor is there any provision for the recovery of dues from such factories. An employer can delay payment of provident fund dues without any additional financial liability. No punishment has been laid down for contravention of some of the provisions of the Act. This Bill seeks primarily to remedy these defects’. – S.O.R., Gazette of India, 1953, Extra, Pt.II, Sec.2, p.910.”
“(viii) the existing legal and penal provisions, as applicable to unexempted establishments, are being made applicable to exempted establishments, so as to check the defaults on their part;”
“Anything that is written may present a problem of meaning, and that is the essence of the business of judges in construing legislation. The problem derives from the very nature of words. They are symbols of meaning.”
“Words are not passive agents meaning the same thing and carrying the same value at all times and in all contexts. They do not come in standard shapes and sizes like coins from the mint, nor do they go forth with a degree to all the world that they shall mean only so much, no more and no less. Through its own particular personality each word has a penumbra of meaning which no draftsman can entirely cut away. It refuses to be used as a mathematical symbol.”
“a word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used.”
“…The process of construction, therefore, is not an exercise in logic or dialetic: The aids of formal reasoning are not irrelevant; they may simply be inadequate. The purpose of construction being the ascertainment of meaning, every consideration brought to bear for the solution of that problem must be devoted to that end alone…”
“The Court must ascertain the intention of the Legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law, and the setting in which the clause to be interpreted occurs”.
“to read the statue as a whole and ask oneself the question: ‘In this state, in this context, relating to this subjectmatter, what is the true meaning of that word’?”
“General judicial adoption of the term ‘purposive construction’ is recent, but the concept is not new. Viscount Dilhorne, citing Coke, said that while it is now fashionable to talk of a purposive construction of a statute the need for such a construction bas been recognised since the seventeenth century. In fact the recognition goes considerably further back than that.”
“I am not reluctant to adopt a purposive construction where to apply the literal meaning of the legislative language used would lead to results which would clearly defeat the purposes of the Act. But in doing so the task on which a court of justice is engaged remains one of construction, even where this involves reading into the Act words which are not expressly included in it.”
“…legislative purpose must be noted and the statute must be read as a whole. In our view taking into consideration the object underlying the Act and on reading Sections 14 and 17 in full, it becomes clear that cancellation of the exemption granted does not amount to a penalty within the meaning of Section 14(2A). As already noted these provisions which form part of the Act, which is a welfare legislation are meant to ensure the employees the continuance of the benefits of the provident fund. They should be interpreted in such a way so that the purpose of the legislation is allowed to be achieved.”
“…A Judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do so as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases.”
“no labour legislation, no social legislation, no economic legislation, can be considered by a court without applying the principles of social justice in interpreting the provisions of these laws. Social justice is an objective which is embodied and enshrined in our Constitution……it would indeed be startling for anyone to suggest that the court should shut its eyes to social justice and consider and interpret a law as if our country had not pledged itself to bringing about social justice.”