Judgment:
ORDER
U.L. Bhat, C.J.
1. A common question arises for consideration in this batch of writ petitions, namely whether the amended paragraph 26(2) of the Employees' Provident Funds Scheme, 1952 (for short, 'the Scheme'), framed under Section 5 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short, 'the Act'), is valid. Hence these writ petitions are being disposed of by a common order
2. M P No. 432/91 is filed by manufacturer of Soya Products. M. P. No. 1230/91 is filed by Association of Lime Manufacturers and a Lime Manufacturer. M. P. No. 743/91 and M. P. No. 3030/91 are filed by Paper Manufacturers. M. P. No. 2680/91 is filed by Cement Manufacturers. M. P. No. 3664/91 is filed by an Engineering and Construction Contractor. The remaining petitions are filed by Bidi manufacturers.
3. The Act, as originally conceived, was to provide institution of Provident Funds for employees of factories and other establishments. Scope of the Act was subsequently extended to provide for family pension scheme and Employees' Deposit Linked Insurance Scheme. Section 5 of the Act enables Central Government to frame Scheme for the establishment of Provident Funds for employees or for any class of employees and specify the establishments or class of establishments to which the Scheme shall apply. On the framing of the Scheme, a fund shall be established in accordance with the provisions of the Act and the Scheme. The Fund shall vest in and be administered by the Central Board constituted under Section 5A. The Scheme may provide for any of the other matters specified in Schedule-II. 'Industry', as defined in Section 2 of the Act, includes any establishment specified in Schedule-I and includes any other industry added in the Schedule by Notification under Section 41. Cement industry, engineering and construction industries, edible oil industry etc. were included originally in Schedule-I. Bidi industry was included in the Schedule by Notification dated 15-5-1977. Paper products industry was included by Notification dated 11-7-1966. The broad features of the Act, as far as this case is concerned, are that employees of the scheduled industries are to be enrolled as members of the Scheme and they, as well as their employers are to make contribution to the Fund. The Act provides for machinery and procedure for recovery of amount under the Scheme from employers and contractors. The Central Government is to appoint Commissioners, Additional Commissioners, Deputy Commissioners, Regional Commissioners and Assistant Commissioners etc.
4. The Scheme, broadly speaking, provides for contributions, payment of contributions, recovery of members' share of contribution, filing declarations and returns, maintenance of contribution costs, allotment of account numbers, mode of payment of contribution, inspection of cards, administration of Fund, accounts and audit, nominations, payment and withdrawal from Fund etc.
5. Paragraph 26 deals with class of employees entitled to join Provident Fund Scheme. Paragraph 26(2) as it originally stood, read as follows :
'26(2) - After this paragraph comes into force in a factory or other establishment, every employee employed in or in connection with the work of that factory or establishment, other than an excluded employee, who has not become a member already, shall also be entitled and required to become a member from the beginning of the month following that in which he completes six months' continuous sendee or has actually worked for not less than 60 days within the period of three months or less in that factory or other establishment or in any factory or establishment to which the Act applies under the same employer, or partly in one and partly in the other or has been declared permanent in any such factory or other establishment whichever is earliest.'
By Notification dated 16-1-1981, the above paragraph was amended substituting 'three months' for 'six months'. In other words, under paragraph 26(2) of the Scheme, an employee eligible to become member of the fund and who has not become a member, shall be entitled and required to become a member from the beginning of the month following that in which he completes three months' continuous service or has actually worked for not less than 60 days within the period of three months.
6. By the impugned Notification dated 1-11-1990, paragraph 26(2) has been amended as follows :
'26(2)- After this paragraph comes into force in a factory or other establishment, every employee employed in or in connection with the work of that factory or establishment other than an excluded employee who has not become a member already, shall also be entitled and required to become a member of the fund from the date of joining the factory or establishment.'
The amendment entitles and requires the eligible employee of a concerned factory or establishment to become a member of the Fund from the date of joining the establishment or factory. The amended provision is now challenged.
7. Learned counsel appearing for the petitioners have urged the following contentions :
(i) The amendment to paragraph 26(2) of the Scheme is invalid for non-compliance of Section 7(2) of the Act.
(ii) The compulsory contribution amounts to denial of minimum wages.
(iii) The amendment is impracticable and unworkable.
(iv) The amendment is ultra vires the Act and Article 14 and Article 19(l)(g) of the Constitution.
8. Point No. (i) :
Section 6D of the Act, as it originally stood, required, inter alia, every scheme framed under Section 5 to be laid, as soon as may be after it is framed, before each House of Parliament. Section 7 deals with modification of scheme. Sub-section (1) enables the Central Government by Notification in the official gazette, as to amend or vary, either prospectively or retrospectively, the Scheme. Sub-section (2), as it originally stood, required that every Notification under sub-section (1) shall be laid as soon as may be, after it is issued, before Parliament. Section 6D as well as Section 7(2) were amended by Central Act No. 4 of 1986. The amended provisions of Section 7(2) read as under :
'7(2)- Every Notification issued under sub-section (1) shall be laid, as soon as may be, after it is issued, before each House of Parliament while it is in session, for a total period of 30 days, which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification, or both Houses agree that the notification should not be issued, the notification shall thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of any thing previously done under that notification.'
9. It is contended by learned counsel for the petitioners that the amendment cannot take effect unless it is laid before each House of Parliament for the requisite period and both the Houses of Parliament take a decision in that regard. This contention is not sustainable. The duty of the Central Government is to lay the notification before each House of Parliament while it is in session. It should be so laid for a total period of 30 days comprised in one session or two sessions or more sessions. There is no provision that notification shall take effect only after both the Houses of Parliament have taken decision in that regard. Section 7(2) only enables the Parliament to make any modification in the notification or decide that the notification should not be issued. If both the Houses of Parliament make any modification, the original notification shall have thereafter the effect only in the modified form. If both the Houses of Parliament agree that notification should not be issued, it shall thereafter be of no effect. The provision makes it clear that the modification or annulment made by both the Houses of Parliament shall be without prejudice to the validity of anything previously done under that notification. It is clear that the notification, as contemplated in Section 5 of the Act, will take effect on the notification being published in the official gazette. The coming into force of the notification is not postponed to the stage when Parliament considers it and the previous operation of the notification is not affected by any decision which the Parliament may take. The decision of Parliament will have effect only from the date of the decision.
10. It is stated in the writ petitions that the Central Government has not complied with the procedural requirement under Section 7(2) and that the provision obliges Central Government to get the amendment duly placed before both the Houses of Parliament before giving effect to it. It is also stated that unless the amendment is duly approved and passed by both the Houses of Parliament, it is unenforceable. We have already explained the scope of the provisions of Section 7(2) which does not support the contention. Learned counsel submitted that there is no material to show that the notification was laid before the Parliament. Paragraph 13 of the return in M. P. No. 350/91 contains a positive statement that provisions of Section 7(2) of the Act have been duly complied with. Our attention is also invited to the decision of A. P. High Court in Writ Petition No. 6963 of 1991 and connected petitions where the Court observed that the impugned notification was placed before the Lok Sabha on 7-1-1991 and before the Rajya Sabha on 8-1-1991 and no amendments were suggested or made by the Parliament. This is not controverted by the petitioners. We, therefore, reject the contention that provisions of Section 7(2) of the Act have not been complied with.
11. Point No. (ii) :
Section 6 of the Act stipulates that the contribution of the employer shall be eight and one third percent of basic wages, dearness allowance and retaining allowance and the employees' contribution shall be equal to the contribution payable by the employer, though he may opt to contribute more. The contribution made by the employer and the employee is for the benefit of the employee. It reaches the hands of the employee or his legal representatives. Therefore, the contention that the employees' contribution erodes the minimum wages guaranteed under the law is without substance, even assuming that the employees are entitled to raise any such plea.
12. Points Nos. (iii) and (v) :
Among the petitioners, manufacturers of bidis, soya products and cement claim to have contractors who engage labourers on daily wages. Manufacturers of paper and lime claim that they are required to employ casual, badli or ad hoc labourers who do not work for three months or 60 days in three months as required under the Scheme before the impugned amendment. The petitioners claim that a part of work force is casual labour engaged for short duration and sometimes they work only for a day or two. Besides the vague averments in the petitions, they have not placed any material before the Court in support of these pleas. It is well known that in bidi and soya product industries, contract labour is engaged. But there is no material before the Court to show that there is a practice prevalent of engaging temporary employees for a few days as alleged or that there are employees who work for a day or two and disappear.
13. The question of employees employed through the contractors is not res integra. The direct decision on the point is in the case of M/s P. M. Patel and Sons v. Union of India, AIR 1987 SC 447. 'Employee', as defined under the Act, means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of a factory or an establishment and who gets his wages directly or indirectly from the employer. Definition of the 'employee' is wide enough to include persons employed through contractors in or in connection with the work of the factory or establishment. A home worker, it has been held, by virtue of the fact that he does the job in connection with the work of an establishment, attracts the definition of 'employee.' The work which the petitioners extract from these employees is not stated to be of a sophisticated nature requiring control and supervision at the time when the work is done.
14. The question posed by the petitioners is answered by the Supreme Court in Provident Fund Inspector, Guntur v. T. S. Hariharan, AIR 1971 SC 1519, which considered the scope of expression 'employment'. Employment of requisite number of persons must be dictated by the normal regular requirement of the establishment reflecting its financial capacity and stability. Number of persons to be considered to have been employed by an establishment for the purpose of the Act has to be determined by taking into account the general requirements of the establishment for its regular work which should also have a commercial nexus with its general financial capacity and stability. It was not the intention of the legislature, the Supreme Court observed, to exclude from the application of the Act an establishment which requires employees for its general business the required number of persons for major part of the year. The Supreme Court observed that employment of a few persons on account of some emergency or for a very short period necessitated by some abnormal contingency which is not a regular feature of the establishment and which does not reflect its business prosperity or its financial capacity and stability from which it can be inferred that the establishment can, in the normal way, bear the burden of contribution towards the provident fund under the Act would not be covered by the Act. 'Employment' must be construed as employment in the regular course of business of establishment. Such employment would not include employment of a few persons for a short period on account of some passing necessity or on account of some temporary emergency beyond the control of the Company. By way of illustration, the Court referred to employment of a few persons for a few hours to extinguish accidental fire in an establishment. Whether the Act would be attracted in a case of particular employee is a matter for decision in the particular facts and circumstances adopting above test.
15. Learned counsel for the petitioners contended that the purpose of this Act is to provide retirement benefits to the employees and the Scheme of the amended provision which does not require a minimum qualifying service of an employee for becoming a member of the fund is contrary to the above purpose. According to the amended impugned provision, an employee becomes eligible for becoming a member of the fund with effect from the date of joining the factory or establishment. It is contended, even if he leaves employment in a few days, the Scheme would apply. This, it is alleged, is not only ultra vires the Act, but also unworkable and impracticable. As we have already indicated, necessary material to support the particular allegation about the state of affairs in the establishments of the petitioners is not before the Court. Therefore, the contention loses force.
16. It would not be correct to say that the Act is intended only to provide retirement benefits to employees. The Act is to provide for institution of the Provident Fund for the employees and conferment of certain other benefits on them. In Provident Fund Inspector, Guntur v. T. S. Hariharan, AIR 1971 SC 1519, the Court observed :
'The Act was brought on the statute book for providing for the institution of Provident Fund for the employees in factories and other establishments. The basic purpose of providing for Provident Funds appears to be to make provision for the future of the industrial worker after his retirement or for his dependents in case of his early death. To achieve this ultimate object, the Act is designed to cultivate among the workers a spirit of saving something regularly and also to encourage stabilisation of a steady labour force in the industrial centres.'
The Scheme of the Act provides for bodies and officers to administer schemes. It provides for contribution by the employer and the employee, determination of money due from employers, determination of escaped amounts, interest payable by employer, mode of recovery of money due from employer, protection against attachment, penal consequences for failure to perform obligations under the Act and other ancillary matters. The details are worked out in the Scheme. The Scheme casts obligation on the employer to co-operate in the formation and administration of the fund by collecting the employees' contribution and paying the same as well as the employers' contribution to the fund, submission of declarations, preparation of contribution cards, furnishing particulars of ownership, submission of returns and the like. We fail to see how the purpose of the Scheme of the Act can be said to spell out the requirement of minimum qualifying service of eligibility for becoming a member of the Fund. We find nothing inequitable or unfair in the requirement that 'employee', as defined, should be required to become member of the fund with effect from the date of joining the factory or establishment. It may be that employers may have some difficulty, but the same is not avoidable in the implementation of the social security measure like the present one.
17. It is contended that there are employees who work for a few days and then disappear. We have indicated that there is no material before us in support of this allegation. Even assuming the allegation to be true, if the employee falls within the definition of the word 'employee' in the Act, the contribution will be credited to his account and the fund will stand to his benefit. It is contended that even before the impugned amendment, hundreds of crores of rupees were lying in the Fund unclaimed. This may be due to inefficiency in the implementation of the Scheme or the lack of awareness on the part of employees of their rights. Such shortcoming, if any, can certainly be rectified by the Board and the Commissioners by taking appropriate steps.
18. Reference is made in the course of arguments to Annexure R-5 which is an extract of the minutes of the 124th Meeting of the Central Board of Trustees of the Fund. The minutes refer to the opinion of the Estimates Committee of the Lok Sabha in its 78th Report on the working of the Organisation. The Estimates Committee commented that the eligibility criterion of completion of three months' continuous service or of 60 days' actual work has given room for evasion of membership of the fund by unscrupulous employers who resort to unfair labour practice of changing the names of the employees frequently and manipulating their service particulars. The Committee was of the opinion that there should be no period of eligibility for membership to the Fund and every employee should be enrolled as member as soon as he or she joins the service 'on a regular basis.' The Board of Trustees noticed that the use of the expression 'regular basis' by the Estimates Committee is not appropriate, since it is well known that employees are not appointed normally on regular or long term basis. The Board reiterated its earlier recommendation at the 74th Meeting that the requirement of qualifying service should be dispensed and this was reiterated also in 1985. The Regional Commissioners also favoured the removal of the qualifying period of service with a view to ensure extension of benefits to the employees from the date they join service. This recommendation was based on the experience of the Commissioners in the field where some unscrupulous employers, especially those in unorganised sectors, terminated services of their workers just before they complete the qualifying period of service, re-engage them after giving break in service or change their names at the time of rq-employment, thereby preventing them from completing the qualifying period of service. The Board indicated that total removal of the qualifying period of service may create some problems in establishment which are purely seasonal in nature and in case where the workers are highly mobile as in construction industry, but this cannot be avoided if the objective of the organisation to ensure universal coverage under the Employees' Provident Fund, especially for those who are the most exploited, is to be ensured. All these aspects were referred to in the agenda of the Meeting. The Board accepted the proposal in the agenda. The Government also agreed that the term 'regular basis' is not generally used in relation to employment in the private sector and evasions of the type mentioned by the Committee generally take place in employments which are on casual or short term contract basis. It was on the basis of these exercises that the impugned amendment was made.
19. Ever since the introduction of Labour Laws, there have been attempts to circumvent the same. The Courts have repeatedly commented on this tendency. Supreme Court, on the basis of a letter, registered Writ Petition (Civil) No. 1262/87 in relation to complaints about violation of provisions of Factories Act in a bidi industry. The Court requested the Society for Community Organisation Trust, Madurai, to enquire into the allegations and make a report to the Court. The report is referred to the decision in Rajangam v. State of T. N., AIR 1991 SC 216. The report betrays the sad absence of effective implementation of the Labour Laws. Court directed the Union of India, State Government and others to suggest remedial measures. These measures came up for consideration in the decision reported in Rajangam, Secry., Distt. Bidi Workers' Union v. State of Tamil Nadu, AIR 1993 SC 404. The Supreme Court gave appropriate directions for implementation of the Labour Laws. One of the directions is for establishment of Regional Provident Fund Commissioner with full equipment for the purposes of implementation of the statute to be located within the area. We have referred to above materials to indicate that there may not be substance in the grievance projected by the employers and the crux is the non-implementation of these laws.
20. We are unable to agree that the impugned provision is ultra vires the Act or is impracticable. There are also no materials placed before the Court to support the contention that the impugned provision violates Article 14 or Article 19(l)(g) of the Constitution. See the decision in M/s P. M. Patel and Sons v. Union of India, AIR 1987 SC 447. There is no material before the Court to show that the provision places unbearable burden or onerous obligation on the employer so as to affect their constitutional rights.
21. We are supported in the above view by the decision of the Andhra Pradesh High Court in Writ Petition No. 6963/91 and other cases, of the Karnataka High Court in Jyoti Home Industries and Ors. v. R.P.F.C. Karnalaka, 1994 (1) LLJ 49 of the Rajasthan High Court in Cotton Corporation and Ors. v. Union of India and others, 1993 (1) LLJ 1015. Points (iii) and (iv) are answered against the petitioners.
22. Learned counsel for the petitioners contended that this Court and several other High Courts had stayed the operation of the impugned provision and the petitioners may not be compelled to implement the impugned provision during the period of stay. Such a relief was granted, it is stated, by the High Court of Karnataka, though not by other High Courts. In paragraph 17(2) of the decision in Jyoti Home Industries, Karnataka High Court noticed that if the notification is allowed to be operated from 1-11-1990, it would result in opening Pandora's box, because in the case of every establishment, it has to be decided whether the persons employed over and above twenty were employed in or in connection with the work of the establishment and whether they were employed in the regular course of business of the establishment. The Court also noticed that the Department itself had taken note of the interim orders and issued direction to follow provision in the unamended paragraph 26(2) of the Scheme. The Court directed that the provision be given effect to only from the date of final order passed in the Writ Petitions by the learned Single Judge. Reference is made to the letter stated to have been issued by the Regional Provident Fund Commissioner taking notice of the stay orders passed by various courts and directing that unamended provision may be implemented till the decision in the writ petitions.
23. With great respect, we are unable to agree with the view taken by the High Court of Karnataka in this regard. Petitioners have filed writ petitions and obtained orders staying the implementation of the amended provisions. Other High Courts also issued similar orders of stay. The Regional Provident Fund Commissioner merely clarified that the existence of the stay orders cannot lead to non-collection of contribution and that contributions should be collected in the light of para 26(2) of the Scheme as it existed prior to the impugned amendment. This direction is traceable to the orders passed by the High Courts. The amended provision having come into force, the Commissioner has no authority to postpone the operation of the amended provision. If challenge against the amended provision fails, it has to be implemented. The fact that for a certain period, order of stay was in operation, cannot have the effect of postponing the coming into force of the amended provision or its implementation.
24. In the result, the writ petitions are dismissed with costs. Counsels' fee rupees five hundred each.