Speed Sales Private Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment

SooperKanoon Citationsooperkanoon.com/894975
SubjectService
CourtGuwahati High Court
Decided OnApr-27-2009
JudgeH.N. Sarma, J.
Reported in(2009)IVLLJ726Gau
AppellantSpeed Sales Private Ltd.
RespondentUnion of India (Uoi) and ors.
DispositionPetition allowed
Cases ReferredShri Mahila Griha Udyog v. Union of India and Ors.
Excerpt:
- h.n. sarma, j.1. the subject-matter of challenge in this writ petition is a proceeding under section 7-a of the employee's provident funds and miscellaneous provisions act, 1952, wherein, the respondent authorities namely assistant provident fund commissioner (enf), guwahati vide order dated january 5, 2001 determined the liability of the petitioner to pay the contribution under the provisions of the act: holding that the petitioner's firm is covered under the scheme namely the employees' provident funds & miscellaneous provisions act, 1952, w.e.f. june 1, 1997.2. i have heard mr. l.p. sharma, learned counsel for the petitioner and mr. d borah, learned counsel appearing for the respondent no. 2 & 3.3. the petitioner herein is a private limited: company, registered under the indian companies act, having its registered office at bhangagarh, guwahati-5, as per the articles of association, the main object of the petitioner-company, inter alia, is to carry out the business as buyers, sellers, agents, principals, importers, exporters, exporters and dealers of all types of automobile vehicles including two wheelers, three wheelers, motorcars, light commercial vehicles, heavy; commercial vehicles and any other mode, conveyance on commercial basis throughout the country or abroad and to carry on the business of iron founders, mechanical engineers, electrical engineers, automobile engineers, service, engineers, automobiles body builders, tool makers, enamellers, electroplaters, painters, manufactures of machineries, tools, implements, metal workers, smiths, wood workers and metallurgists related to the above etc. etc.4. the petitioner being an establishment (within the meaning of section 2-a of the employees' provident funds and miscellaneous provisions act, 1952, (hereinafter referred to as the 'act'), the respondent authorities vide order dated june 17, 1999 issued a notice asking the petitioner to submit certain documents including the attendance register of its establishment, salary register, cash book/ledger with related vouchers, balance sheet for the last three years.5. the petitioner denies that its establishment falls under the provision of balance sheet act contending that it has lesser than twenty numbers of employees in its establishment. in view of such contention of the petitioner-company the respondent authorities vide orders dated february 10, 2000, march 14, 2000 asked the petitioner-company to submit the necessary documents in support of their claim. on august 30, 2000, the petitioner was asked to appear before the court of the employees' provident fund commissioner along with necessary documents. the petitioner-company also denies to be covered under the provisions of the act, as in the establishment of the petitioner there are employees lesser than 20 numbers. the petitioner contends that one sri bhupen basak and sri bhanu kar who were also shown as the employees of the petitioner-company, in fact, they are the employees of different establishments of jagiroad in the district of morigaon and they were deputed on training to the petitioner-company and during their training period they drew certain sum which was reimbursed by their employer. the respondent initiated the under section 7-a of the act against the petitioner and issued notice to the petitioner to attend for hearing on november 30, 2000 and also to produce certain documents, such as, attendance register of the employees for the period since 1993-94 to october, 2000, salary registers or salary vouchers for the period 1993-94 to october, 2000 and income tax returns, balance sheet as: on march 31, 1999 and the period ending march 31, 2000.6. from the documents so submitted by the petitioner the authority came to the conclusion that the director and managing director of the establishment drew remuneration and house rent allowances for every months as reflected in the balance sheet. in, its establishment of the petitioner employed 18 persons for the month of june, 1996 as reflected in the salary voucher, which was verified by the enforcement officer december 13, 1999. the petitioner repeated his contention that the two employees were deputed by m/s. gautam automobiles and m/s. moped house for their training in the establishment of the petitioner company. the stipend and other allowances were paid by their respective employers and not by the petitioner-company and the petitioner never employed or engaged 20 or more employees. further contention of the petitioner-company is that the directors and managing director of the company cannot be treated as employees within the meaning of the act. on november 13, 2000, the assistant provident fund commissioner (enf) assisted by employment officer made a surprise inspection of the petitioner's company. during such inspection it was found that shri swapan das, who was alleged to be an employee of gautam automobiles, rangia and deputed for training on june, 1996 for the month of july, 1997 was working in the petitioner-company. on being interrogated, shri swapan das stated that he was working in the establishment of petitioner-company since 1993-1999 and he did not recognize any establishment by the name of gautam automobile and did not work under the said establishment. it is contended that in the said enquiry sri bhupen basak also stated that he had been working in the establishment of m/s. speed sales service centre since 1993 and denied to have working under moped house, jagiroad at any point of time. this fact demolished the defence of the petitioner. the other contention of the petitioner that the managing director and the directors of the establishment drawing salary are not to be treated as employees of the establishment for the purpose of determining required number of employees and needs to be rejected in view of the decision of the apex court interpreting section 2(9) of the act rendered in the case of e.s.i. corporation v. apex engineering pvt. ltd. : (1998) 1 scc 86 : (1998) 2 mlj 33 : 1998-i-llj-274.7. although, the petitioner-company contends that the aforesaid employees are not in the employment of the petitioner's establishment but they are trainees from different organization, the same was not accepted in view of direct evidence collected during the spot verification/inspection made by the authority. the authority also found that the petitioner-company failed to produce the attendance register as called for without any reason. had the petitioner-company produced all the attendance register would confirm the applicability of the provision of the act with the establishment.8. upon consideration of overall facts, the court of apfc, ro, guwahati, in exercise of power under section 7-a of the act found that the petitioner-company is liable for payment of dues under the provisions of the act to the extent of rs. 2,34,180/- on five different accounts and under section 7-q of the act an amount of rs. 55,021/- is payable as penal interest at rate of 12% per annum. vide order dated january 5, 2009 the petitioner-company was directed to pay the aforesaid amount in the different accounts within a period of 15 days from the date of receipt of the said order. the aforesaid order dated january 5, 2009 was communicated to the petitioner-company vide letter dated january 19, 2001.9. mr. sarma, learned counsel for the petitioner contends that the spot verification/inspection conducted in the premises of the petitioner-company under section 13(2) of the act was behind his back and the petitioner- company did not get any opportunity to cross-examine the witnesses examined by the authority. accordingly, the alleged statements of those employees should be excluded from consideration.10. the aforesaid spot verification/inspection under section 13 of the act was made in the premises of the petitioner company and not in any other place and, as such, the petitioner company or its representative was present at the time of completion of the inspection. that apart, the persons concerned were found to be physically working in the establishment. all these questions are findings of fact, i find no justifiable reason to interfere with such finding of fact in this writ proceeding. the contentions raised by the petitioner-company are not acceptable.11. the other points that have been raised regarding justifiability of payment made by the petitioner-company is to the effect that the directors and the managing director cannot be treated as employees for the purpose of calculating the required number of employees to attract the provisions of the act. it is contended that in e.s.i corporation v. apex engineering pvt. ltd. (supra) the question of inclusion of the managing director and the directors as employees came up for consideration under the provisions of employee state insurance act, 1948, and not under the employees' provident fund and. miscellaneous provisions act, 1952. the materials made available on records disclose that the petitioner-company paid remuneration to the directors and the managing director and house rent allowance to the managing director. the balance sheet discloses that the same was paid as salary and not as stipend/sitting fee or as other payment as sought to be projected by the petitioner-company. in such a situation, the ratio of the aforesaid case would be squarely applicable and it is difficult to hold that the respondent authorities committed any illegality in accepting these persons towards the total number of employees necessary to be included under the provisions of the act. the act in question is a socially benevolent legislation and it is enacted for the purpose of the welfare of the employees who are poorly paid and are in unsatisfactory service condition, amenities, to determine the purpose of providing benefit such as provident fund, depository linkage insurance fund, family pension scheme, for the workers employed in factories and other establishment, which is included under the social welfare scheme.12. at this stage, mr. sarma submits that the petitioner-company was a dealer of lml vespa scooter and having stopped its business now the petitioner-company has no link with the manufacturing company. the petitioner-company mostly dealt with the self acting as agent of the products of lml vespa scooter.13. it is further submitted that most of the employees have left the petitioner-company in the year 1998, after closure of the lml pvt. ltd. in such a situation, it is contended that the direction to pay the dues from 1997 onwards would not be justifiable in the facts and circumstances of this case as demonstrated. in this regard mr. sarma refers the decision of the apex court rendered in shri mahila griha udyog v. union of india and ors. (1999) 6 scc 38 : 1999-ii-llj-954, rejecting the contention of the petitioner. the apex court on the facts and circumstances allowed the; application of the provision was allowed from the date of the decision by the court i.e. from april 1, 1999. i have noted the above decision of the apex court while not interfering with the decision of the assistant provident fund commissioner (enforcement) in holding the petitioner-company to be liable for payment of the contribution under the act, based on findings of facts collected by the authority, it is held that such liability in respect of the petitioner-company would arise only from the date on decision arrived at after completion of the enquiry initiated under section 7-a of the act i.e. january 5, 2001.14. although, mr. sarma refers to the affidavits sworn by shri swapan das and shri bhupen basak and tried to impress the court that they were not the employees in the establishment of the petitioner-company, it is found that such affidavits were sworn after passing of the impugned order and that would not affect the decision of the spot verification/inspection conducted by the said authorities.15. in view of the above discussion, this writ petition stands allowed to the extent indicated above. the interim order passed earlier merges with this judgment.
Judgment:

H.N. Sarma, J.

1. The subject-matter of challenge in this writ petition is a proceeding under Section 7-A of the Employee's Provident Funds and Miscellaneous Provisions Act, 1952, wherein, the respondent authorities namely Assistant Provident Fund Commissioner (ENF), Guwahati vide order dated January 5, 2001 determined the liability of the petitioner to pay the contribution under the provisions of the Act: holding that the petitioner's firm is covered under the scheme namely the Employees' Provident Funds & Miscellaneous Provisions Act, 1952, w.e.f. June 1, 1997.

2. I have heard Mr. L.P. Sharma, learned Counsel for the petitioner and Mr. D Borah, learned Counsel appearing for the respondent No. 2 & 3.

3. The petitioner herein is a Private limited: Company, registered under the Indian Companies Act, having its registered office at Bhangagarh, Guwahati-5, as per the Articles of Association, the main object of the petitioner-company, inter alia, is to carry out the business as buyers, sellers, agents, principals, importers, exporters, exporters and dealers of all types of automobile vehicles including two wheelers, three wheelers, motorcars, light commercial vehicles, heavy; commercial vehicles and any other Mode, conveyance on commercial basis throughout the country or abroad and to carry on the business of iron founders, mechanical engineers, electrical engineers, automobile engineers, service, engineers, automobiles body builders, tool makers, enamellers, electroplaters, painters, manufactures of machineries, tools, implements, metal workers, smiths, wood workers and metallurgists related to the above etc. etc.

4. The petitioner being an establishment (within the meaning of Section 2-A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, (hereinafter referred to as the 'Act'), the respondent authorities vide order dated June 17, 1999 issued a notice asking the petitioner to submit certain documents including the attendance register of its establishment, salary register, Cash Book/Ledger with related vouchers, Balance Sheet for the last three years.

5. The petitioner denies that its establishment falls under the Provision of Balance Sheet Act contending that it has lesser than twenty numbers of employees in its establishment. In view of such contention of the petitioner-company the respondent authorities vide orders dated February 10, 2000, March 14, 2000 asked the petitioner-company to submit the necessary documents in support of their claim. On August 30, 2000, the petitioner was asked to appear before the Court of the Employees' Provident Fund Commissioner along with necessary documents. The petitioner-company also denies to be covered under the provisions of the Act, as in the establishment of the petitioner there are employees lesser than 20 numbers. The petitioner contends that one Sri Bhupen Basak and Sri Bhanu Kar who were also shown as the employees of the petitioner-company, in fact, they are the employees of different establishments of Jagiroad in the district of Morigaon and they were deputed on training to the petitioner-company and during their training period they drew certain sum which was reimbursed by their employer. The respondent initiated the under Section 7-A of the Act against the petitioner and issued notice to the petitioner to attend for hearing on November 30, 2000 and also to produce certain documents, such as, attendance register of the employees for the period since 1993-94 to October, 2000, Salary registers or salary vouchers for the period 1993-94 to October, 2000 and income tax returns, balance sheet as: on March 31, 1999 and the period ending March 31, 2000.

6. From the documents so submitted by the petitioner the authority came to the conclusion that the Director and Managing Director of the establishment drew remuneration and house rent allowances for every months as reflected in the balance sheet. In, its establishment of the petitioner Employed 18 persons for the month of June, 1996 as reflected in the salary voucher, which was verified by the Enforcement Officer December 13, 1999. The petitioner repeated his contention that the two employees were deputed by M/s. Gautam Automobiles and M/s. Moped House for their training in the establishment of the petitioner company. The stipend and other allowances were paid by their respective employers and not by the petitioner-company and the petitioner never employed or engaged 20 or more employees. Further contention of the petitioner-company is that the Directors and Managing Director of the Company cannot be treated as employees within the meaning of the Act. On November 13, 2000, the Assistant Provident Fund Commissioner (ENF) assisted by Employment Officer made a surprise inspection of the petitioner's company. During such inspection it was found that Shri Swapan Das, who was alleged to be an employee of Gautam Automobiles, Rangia and deputed for training on June, 1996 for the month of July, 1997 was working in the petitioner-company. On being interrogated, Shri Swapan Das stated that he was working in the establishment of petitioner-Company since 1993-1999 and he did not recognize any establishment by the name of Gautam Automobile and did not work under the said establishment. It is contended that in the said enquiry Sri Bhupen Basak also stated that he had been working in the establishment of M/s. Speed Sales Service Centre since 1993 and denied to have working under Moped House, Jagiroad at any point of time. This fact demolished the defence of the petitioner. The other contention of the petitioner that the Managing Director and the Directors of the establishment drawing salary are not to be treated as employees of the establishment for the purpose of determining required number of employees and needs to be rejected in view of the decision of the Apex Court interpreting Section 2(9) of the Act rendered in the case of E.S.I. Corporation v. Apex Engineering Pvt. Ltd. : (1998) 1 SCC 86 : (1998) 2 MLJ 33 : 1998-I-LLJ-274.

7. Although, the petitioner-company contends that the aforesaid employees are not in the employment of the petitioner's establishment but they are trainees from different organization, the same was not accepted in view of direct evidence collected during the spot verification/inspection made by the authority. The authority also found that the petitioner-company failed to produce the attendance register as called for without any reason. Had the petitioner-company produced all the attendance register would confirm the applicability of the provision of the Act with the establishment.

8. Upon consideration of overall facts, the Court of APFC, RO, Guwahati, in exercise of power under Section 7-A of the Act found that the petitioner-company is liable for payment of dues under the provisions of the Act to the extent of Rs. 2,34,180/- on five different accounts and under Section 7-Q of the Act an amount of Rs. 55,021/- is payable as penal interest at rate of 12% per annum. Vide order dated January 5, 2009 the petitioner-company was directed to pay the aforesaid amount in the different accounts within a period of 15 days from the date of receipt of the said order. The aforesaid order dated January 5, 2009 was communicated to the petitioner-company vide letter dated January 19, 2001.

9. Mr. Sarma, learned Counsel for the petitioner contends that the spot verification/inspection conducted in the premises of the petitioner-company under Section 13(2) of the Act was behind his back and the petitioner- company did not get any opportunity to cross-examine the witnesses examined by the authority. Accordingly, the alleged statements of those employees should be excluded from consideration.

10. The aforesaid spot verification/inspection under Section 13 of the Act was made in the premises of the petitioner company and not in any other place and, as such, the petitioner company or its representative was present at the time of completion of the inspection. That apart, the persons concerned were found to be physically working in the establishment. All these questions are findings of fact, I find no justifiable reason to interfere with such finding of fact in this writ proceeding. The contentions raised by the petitioner-company are not acceptable.

11. The other points that have been raised regarding justifiability of payment made by the petitioner-company is to the effect that the Directors and the Managing Director cannot be treated as employees for the purpose of calculating the required number of employees to attract the provisions of the Act. It is contended that in E.S.I Corporation v. Apex Engineering Pvt. Ltd. (supra) the question of inclusion of the Managing Director and the Directors as employees came up for consideration under the provisions of Employee State Insurance Act, 1948, and not under the Employees' Provident Fund and. Miscellaneous Provisions Act, 1952. The materials made available on records disclose that the petitioner-company paid remuneration to the Directors and the Managing Director and house rent allowance to the Managing Director. The balance sheet discloses that the same was paid as salary and not as stipend/sitting fee or as other payment as sought to be projected by the petitioner-company. In such a situation, the ratio of the aforesaid case would be squarely applicable and it is difficult to hold that the respondent authorities committed any illegality in accepting these persons towards the total number of employees necessary to be included under the provisions of the Act. The Act in question is a socially benevolent legislation and it is enacted for the purpose of the welfare of the employees who are poorly paid and are in unsatisfactory service condition, amenities, to determine the purpose of providing benefit such as provident fund, depository linkage insurance fund, family pension scheme, for the workers employed in factories and other establishment, which is included under the social welfare scheme.

12. At this stage, Mr. Sarma submits that the petitioner-company was a dealer of LML Vespa Scooter and having stopped its business now the petitioner-company has no link with the manufacturing company. The petitioner-company mostly dealt with the self acting as agent of the products of LML Vespa Scooter.

13. It is further submitted that most of the employees have left the petitioner-company in the year 1998, after closure of the LML Pvt. Ltd. In such a situation, it is contended that the direction to pay the dues from 1997 onwards would not be justifiable in the facts and circumstances of this case as demonstrated. In this regard Mr. Sarma refers the decision of the Apex Court rendered in Shri Mahila Griha Udyog v. Union of India and Ors. (1999) 6 SCC 38 : 1999-II-LLJ-954, rejecting the contention of the petitioner. The Apex Court on the facts and circumstances allowed the; application of the provision was allowed from the date of the decision by the Court i.e. from April 1, 1999. I have noted the above decision of the Apex Court while not interfering with the decision of the Assistant Provident Fund Commissioner (Enforcement) in holding the petitioner-company to be liable for payment of the contribution under the Act, based on findings of facts collected by the authority, it is held that such liability in respect of the petitioner-company would arise only from the date on decision arrived at after completion of the enquiry initiated under Section 7-A of the Act i.e. January 5, 2001.

14. Although, Mr. Sarma refers to the affidavits sworn by Shri Swapan Das and Shri Bhupen Basak and tried to impress the Court that they were not the employees in the establishment of the petitioner-company, it is found that such affidavits were sworn after passing of the impugned order and that would not affect the decision of the spot verification/inspection conducted by the said authorities.

15. In view of the above discussion, this writ petition stands allowed to the extent indicated above. The interim order passed earlier merges with this judgment.