Case Law Details
M/S Express Publications (Madurai) Private Limited Vs Union of India (Karnataka High Court)
Karnataka High Court held that any person who is paid wages by the employer would become an employee under the EPF Act whether the said payment is done directly or through a contractor and accordingly EPF would be applicable.
Facts-
The Petitioner filed a petition under Section 26-B of the Employee Provident Fund Scheme, 1952 to determine the issue with regard to existence of employer-employee relationship between the petitioner and the respondent.
Conclusion-
Held that in terms of Subsection (f) of Section 2 of EPF Act (i.e. definition of employee), even a person who is engaged through a contractor being covered under the EPF act, in my considered opinion that if an employer were to employ a person directly on a contractual basis, the EPF Act would apply to such a relationship also more so when there in no exemption issued under sub-section (ff) or (fff) of Section 2.
An employee means any person who is employed for wages to do any kind of work. Thus, it is only the payment and receipt of wages which is important. So long as this dual test is satisfied, any person who is paid wages by the employer would become an employee under the EPF Act whether the said payment is done directly or through a contractor.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
1. The petitioner is before this Court seeking for the following reliefs:
i. Issue a Writ of Certiorari quashing the order dated 29.10.2020 passed by the 2nd respondent bearing No.RO/BG/BNG(Malleshwaram)/Comp/2D/3485/2 020-21/80 (produced as Annexure-J) and;
ii. Pass such other and further orders as deemed fit in the facts and circumstances of the case in the interest of justice and equity.
2. The petitioner is a company which is engaged in the publication of newspapers. 3rd respondent, who is a Photographer, had approached the petitioner offering his services only on a contract basis to do some work on photography which was accepted by the petitioner, and in order to formalise the arrangement, a contract was entered into between the petitioner and the 3rd respondent.
3. 3rd respondent submitted a representation to the Hon’ble Prime Minister of India stating that he was a contract employee of the petitioner but was not enrolled under the Provident fund and as such sought for the Prime Minister’s intervention in release of the provident fund amount.
4. It appears that in pursuance thereof, the matter was referred to 2nd respondent and 2nd respondent issued a summons to the petitioner for enquiry under Section 7-A of the Employees Provident Fun and Miscellaneous Provisions Act [for short referred to as ‘EPF Act’].
5. The petitioner entered appearance and filed a petition under Section 26-B of the Employee Provident Fund Scheme 1952 [hereinafter referred to as ‘Scheme’] to determine the issue with regard to the existence of employer-employee relationship between the petitioner and the respondent. Applications and objections having been filed, written arguments having been filed, after hearing the parties, the 2nd respondent vide its order dated 29.10.2020 held that 3rd respondent is an employee of the petitioner and directed his enrolment to be made by the petitioner under the Scheme. It is aggrieved by the same that the petitioner is before this Court seeking for the aforesaid relief.
6. Ashok Haranahalli, learned Senior counsel appearing for the petitioner submitted that:
6.1. There is no employer-employee relationship between the petitioner and 3rd respondent. To make applicable the EPF Act and or the Scheme, it is required that there is a master-servant relationship established by the employee, and in the absence of the same, 2nd respondent could not have returned a finding on the issue raised by the petitioner under para 26-B of the Scheme holding that 3rd respondent was an employee of the petitioner.
6.2. One of the predominant tests for a person to be classified and/or treated as an employee, there has to be control and supervision by the employer. Insofar as a regular employee is concerned, the petitioner would excise control and supervision, as also disciplinary proceedings could be taken, but insofar as a contractual employee is concerned, the petitioner would not have control or supervision, let alone the right to initiate disciplinary proceedings.
6.3. There are various differences between regular employee and contractual person and refers to the table appended to para 5 of the petition, which is reproduced hereunder for easy reference:
| SL. NO. |
REGULAR EMPLOYEE | CONTRACTUAL PERSON |
| 1 | Once regular employee is confirmed the person will continue till the age of superannuation. | Contract is for a limited period of 1 or 2 years |
| 2 | Regular employees are paid wages/salary | Contract person is paid a consolidated amount. |
| 3 | Regular employees are subjected to rules, regulations, standing orders and subjected to disciplinary proceedings. | Contract person is not subjected to rules, regulations, standing orders and are not subjected to disciplinary proceedings. |
| 4 | Regular employee cannot take any outside work or work for others. | Contract person is not restricted or prohibited to take work from others outside. |
| 5. | Regular employee can be transferred from can be transferred from one department to another department or from one place to another place in India. | Contract person is not subjected to transfer. |
6.4. Relying on the above table, he submits that insofar as 3rd respondent is concerned, he is a contractual person, subject to a contract entered between the petitioner and 3rd respondent and it is only the said contract which would govern the relationship but does not provide control or supervision to the petitioner.
6.5. Insofar as the regular employees are concerned, petitioner has enrolled them under the EPF Act and Scheme, insofar as contractual persons are concerned, they are not required to be enrolled.
6.6. 3rd respondent is a freelancer who does not offer exclusive service to the petitioner, the 3rd respondent can offer services to any third party and even if such services are provided, the petitioner would not take any action, even if the services were provided to the competitor of the petitioner.
6.7. The deduction which is made is in terms of the Form-16 of the Income Tax Act insofar as a regular employee is concerned, however, in respect of a contractual employee, the deduction is made in terms of Form-16A and under Section 194(c) of the Income Tax Act, 1961. In the present case, deduction having been made under the said provision and Form-16C having been issued, 3rd respondent is only a contractual labour and cannot be said to be an employee and as a consequence thereof, employer and employee relationship between the petitioner and 3rd respondent.
6.8. The 2nd respondent has not properly applied its mind to the terms of the contract inasmuch as the 2nd respondent has not taken into consideration the clause which categorically states that the agreement does not create any master servant relationship and is purely contractual on principal to principal basis. If that clause had been considered, the 2nd respondent would have had no option but to come to a conclusion that there is no employer and employee relationship between the petitioner and 3rd respondent.
6.9. What is required to be paid under the contract is a consolidated pay, there is no separate amount of Provident Fund, gratuity, bonus or the like which could be applicable and it is for that reason it is mentioned in the contract that consolidated pay includes bonus, gratuity and other benefits.
6.10. The contract between the petitioner and 3rd respondent having been admitted, the terms of the contact could not have been ignored and or misinterpreted by the 2nd respondent. The contract ought to be given effect to as is and a beneficial interpretation was not required to be given by 2nd respondent.
6.11. 3rd respondent being a freelancer was free to send photographs taken by him to any other newspapers, magazines or like. It is only the photographs which are sent to the petitioner which become property of the petitioner whether published or not. Insofar as other photographs which have been sent to other newspapers and or publishing houses, the petitioner would have no claim over the said photographs. The contract between the parties can be terminated by issuing necessary notice by either of the parties.
6.12. 2nd respondent has come to an erroneous conclusion that the Evidence Act is not applicable to the proceedings before it. 2nd respondent acting under a quasi judicial capacity would be bound by the principles of the Evidence Act and ought to have considered the documents by applying principles under the Evidence Act.
6.13. 3rd respondent is a freelancer who is not exclusively working for the petitioner nor does he work full-time for the petitioner. 3rd respondent is more like a freelance photographer who would after taking photographs, send them to the petitioner, which could be used by the petitioner. This, in no manner, establishes an employer-employee relationship.
6.14. He relies upon the following decisions
6.14.1. P.M. Patel & Sons v. Union of India1, more particularly para No.9 thereof which is reproduced hereunder for easy reference:
9. Now to be an employee it is necessary that the relationship of master and servant should exist with the employer. The principal question is whether such a relationship exists between the manufacturer and a home worker. Several cases were placed before us by the parties in this connection, and reference may be made to them. In Chintaman Rao v. State of M.P. [AIR 1958 SC 388 : 1958 SCR 1340 : (1958) 2 LLJ 252] this Court held that independent contractors, known as Sattedars, with whom a manufacturer contracted for the supply of beedis could not be described as workers within the definition of sub-section (1) of Section 2 of the Factories Act, nor could their coolies, because the Sattedars undertook to supply the beedis by manufacturing them in their own factories or by entrusting the work to third parties. The Sattedars were not subject to a right of control by the manufacturer in respect of the manner in which the work was to be done. The Court applied the principle that the test for determining the relationship of master and servant lay in the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant was to do but also the manner in which he should do it. In passing, the Court referred to home workers employed by the Sattedars for making beedis in their respective homes, and the Court observed that they could not be regarded as persons employed by the manufacturer directly or through any agency. Thereafter, in Birdhichand Sharma v. First Civil Judge, Nagpur [AIR 1961 SC 644 : (1961) 3 SCR 161 : (1961) 2 LLJ 86] this Court considered a case where the manufacturer had employed workmen in his beedi factory and who were at liberty to work at their homes, and the Court held that the conditions in which they worked made them “workers” within the meaning of clause (1) of Section 2 of the Factories Act. The significant feature of the judgment lies in the observation of the Court that in the case of the beedi industry the right of rejection of the beedis if they did not come up to the proper standard was evidence of the supervision and control exercised by the manufacturer. Noting that the nature and extent of supervision and control varied in different industries, the Court said:
“Taking the nature of the work in the present case it can hardly be said that there must be supervision all the time when biris are being prepared and unless there is such supervision there can be no direction as to the manner of work.
In the present case the operation being a simple one, the control of the manner in which the work is done is exercised at the end of the day, when biris are ready, by the method of rejecting those which do not come up to the proper standard. In such a case it is the right to supervise and not so much the mode in which it is exercised which is important.”
Reference may be made next to Shankar Balaji Waje v. State of Maharashtra [AIR 1962 SC 517 : 1962 Supp 1 SCR 249 : (1962) 1 LLJ 119] . The majority view taken on the particular facts of that case was that the workers were not subject to the control and supervision of the manufacturer. The learned Judges constituting the majority appear to have overlooked the observations in Birdhichand Sharma [AIR 1961 SC 644 : (1961) 3 SCR 161 : (1961) 2 LLJ 86] that the right of rejection of the beedis prepared by the workers in itself constituted a sufficient element of supervision and control. Our attention was also invited by the petitioners to Orissa Cement Ltd. v. Union of India [AIR 1962 SC 1402 : 1962 Supp 3 SCR 837 : (1962) 1 LLJ 400] but this is a case where the question was whether a notification was valid which made the employer liable to pay into the provident fund, constituted under the Provident Funds Act, 1952, the share of workers who were in fact the employees of independent contractors. The Court drew a careful distinction between labour employed by the manufacturer and that employed by an independent contractor. Most of these cases were considered thereafter by this Court in D.C. Dewan Mohideen Sahib and Sons v. Industrial Tribunal, Madras [AIR 1966 SC 370 : (1964) 7 SCR 646 : (1964) 2 LLJ 633] and while reviewing the law the Court rejected the plea of the manufacturers against the application of the Industrial Disputes Act on the ground that the workers ostensibly employed by the “so-called contractors” were in fact the workmen of the appellants who had employed them through their agents or servants. It may be pointed out, however, that the Court reiterated the view expressed in Birdhichand Sharma case [AIR 1961 SC 644 : (1961) 3 SCR 161 : (1961) 2 LLJ 86] that the rolling of beedis was work of such a simple nature that supervision was not required all the time and it was sufficient if supervision was exercised at the end of the day through the system of rejecting defective beedis. The law took a major shift in Silver Jubilee Tailoring House v. Chief Inspector of Shops and Establishments [(1974) 3 SCC 498 : 1974 SCC (L&S) 31 : AIR 1974 SC 37 : (1974) 1 SCR 747] as to the criteria which determined the relationship of master and servant. Mathew, J., who spoke for the Court, reviewed the earlier decisions of this Court as well as some of the decisions rendered in England, and pointed out that the test of control as traditionally formulated was no longer treated as an exclusive test. He observed: (SCC pp. 507-08, paras 28 & 29)
“It is exceedingly doubtful today whether the search for a formula in the nature of a single test to tell a contract of service from a contract for service will serve any useful purpose. The most that profitably can be done is to examine all the factors that have been referred to in the cases on the topic. Clearly, not all of these factors would be relevant in all these cases or have the same weight in all cases. It is equally clear that no magic formula can be propounded, which factors should in any case be treated as determining ones. The plain fact is that in a large number of cases, the court can only perform a balancing operation weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction.
During the last two decades the emphasis in the field has shifted and no longer rests so strongly upon the question of control. Control is obviously an important factor and in many cases it may still be the decisive factor. But it is wrong to say that in every case it is decisive. It is now no more than a factor, although an important one.”
He was dealing with a case where the workers who were tailors went to tailoring shops and were given work as and when work was available, and when cloth was given for stitching to a worker he was told how he should stitch it, and if the instructions were not carried out the work was rejected and he was asked to re-stitch it. Some of the workers were allowed to take the clothes home for stitching. The Court held that there was a relationship of master and servant because of the right in the employer to reject the work done, and it reiterated that “the degree of control and supervision would be different in different types of work”. In the present cases, the right of rejection can similarly be said to represent the control and supervision exercised by the manufacturer over the beedis prepared by the home workers. Quite obviously, while in Silver Jubilee Tailoring House case [(1974) 3 SCC 498 : 1974 SCC (L&S) 31 : AIR 1974 SC 37 : (1974) 1 SCR 747] it was possible for the employer to direct re-stitching of the garment, no such direction can be reasonably envisaged in the case of substandard beedis. A Constitution Bench of this Court had occasion to consider the law in Mangalore Ganesh Beedi Works v. Union of India [(1974) 4 SCC 43 : 1974 SCC (L&S) 205 : AIR 1974 SC 1832 : (1974) 3 SCR 221] which questioned the validity of the Beedi and Cigar Workers (Conditions of Employment) Act, 1966. The Court adopted the test of rejection of defective beedis for determining whether the beedi workers were the employees of the manufacturer or the independent contractors. The Court observed: (SCC p. 62, para 35)
“. . . the manufacturers or trade mark holders have liability in respect of workers who are directly employed by them or who are employed by them through contractors. Workers at the industrial premises do not present any problem. The manufacturer or trade mark holder will observe all the provisions of the Act by reason of employing such labour in the industrial premises. When the manufacturer engages labour through the contractor the labour is engaged on behalf of the manufacturer, and the latter has therefore liability to such contract labour. It is only when the contractor engages labour for or on his own behalf and supplies the finished products to the manufacturer that he will be the principal employer in relation to such labour and the manufacturer will not be responsible for implementing the provisions of the Act with regard to such labour employed by the contractor. If the right of rejection rests with the manufacturer or trade mark holder, in such a case the contractor who will prepare beedis through the contract labour will find it difficult to establish that he is the independent contractor.”
6.14.2. Naresh Kumar Manilal Parmar v. O.N.G.C. Ltd2., more particularly paras 2, 8, 9, 11 to 13 thereof which are reproduced hereunder for easy reference:
2. Before September, 1999, appellant No. 1 was working as pharmacist of a contractor who was engaged by the respondent to provide labour. During the year 1998, three sanctioned posts had fallen vacant in dispensary being run by the respondent, and therefore, the Administrative Officer, ONGC Mahesana had recommended to the General Manager to take an earlier action to fill in the vacant posts by addressing a letter dated January 16, 1998. Thereupon, the Western Regional Business Centre had arranged Walk-in-interview for filling in the vacant posts, and for that purpose, an advertisement was issued in “Gujarat Samachar” daily published on September 7, 1999. In the said advertisement, it was mentioned that the respondent wanted to engage suitable and interested person on job on contract basis for one post of pharmacist at ONGC Health Centre, Mahesana for a period of one year which was extendable by another year and it was specifically stated that the job was purely contractual and did not carry liability on ONGCL for regular appointment at any stage. What was mentioned in the said advertisement was that the agreement to be entered into for job on contract basis was required to be signed by the candidate concerned. The appellant No. 1 appeared for the interview held on September 14,1999, and was selected to be engaged for the job for one year purely on contract basis. The respondent had informed the appellant No. 1 by communication dated September 29/30, 1999 that he was selected for the post of pharmacist purely on contractual basis for one year, and that his engagement was purely temporary and liable to be discontinued at any time without notice or assigning any reason. Pursuant to the selection of the appellant No. 1 on post of pharmacist, an agreement was entered into between the appellant No. 1 and respondent on October 9, 1999, wherein the appellant No. 1 accepted the position that he was appointed as pharmacist on contract basis for one year and that the appellant No. 1 was entitled to receive remuneration of Rs. 3.600/- P.M. Further, in the said agreement, it was stipulated that there was no employer and employee relationship between ONGCL and the appellant No. 1. Meanwhile, regular selection process for filling in the post of pharmacist was initiated by the respondent and as the said process was likely to take considerable time, on request being made by the appellant no. 1, his contractual engagement was extended till July 31, 2001. The appellant No. 1 applied for the post of Junior Pharmacist regarding which regular selection process was initiated by the respondent, and before out come of the said selection process, the appellants filed Special Civil Application No. 9381 of 2000 in the High Court. In the petition, the case of the appellants was that continuation of the engagement of the appellant No. 1 was on contractual basis, though he was working on clear vacancy for more than 240 days, was contrary to the provisions of Articles 14 and 16 of the Constitution as well as Industrial Disputes Act, 1947, and he was entitled to a declaration that he was a permanent and regular employee of the respondent. What was claimed by the appellants was that the agreement by which the appellant No. 1 was engaged as pharmacist was illegal and unfair, and therefore, the appellant No. 1 was entitled to all the benefits including time scale of pay and other perks at par with the permanent and regular employees of the respondent. Under the circumstances, in the petition, the appellants had prayed the Court to issue a writ of certiorari or any other appropriate writ, order or direction to declare that agreement by which the appellant No. 1 was engaged as pharmacist was unconstitutional. It was also prayed to declare that the appellant No. 1 acquired temporary status in service of the respondent and was entitled to all the benefits including time scale of pay and other perks at par with the permanent employees of the respondent. On service of notice, affidavit-in-replies were filed by the respondent and claim advanced by the appellants in the petition was contested. In the reply, it was stated that the appellant No. 1 had appeared in the interview held for filling in vacant posts of pharmacists on regular basis, but had failed, and as he was not selected, the appellants were not entitled to reliefs claimed in the petition. What was claimed in the replies was that in view of the provisions of Section 2(oo)(bb) of the Industrial Disputes Act, 1947, the appellants were not entitled to claim that the appellant No. 1 was temporary employee of the respondent.
8. We have heard the learned Counsel for the parties and taken into consideration the documents forming part of the petition. The record of the case indicates that advertisement at Annexure B was issued by the respondent in ‘Gujarat Samachar’ daily published on September 7,1999, specifically mentioning that suitable and interested persons were to be engaged on job contract basis for a period of one year. In the note 1 appended to the advertisement, it was clearly stated that the job was purely contractual and did not carry liability on ONGCL for regular appointment at any stage. Note 2 appended to the said advertisement required that an agreement was to be entered into for job on contractual basis by the candidate selected. Thus, it was made very clear in the advertisement itself that the applications were invited for engagement on contractual basis. After understanding the contents of the advertisement, the appellant no. 1 had applied for engagement as pharmacist on contractual basis and was selected in interview held on September 14, 1999 which is quite evident from Annexure-C dated September 29/30, 1999. In the letter of appointment also, it was specifically mentioned that the engagement of the appellant No. 1 was purely on contractual basis and was extendable by a period of one year on approval by the competent authority. One of the conditions stipulated in the appointment letter was that the engagement of the appellant No. 1 on contractual basis for period of one year, was purely temporary and liable to be discontinued at any time without notice or without assigning any reasons. As observed earlier, the selected candidate was required to enter into an agreement after his selection for the post of pharmacist on contractual basis. Accordingly, the appellant No. 1 had entered into a contract with the respondent No. 1 and in the said contract also, it was accepted by appellant No. 1 that he was engaged as pharmacist on contractual basis for period of one year and that period was extendable by another period of one year on approval of the competent authority. It is not in dispute that meanwhile, the respondent had initiated selection process for filling in post of pharmacist on regular basis and that the appellant No. 1 had applied for the said post. As the said process was likely to take some time, the appellant no. 1 had made an application dated June 22, 2000 requesting the respondent to extend his engagement as pharmacist on contractual basis by a further period of one year which request was accepted by the respondent vide communication dated July 13, 2000. In this communication also, it was specifically mentioned that the appellant No. 1 was engaged as pharmacist for period of one year with effect from August 1, 2000 on contract basis and that his engagement was purely temporary in nature. It is not in dispute that at the regular selection process, the appellant No. 1 has failed and could not get himself selected for the post of pharmacist. The contention that the agreement for engagement of the appellant as pharmacist is contrary to the provisions of the Indian Contract Act or the Industrial Disputes Act or Article 14 of the Constitution, and therefore, the appellants are entitled to the reliefs claimed in the petition, is devoid of merits. It is relevant to notice at this stage the provisions of Section 2(oo)(bb) of the Industrial Disputes Act. 1947 which reads as follows:
Section 2. Definition—In this Act, unless there is anything repugnant in the subject or context,
xxxxxxxxxxxx
(oo)’retrenchment’ means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include—
(a) xxxxxxxxxxxxxxx
(b) xxxxxxxxxxxxxxx
(bb) termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein.
9. A bare reading of the above quoted provisions makes it manifest that ‘retrenchment’ means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include the termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein. In view of the provisions of Section 2(oo)(bb) of the Industrial Disputes Act, 1947, there is no manner of doubt that there can be a contract of employment for a fixed period, and if there is such contract then the employer can terminate the service of the employee on expiry of the contract or in terms of the stipulation contained in the contract. This further implies that fixed term contract of employment is not prohibited under the Industrial Disputes Act. Consequently, the appointment of the petitioner on contractual basis for a fixed term of one year cannot be said to be illegal or contrary to the provisions contained in the Industrial Disputes Act.
11. A reasonable reading of the above clause makes it clear that the Contingent Employees of the Commission are classified as temporary and casual workmen, and the workman who is on the rolls of the Commission and had put in not less than 180 days of attendance in any period of 12 consecutive months shall be temporary workman, but a temporary workman who has put in not less than 240 days of attendance in any period of 12 consecutive months and who possesses the minimum qualifications prescribed by the Commission may be considered for conversion as regular employee. There is nothing on the record of the petition which indicates that the appellant No. 1 was appointed as temporary employee of the respondent. As observed earlier he was engaged as pharmacist on contractual basis, and therefore, in bur view, claim advanced by the appellants that the appellant No. 1 is entitled to be treated as temporary workman in view of the provisions of the Certified Standing Orders, is rightly rejected by the learned Single Judge.
12. In Central Inland Water Transport Corporation Ltd. (supra), the Supreme Court had occasion to consider validity of Rule 9(i) of the Central Inland Water Transport Corporation (Service, Discipline and Appeals) Rules, 1979. The said rule empowers the Corporation to terminate services of the permanent employees without any reason and by giving notice. While adjudicating the validity of the said rule, the Supreme Court has observed that said rule is void under Section 23 of the Contract Act, as being opposed to public policy and is also ultra vires Article 14 of the Constitution as well as violative of directive principles contained in Article 39(d) and 41 of the Constitution. Further, the Supreme Court has observed that the principle is that courts will not enforce and will, when called upon to do so, strike down unfair and unreasonable contract or unfair and unreasonable clause in a contract entered into between the parties who are not equal in bargaining power. In the case before us, we find that the agreement which was executed between the appellant no. 1 and the respondent is neither unfair nor unreasonable in its nature. Looking to the requirements and exigency of the situation, respondent had decided to engage the respondent No. 1 as pharmacist on contractual basis till regular appointment was made. All terms and conditions were mentioned in the advertisement as well as in the letter by which the respondent No. 1 was engaged as pharmacist on contractual basis. Consequently, we are of the opinion that the principle laid down by the Supreme Court in the case of Central Inland Water Transport Corporation (supra) cannot be made applicable to the facts of the present case, more particularly in view of the provisions of Section 2(oo)(bb) of the Industrial Disputes Act, 1947.
13. The plea that the respondent had acted in an unfair manner by requiring the appellant No. 1 to enter into an agreement for engagement as pharmacist on contractual basis, and therefore, reliefs claimed in the petition ought to have been granted, cannot be accepted. As observed earlier, the contract was entered into by the respondent no. 1 having regard to the conditions prevailing at the relevant time and till the regular appointment was made. During the process for regular recruitment, the appellant No. 1 could not get himself selected. If the reliefs claimed in the petition are granted, the consequence would be that the appellant no. 1 who is not selected at regular selection process would get employment as a pharmacist pursuant to the orders of the Court and this simply cannot be done at all in a petition filed under Article 226 of the Constitution. The record does not indicate that the respondent has acted in any unfair manner, more particularly when the appellant no. 1 was permitted to appear at regular selection process and during that time, his contractual engagement was extended by period of one year. On over all view of the matter, we are satisfied that no error is committed by the learned Single Judge by dismissing the petition filed by the appellants and no ground was made out by the learned Counsel for the appellants to warrant our interference with the same in the present appeal. Result is that the appeal is liable to be dismissed. For the foregoing reasons, the appeal fails and is dismissed. Notice is discharged with no orders as to costs. Ad-interim relief granted earlier is hereby vacated.
6.14.3. MD, Karnataka Handloom Development Corpn. Ltd. v. Sri Mahadeva Laxman Raval3, more particularly paras 14, 15, 16, 18 and 20 thereof, which are reproduced hereunder for easy reference:
14. It is thus clear from the above that the respondent claimant is aware that his appointment was purely contractual and for a specified period. He is also aware that he is not eligible to any other benefits as a regular employee of the Corporation and could be liable for termination without any notice and without payment of compensation. The claimant is also aware that his appointment stood automatically terminated on the completion of the stipulated period. The case of the claimant, therefore, in our view, does not become an industrial dispute.
15. We shall now as a sample reproduce one appointment order dated 30-11-1993.
“Karnataka Handloom Development Corporation Limited, Bangalore 560 046
Intensive Handloom Development Project,
Banhatti 587 311
No. KHDC: IHDP: BNT: ADM/93-94/1301Date: 30-11-1993
To,
Shri Mahadeva L. Raval,
Expert Weaver,
Near Sadashiv temple, Forest Area,
Post: Banhatti 587 311,
Taluk: Jamkhandi,
District: Bijapur.
The Corporation has been tasked with implementation of the Vishwa programme by the State Government. One of the objects of the Scheme is to train the persons/weavers covered under the Scheme in the field of weaving different varieties of fabric. Keeping in view this need, the management is pleased to consider your candidature for the post of Expert Weaver and appoint you as expert weaver on a stipend of Rs 1000 per month for a period of 9 months (nine months only) on the terms and conditions hereinafter mentioned and post you to SCP Training Centre, Muleganvi Building, IHDP, Banhatti, Taluk Jamkhandi, District Bijapur.
(1) Your appointment will be purely contractual.
(2) Your term of contract will be for nine months from the date you report for duty in the Corporation.
(3) You will not be eligible for any benefits like DA, HRA and CCA or privileges as are admissible to the regular employees of the Corporation except to the extent provided in this order.
(4) You will be governed by the KHDC (Disciplinary and Appeal) Rules, applicable to other employees of the Corporation.
(5) During the period of contract, if you intend to resign or leave the services of the Corporation, you shall be liable to give one month’s notice or pay one month’s stipend in lieu of such notice to the Corporation.
(6) Your duties shall be as allocated by the management from time to time.
(7) You will be liable for termination without any notice and without payment of any compensation and without assigning any reasons therefor at any time during the period of contract.
(8) The contract of your appointment stands automatically terminated on the expiry of nine months from the date of your reporting for duty in the Corporation.
If you are agreeable to the above terms and conditions, you are requested to sign the duplicate copy hereof and send it to us in token of having accepted the appointment and report for duty to the Project Administrator, Intensive Handloom Development Project, Banhatti, after communicating your acceptance. If you fail to convey your acceptance and report for duty as advised above, it will be presumed that you are not interested to accept the appointment order and the appointment order will be revoked without further reference to you.
For Karnataka Handloom Development Corporation Ltd.
sd/-
Project Administrator,
Intensive Handloom
Development Project,
Banhatti 587 311.”
(emphasis supplied)
16. A careful perusal of the terms and conditions of appointment would go to show that the respondent is not a worker but employed on contract basis on a time-bound specific Scheme assigned as weaving trainer. However, the learned Judges of the Division Bench committed a factual error in holding that the above letter of appointment does not show that employment was not a contract which stipulated that it comes to an end with the expiry of project or scheme nor is it the case of the Corporation that the respondent was made aware of any such stipulation even at the commencement of the employment. The High Court has failed to notice that the respondent was engaged on contract basis and had been assigned to train weavers who were lagging in weaving skills in the weaving potential development area working on time-specific, short-term Scheme sponsored by the Corporation. We are, therefore, of the opinion that the respondent is not a worker for the purposes of Section 25-F of the ID Act but employed on contract basis only. The High Court also has not properly appreciated the judgment relied on S.M. Nilajkar v. Telecom District Manager [(2003) 4 SCC 27 : 2003 SCC (L&S) 380] . As the respondent was engaged as trainer for a specific period under the Scheme and was paid a stipend of Rs 1000 p.m. from the date of his appointment and, therefore, Section 2(oo) of the Act is not attracted as soon after the expiry of the specific period the respondent’s service was discontinued and so it is not a retrenchment as defined under Section 2(oo) of the ID Act.
18. We have perused all the appointment letters dated 14-1-1991, 24-2-1992, 10-2-1993, 3-3-1993 and 30-11-1993 produced by the respondent as annexures which consistently and categorically state that the respondent’s appointment with the Corporation was purely contractual for a fixed period. The respondent was engaged only under the Vishwa programme/Scheme which is not in existence (sic any longer). Now the Scheme came to an end during August 1994; the respondent was also not governed by any service rules of the Corporation. The Corporation put an end to the contract w.e.f. 31-8-1994 which, in our opinion, cannot be termed as dismissal from service. Even assuming that the respondent had worked 240 days continuously he, in our opinion, cannot claim that his services should be continued because the number of 240 days does not apply to the respondent inasmuch as his services were purely contractual. The termination of his contract, in our view, does not amount to retrenchment and, therefore, it does not attract compliance with Section 25-F of the ID Act at all.
22. Learned Senior Counsel appearing for the Corporation placed reliance on the decision of this Court in Secy., State of Karnataka v. Umadevi (3) [(2006) 4 SCC 1 : 2006 SCC (L&S) 753] (Constitution Bench), paras 45 and 47 of the judgment. P.K. Balasubramanyan, J. speaking for the Bench has observed as follows: (SCC pp. 37-39)
“45. While directing that appointments, temporary or casual, be regularised or made permanent, the courts are swayed by the fact that the person concerned has worked for some time and in some cases for a considerable length of time. It is not as if the person who accepts an engagement either temporary or casual in nature, is not aware of the nature of his employment. He accepts the employment with open eyes. It may be true that he is not in a position to bargain—not at arm’s length—since he might have been searching for some employment so as to eke out his livelihood and accepts whatever he gets. But on that ground alone, it would not be appropriate to jettison the constitutional scheme of appointment and to take the view that a person who has temporarily or casually got employed should be directed to be continued permanently. By doing so, it will be creating another mode of public appointment which is not permissible. If the court were to void a contractual employment of this nature on the ground that the parties were not having equal bargaining power, that too would not enable the court to grant any relief to that employee. A total embargo on such casual or temporary employment is not possible, given the exigencies of administration and if imposed, would only mean that some people who at least get employment temporarily, contractually or casually, would not be getting even that employment when securing of such employment brings at least some succour to them. After all, innumerable citizens of our vast country are in search of employment and one is not compelled to accept a casual or temporary employment if one is not inclined to go in for such an employment. It is in that context that one has to proceed on the basis that the employment was accepted fully knowing the nature of it and the consequences flowing from it. In other words, even while accepting the employment, the person concerned knows the nature of his employment. It is not an appointment to a post in the real sense of the term. The claim acquired by him in the post in which he is temporarily employed or the interest in that post cannot be considered to be of such a magnitude as to enable the giving up of the procedure established, for making regular appointments to available posts in the services of the State. The argument that since one has been working for some time in the post, it will not be just to discontinue him, even though he was aware of the nature of the employment when he first took it up, is not (sic) one that would enable the jettisoning of the procedure established by law for public employment and would have to fail when tested on the touchstone of constitutionality and equality of opportunity enshrined in Article 14 of the Constitution.
***
47. When a person enters a temporary employment or gets engagement as a contractual or casual worker and the engagement is not based on a proper selection as recognised by the relevant rules or procedure, he is aware of the consequences of the appointment being temporary, casual or contractual in nature. Such a person cannot invoke the theory of legitimate expectation for being confirmed in the post when an appointment to the post could be made only by following a proper procedure for selection and in cases concerned, in consultation with the Public Service Commission. Therefore, the theory of legitimate expectation cannot be successfully advanced by temporary, contractual or casual employees. It cannot also be held that the State has held out any promise while engaging these persons either to continue them where they are or to make them permanent. The State cannot constitutionally make such a promise. It is also obvious that the theory cannot be invoked to seek a positive relief of being made permanent in the post.”
6.14.4. National Small Industries Corpn. Ltd. v. V. Lakshminarayanan4, more particularly paras 17, 23 and 24 thereof which are reproduced hereunder for easy reference:
17. Section 2(s) of the 1947 Act defines “workman” in the following terms:
“2. (s) ‘workman’ means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—
(i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or
(ii) who is employed in the police service or as an officer or other employee of a prison; or
(iii) who is employed mainly in a managerial or administrative capacity; or
(iv) who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.”
23. From the aforesaid documents it would be evident that even if the respondent had been working on a daily-wage basis prior to his appointment as apprentice trainee (shop assistant), at least from 3-51990 till 2-5-1992, he was working as an apprentice on a consolidated salary and the respondent himself was conscious of such fact since he had requested the Corporation and its authorities to absorb his services on a permanent basis purportedly on the basis of a promise held out at the time when he was interviewed for appointment to the post of apprentice trainee (shop assistant). Other than the assertion made on behalf of the respondent that the appellant had agreed to absorb the respondent in Group D category as peon/shop assistant after completion of apprenticeship and the recommendation said to have been made by the General Manager indicating that the respondent could be appointed and taken as a permanent worker, there is no other material on record to support the case made out by the respondent.
24. In the absence of any such material, it is difficult to understand the reasoning of the Labour Court that the respondent was not an “apprentice trainee” but a “workman” who was made to perform a full-time job under the guise of an apprentice trainee. The High Court appears to have been impressed by the reasoning of the Labour Court with regard to the finding that although designated as an apprentice, the respondent was not undergoing training, but was an employee doing full-time work in the establishment. Such a view, in our judgment, is not supported by the materials on record and is completely contrary to the appointment letter issued to the respondent on 26-41990 and the respondent’s own letter dated 29-4-1992, in admission of such fact. Had such a letter of appointment not been available, the Labour Court and/or the High Court could justifiably have embarked on an exercise as to whether the respondent was in effect a “trainee” under the Apprentices Act, 1961, or a “workman” within the meaning of Section 2(s) of the 1947 Act. There is nothing on record to indicate that the respondent’s services had ever been regularised or that he was brought on the rolls of the permanent establishment.
6.14.5. Rampat vs. Presiding Officer, Industrial Tribunal-cum-Labour Court, Panipat and Anr5., more particularly paras 2 to 4 thereof which are reproduced hereunder for easy reference:
The respondent-School defended the action by pleading that the workman was a stranger to the school and there was, therefore, no relationship of employer and employee between the parties. There was no occasion with the respondent to terminate the services of a person who was not their employee. The onus to prove relationship of employment was on the workman. The petitioner failed to discharge the burden and onus on the issue which fell on him. No proof of salary or wages having been paid to the workman was produced on the record. There was neither appointment nor termination order. In the absence of any documentary evidence proving relationship of employment, the Labour Court has answered the reference against the workman.
The unsubstantiated oral testimony of the workman is not sufficient to prove relationship of master and servant. The only document on which the workman depended was an identity card issued by the Board of School Education, Haryana, Bhiwani (P-4) for purpose of examination duty is not sufficient evidence to prove employment. Receipt of stock of cement from M/s. Mittal Cement Store allegedly signed by the petitioner, as Chowkidar in receipt of material, and bills of M/s. Jai Karan Bhatta Co. or photographs (P-8) are not sufficient to reach the definite conclusion that the petitioner had worked for the School or that, in any case, had worked for 240 days preceding the date of alleged termination.
Resultantly, it is not possible on the basis of the evidence produced before the Labour Court to reach a conclusion or record a finding other than what the Presiding Officer, Labour Court, Panipat has arrived at as a result of appreciation of evidence which “cannot be reopened or questioned in writ proceedings” as explained in Syed Yakoob v. K.S. Radhakrishnan; AIR 1964 SC 477.
6.15. He submits that the petitioner being a commercial entity carrying on business of printing newspapers, it is entitled to arrange its own business in such manner as it best serves its purpose including reduction of cost. It is for this reason that several persons have been engaged as photographers on contractual basis, more so since they are not working fulltime and only part time. In this regard, he relies on the following decisions:
6.15.1. Parry & Co. Ltd. v. P.C. Pal6, more particularly paras 12 and 14 thereof which are reproduced hereunder for easy reference:
12. In D. Macropollo & Co. v. Employees’ union [(1958) (2) LLJ 492] this Court held that if a scheme of reorganisation has been adopted by an employer for reasons of economy or convenience and it has been introduced in all the areas of its business, the fact that its implementation would lead to the discharge of some of the employees would have no material bearing on the question as to whether the scheme was adopted by the employer bona fide or not. In the circumstances, an Industrial Tribunal considering the issue relating to retrenchment, should not attach any importance to the consequences of reorganisation. The resulting discharge and retrenchment would have to be considered as an inevitable, though unfortunate, consequence of such a scheme. It also held that where the finding of a tribunal is based on wrong and erroneous assumption of certain material facts, such a finding would be perverse. A recent decision in Ghatge & Patil Concern’s Employees’ union v. Ghatge & Patel (Transport) (P) Ltd. [(1968) (1) SCR 300] was a case of an employer reorganising his business from conducting a transport business himself through employees engaged by him to conducting it through a contract system whereunder he let out his motor trucks to persons who, before this charge, were his employees. Admittedly, this was done because he could not implement some of the provisions of the Motor Transport Workers Act, 1961. The charge over to the contract system was held by the Tribunal not to have been effected for victimising the employees. The employees had voluntarily resigned and hired the employer’s trucks on contract basis. It was held that a person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying. In Workmen of Subong Tea Estate v. Outgoing Management of Subong Tea Estate [(1964) (5) SCR 602] this Court laid down the following propositions : (1) that the management can retrench its employees only for proper reasons, which means that it must not be actuated by any motive of victimisation or any unfair labour practice, (2) that it is for the management to decide the strength of its labour force, for the number of workmen required to carry out efficiently the work in his industrial undertaking must always be left to be determined by the management in its discretion, (3) if the number of employees exceeded the reasonable and legitimate needs of the undertaking it is open to the management to retrench them, (4) workmen may become surplus on the ground of rationalisation or economy reasonably or bona fide adopted by the management or on the ground of other industrial or trade reasons, and (5) the right to affect retrenchment cannot normally be challenged but when there is a dispute about the validity of retrenchment the impugned retrenchment must be shown as justified on proper reasons i.e. that it was not capricious or without rhyme or reason.
14. It is well established that it is within the managerial discretion of an employer to organise and arrange his business in the manner he considers best. So long as that is done bona fide it is not competent of a tribunal to question its propriety. If a scheme for such reorganisation results in surplus age of employees no employer is expected to carry the burden of such economic deadweight and retrenchment has to be accepted as inevitable, however unfortunate it is. The Legislature realised this position and therefore provided by Section 25-F compensation to soften the blow of hardship resulting from an employee being thrown out of employment through no fault of his. It is not the function of the Tribunal, therefore, to go into the question whether such a scheme is profitable or not and whether it should have been adopted by the employer. In the instant case, the Tribunal examined the propriety of reorganisation and held that the Company had not proved to its satisfaction that it was profitable. The Tribunal then held (a) that the scheme was not reasonable inasmuch as the number of agencies given up in Madras was less than that in Calcutta, (b) that though development of manufacturing activity was taken up in Madras, no such activity was undertaken in Kidderpore, and (c) that the Company should have developed its manufacturing activity in Kidderpore simultaneously with the surrender of the agencies. It is obvious that while reorganising its business it is not incumbent on the Company to develop its manufacturing side at the very place where it has surrendered its agencies, namely, Calcutta, nor to do so at the very same time. These considerations which the Tribunal took into account were totally extraneous to the issue before it and the Tribunal ought not to have allowed its mind to be influenced by such considerations and thereby disabling itself from viewing the issue from proper perspective. It was also beyond its competence to go into the question of propriety of the company’s decision to reorganise its business. Having come to the conclusion that the said policy was not actuated by any motive of victimisation or unfair labour practice and therefore was bona fide, any consideration as to its reasonableness or propriety was clearly extraneous. Therefore, its finding that the Company had failed to establish that it was profitable was incompetent. It is for the employer to decide whether a particular policy in running his business will be profitable, economic or convenient and we know of no provision in the industrial law which confers any power on the tribunal to inquiry into such a decision so long as it is not actuated by any consideration for victimisation or any such unfair labour practice.
6.15.2. Management of Hindustan Lever Ltd. v. Administrator of Delhi Administration7, more particularly paras 19, 20 and 34 thereof which are reproduced hereunder for easy reference:
19. In my opinion the workmen have no vested right in these ten posts. They cannot compel the management to fill them up if they do not want to. The management can reorganize their work or rationalise it in such a manner that they can do with a lesser number of persons than before. In fact this is the answer of the management to the demand of the workmen. They say that after reorganization of the work they find that it is not economical or convenient to fill up these posts. It should clearly be noted that the management has not retrenched any workman. That could have been a genuine grievance of the workmen if it had been done. Posts have fallen vacant by reason of retirement, resignation or death. If by reason of non-filling of the above ten posts the conditions of labour are adversely affected they can legitimately raise disputes. They can complain of load work, over-time or of any other unfair practice by the management such as employment of temporary labour, if such is the effect of non-filling of ten posts. In that case (a) intensification of work load, (b) increase in over-time and (c) employment of casual or temporary labour for doing the work of a perennial nature, can form specific disputes. In these disputes no one can say that the labour has no direct interest. But interest in filling up of vacancies is “fanciful or remote”. This is in no sense direct. The whole dispute raised is rather abstract in nature. It is academic and amorphous. It is not a concrete question which the Tribunal has been called upon to answer. The Act does not profess to give relief in cases such as this. If there are evil effects or ramifications of the management’s refusal to fill the ten vacancies the workmen can have legitimate grievance and can ask the Tribunal to give relief to them. In fact reference No. 2 distinctly sets out one particular grievance of this nature to the adjudication of which no exception can legitimately be taken.
20. Suppose I am wrong in this view. There is yet another answer to the argument of the workmen. In a catena of decisions the Supreme Court has recognised the right of the management to conduct their business in the manner they think best. A person must be considered free to so arrange his business. As was said in Workmen of S.T. Estate v. S.T. Estate, AIR 1967 SC 420 (6):
“It is undoubtedly true that it is for management to decide the strength of its labour force, for the number of workmen required to carry out efficiently the work involved in the industrial undertaking of any employer must always be left to be determined by the management in its discretion, and so, occasions may arise when the number of employees may exceed the reasonable and legitimate needs of the undertaking.”
(See also Parry and Co. Ltd. v. P.C. Pal, (1970) 2 LLJ 429). (7) See also Ghatge & Patil Concerns Employees’ Union v. G. & P. (Transports) (Private) Ltd., (1968) 1 LLJ 566. (8)
34. I am glad to find that a division bench of the Bombay High Court in Bombay Port and Dock Employees’ Union v. Meher (M.R.), (1965) 2 LLJ 687 (16) has taken the same view as I have taken here. In that case a demand was made by the workmen upon the company to create certain posts and to allocate a number of workmen to each of such post. They asked for the reorganization of the whole of the company. They also asked the company to increase the welding plants. These demands, it was held, did not raise industrial disputes. Patel J. speaking for the court said:
“It must be remembered that an industry has to be run not only with a view to benefit the workmen but with a view to promote general interests of the entire community. Considerations, therefore, of economy and efficient management come in. Therefore, it is for the management to decide as to how each section or department or the industry should be organized; and while doing so, the management is bound in the interests of the industry itself to consider what would be the most economical way of managing its affairs.”
6.15.3. Ghatge and Patil Concerns’ Employees’ Union v. Ghatge and Patil (Transport) (P) Ltd8., more particularly paras 3, 5 to 7 and 10 thereof which are reproduced hereunder for easy reference:
3. For the operation of its trucks the Company was previously employing 70 drivers and an equal number of cleaners. On January 8, 1963, the Company advertised in a local newspaper of Kolhapur that it had trucks in working condition for sale and also trucks in working condition to be given for plying on a contract system. As many as 54 drivers applied for obtaining contracts having resigned their service as drivers. The Company then entered into agreements with these drivers between January 9 and 31. Each driver received one motor truck for operation according to the terms of the agreement. A model agreement has been produced in the case in which the parties, after reciting that there were difficulties in operating motor transport vehicles, because of the passing of the Motor Transport Workers Act, stated that the agreement was being entered into for the operation of the trucks. It is not necessary either to set out the agreement or to analyse all its terms. For our purpose it is sufficient to say that the Company let to these former drivers (to whom we may refer as operators) a truck each on condition that they paid the Company Re. 1.00 per mile for its use. The Company on its part undertook to supply fuel, oil, tyres, tubes, etc. for the purpose of running the vehicle. Under this agreement the operator was at liberty to canvass for goods and transport them but he was required to give the utmost priority to the goods entrusted to the Company for transport. In this way the goods booked with the Company were transported by the operators in priority and they paid Re. 1.00 per mile for the use of the truck, all other expenses being borne by the Company. The operators were required to bring all the gross receipts to the Company which deducted its own charges at Re. 1.00 per mile and handed over the balance. The operators were responsible for any damage to the vehicle, save normal wear and tear, and were required to observe the terms and conditions of the permit held by the Company. In this way, the Company continued to function as a transport undertaking while the trucks were not run through paid servants but through independent contractors.
5. The Company frankly admitted at all stages that it was impossible for it to implement all the conditions of the Act in respect of the drivers of motor vehicles. It stated that its motor drivers while working in its employment, were required to go on long journeys and it was practically impossible to enforce the conditions of hours of work or of rest. Since this entailed penal consequences and the possibility of the permits being cancelled, the Company was forced to adopt a system under which it would not be required to observe the Act because under it the truck drivers became independent contractors and were therefore not within the ambit of the Act. On the other hand, the Union contended that this arrangement was invented to nullify the beneficial legislation intended to improve the conditions of Motor Transport workers in general and truck drivers in particular. Under the system, the Union submitted, the drivers lost the benefit of leave of various kinds, overtime payment, Provident Fund, gratuity and insurance and there was no control either in respect of hours of work or of rest which were the main objects of the Act to secure.
The matter of dispute referred to the Tribunal was:
“The contract system for the running of vehicles which has been newly introduced, must be abolished immediately. Such ex-employees of the Company who have been given this work on contract basis should be reinstated with back wages.”
The Tribunal held that the first part as also the second referred to the 54 drivers who had resigned their jobs and become operators. The Tribunal saw difficulty in acting on the second part because the drivers had resigned. In dealing with this problem the Tribunal considered the evidence and came to the conclusion that the drivers were not coerced or forced to take this action. The Tribunal then posed the question, how to re-instate persons who had voluntarily resigned their services and could not be said to be dismissed, discharged or retrenched within the Industrial Disputes Act? The Tribunal also held that the agreements were simple agreements for transport of goods and were essentially fair to the operators. Of course, there were advantages as well as disadvantages but the employees not being servants were free agents and could do the work as and when they liked and even accept work from others. They thus got, what they considered, more benefit from the contract system than from their contract of employment. None of the drivers had appeared to complain against the new system. There was also nothing to show that this system took unfair advantage of the former drivers. The Tribunal, therefore, held that the contract system could not be described as an unfair labour practice. The Tribunal also commented that under the agreements themselves the contract was capable of being terminated by three days’ notice on either side and hence it was hardly necessary for the Union to take recourse to a Tribunal for getting it abolished. Holding that the new system could not be said to be an unfair or anti-labour practice the Tribunal rejected the claim of the Union. The Union now appeals by special leave.
6. The argument on behalf of the Union centres round two facts. Firstly, that the resignation of the drivers and cleaners and the setting up of the contract system amounts to an unfair labour practice and exploitation of labour because by this device these and other transport workers are being victimized; and, secondly, the salutary and beneficial legislation conceived in the best interest of the transport workers is being deliberately set at naught. According to the Union the operators continue to be workmen notwithstanding that they are posed as independent contractors hiring the trucks. By this system many of the benefits secured to the Motor Transport workers including drivers and cleaners, have been made inapplicable to a section of Motor Transport workers, namely, the former drivers and cleaners employed by the Company. The argument on the side of the Company is that the hiring out of trucks to the operators is not illegal and does not amount to exploitation of the former drivers or an unfair labour practice. According to the Company the operators are free agents and freely resigned their jobs and the Company points out that even the office-bearers of the Union were among those who resigned as drivers and entered into agreements to become operators. The Company further points out that many of the contracts were entered into after the present reference was made to the Tribunal.
7. There is no doubt that the Company is a Motor Transport Undertaking because it is engaged in carrying goods by road for hire or reward. Since the drivers have resigned their jobs they cannot be said to be employed in the Motor Transport Undertaking. The word “employed” in the definition of Motor Transport worker is not used in the sense of using the services of a person but rather in the sense of keeping a person in one’s service. The definition is, of course, made wide to take in all persons working in a professional capacity in an undertaking for running its affairs in any capacity and not only persons employed on wages. The word “wage” has the meaning given to the word in the Payment of Wages Act and takes in all paid employees and also persons who are employed in a professional capacity although not in receipt of wages. Persons who are independent and hire a vehicle for their own operation paying a fixed hire per mile from their earnings cannot be said to be persons employed in the Motor Transport Undertaking in the sense of persons kept in service. The operators, therefore, are not Motor Transport workers within the definition.
10. The matter of dispute no doubt referred in the second part to ex-drivers but it referred generally to the new system in the first. The Tribunal was wrong in thinking that the first part also referred to the ex-drivers (now operators). On the whole, however, it is clear that the Company has not done anything illegal. A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement, no proper means of obeying. This, of course, he can do only so long as he does not break that or any other law. The Company has declared before us that it is quite prepared, if it was not already doing so, to apply and observe the provisions of the Motor Transport Workers Act in respect of its employees proper where such provisions can be made applicable. In view of this declaration we see no reason to interfere, because Parliament has not chosen to say that transport trucks will be run only through paid employees and not independent operators. The appeal fails but in the circumstances of the case we make no order as to costs.
6.15.4. Employees’ State Insurance Corporation -v- Pooppally Foods9, more particularly para 8 thereof, which is reproduced hereunder for easy reference:
8. Appellant’s counsel, Sir C. Sankaran. Nair, argued:
(1) Though the work of peeling and grading were done through independent contractor. This was only a camouflage or make believe to avoid the applicability of the statute;
(2) that the workers employed through Independent contractor should be deemed to be directly employed since peeling and grading is preliminary or Incidental with the end product J
(3) that the work was done by the workers in the premises of the factory or establishment; and
(4) at any rate, there is supervision by the firm in the peeling or grading work when finally the goods are brought to the factory.
We are unable to accept the above submissions. On the first point, there is no plea or evidence on record to show that arrangement with the independent contractor for peeling and grading was merely a camouflage or sham or a make believe arrangement. There is no finding of the Court below on this score. This in a pure question of fact. It was not pleaded in the Court below. There is no proof for such plea either that apart, we are of the view that there is a vital difference between “avoidance” and “evasion.” “Avoidance” is “not evasion” and it carries no ignominy with it; it is trite law that it is open to any person to so arrange his affairs, as to reduce his burden. But it should not be a pretence or a make believe or sham. As observed by Lindley, L.J. in Yorkshire Railway Wagon Company v. Maclure, [(1882) 21 Ch. D. 309]:
“If we look on that transaction as the real transaction, upon what ground can we treat it as illegal? If it were a mere cloak or screen for another transaction one could see through it but once come to the conclusion that it was the bona fide real transaction between the parties, intended by both sides to operate according to its tenor, there is no mode that I know of holding it illegal unless you find it prohibited by some Act of Parliament or void by reason of some principles of law. It is said to be an evasion of the Act of Parliament really to borrow the money. There is always an ambiguity about the expression ‘evading an Act of Parliament’. In one sense you cannot evade an Act of Parliament; this is to say, the Court is bound so to construe every Act of Parliament as to take care that that which is really prohibited may beheld void. On the other hand, you may avoid doing that which is prohibited by the Act of Parliament and you may do something else equally advantageous to you which is not prohibited by the Act of Parliament.”
Even earlier, Lord Cranworth, L.C., said in Edwards v. Hall, [(1855) 25 L.J. Ch. 82]:
“I never understood what is meant by en evasion of an Act of Parliament: either yon are within the Act of Parliament or not within the Act of Parliament. If you are not within it, you have a right to avoid it to keep out of the prohibition; if you are within it, say so, and then the course is clear; and I do not think you can be said not to he within it because the very words have been violated.”
In Ghate and Patil Concerns’ Employees’ Union v. Ghate and Patil (Transports) (Private), Ltd., [A.I.R 1968 S.C. 503]. Hidayatullah, J., speaking for the Court observed:
“A person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has, without the arrangement no proper, means of obeying. This of course, be can do only so long as be does not break that or any other law.”
So also in Commissioner of Income Tax v. A. Raman and Company, [A.I.R. 1968 S.C. 49], speaking for the Court, Shah, J., observed:
“Counsel for the Commissioner contended that if by resorting to a ‘device or contrivance’, income which would normally have been earned by the assesses is divided between the assessee and another person, the Income Tax Officer would be entitled to bring the entire income to tax as if bad been earned by him. But the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands; income which he could have, but has not earned is not made taxable as income accrued to him. By adopting a device, if it is made to appear that income which belonged to the assessee had been earned by some other person, that income may be brought to tax in the hands of the assessee, and if the income has escaped tax in a previous assessment a case of commencing a proceeding for re-assessment under S. 147(1)(b) may be made out. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality but on the operation of the Income tax Act. Legislative injunction in taxing statutes may not, except on peril of penalty, be violated, but it may lawfully be circumvented.”
In this case, the respondent-firm, has if at all, so arranged or adjusted its affairs to reduce its burden and thereby the firm has not done anything forbidden by any law. The adjustment or arrangement by which “peeling and grading” were done through “independent contractor” is not forbidden by law and it is cot open to any challenge.
6.15.5. Bajaj Tempo, Ltd. v. Bhartiya Kamgar Sena10, more particularly paras 12 and 13 thereof which are reproduced hereunder for easy reference:
12. In another decision of the Supreme Court in the case of Ghatge Patil Concerns Employees Union v. Ghatge Patil Transport (Priavte), Ltd. reported in 1968 (1) S.C.R. 300. The Supreme Court upheld the right of the employer to re-organise his business from conducting a transport business himself through employees engaged by him to conduct it through a contract system whereunder he let out his motor trucks to persons who, before this change were his employees. The Supreme Court did not question the motive of the employer which was avowedly to avoid implementation of some of the provisions of the Motor Transport Workers Act, 1961. It appears that in that case to avoid to implement the provisions of the said Act, the employer had introduced a contract system by engaging his own employees voluntarily as contractors of motor trucks. The Supreme Court has observed that a person must be considered free to so arrange his business that he avoids a regulatory law and its penal consequences which he has without the arrangement no proper means of obeying.
13. It is therefore, crystal clear that the employer is given a free hand within the four corners of law and the bona fides to enable him to arrange, manage and organize his business in his best interest, so long as his policy was not actuated by any motive of victimization or unfair labour practice and that there was bona fide considerations and that it was reasonable and proper. It is for the employer to decide whether a particular policy in running his business will be profitable, economic or inconvenient, so long as it is not actuated by any consideration for victimisation or any such unfair labour practice. In the light of the aforesaid well established position, I am not able to agree with the view of the Industrial Court that by changing a weekly off from Thursday to Wednesday without reducing the number of paid holidays, the petitioner employer has by itself engaged in an unfair labour practice. It was not the case of the union that by doing so any other service conditions were adversely affected, Admittedly, it was an isolated incidence in the given circumstances. It, therefore, cannot be said to be a change in the service conditions warranting a notice of change under S. 9-A of the I.D. Act, 1947.
6.16. A photographer is not a working Journalist in terms of Working journalists and Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 [for short hereinafter referred to as ‘Journalist Act’].
6.17. 3rd respondent being a photographer would not be a Journalist, as such, a working journalist is one who writes articles and or reports news, as such, the working Journalist Act would not be applicable to 3rd respondent who is only a photographer.
6.18. In this regard, he relies upon the decision in Express Newspapers Ltd. v. B. Somayajulu11, more particularly para 9 and 10 thereof, are extracted hereunder for easy reference:
9. In dealing with the question as to whether the respondent can be said to be a working journalist, it is necessary to read the definition prescribed by Section 2(b) of the Act:
“‘Working journalist’ means a person whose principal avocation is that of a journalist and who is employed as such in, or in relation to, any establishment for the production or publication of a newspaper or in, or in relation to, any news agency or syndicate supplying material for publication in any newspaper, and includes an Editor, a Leader-Writer, News Editor, Sub-Editor, Feature-Writer, Copy-Tester, Reporter, Correspondent, Cartoonist, News photographer and Proof reader, but does not include any such person who—
(i) is employed mainly in a managerial or administrative capacity, or
(ii) being employed in a supervisory capacity, exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.”
It is plain that the definition prescribed by Section 2(b) consists of two parts; the first part provides what a working journalist means, and the second part brings within its purview by an artificial extension certain specified categories of newspaper employees. It would be noticed that the first part provides for two conditions which must be satisfied by a journalist before he can be held to be a working journalist. The first condition is that he must be a journalist whose principal avocation is that of a journalist, and the second condition is that he must be employed as such in, or in relation to any establishment as there specified. The first question which arises for our decision is whether the two conditions thus prescribed by the first part of the definition govern the categories of newspaper employees included in the definition by the artificial extension made by the including clause. The High Court has taken the view that the categories of employees who are included in the definition by name, need not satisfy the two conditions prescribed by the first part. The argument is that since a correspondent, for instance, has been named in the second clause, the whole object of the legislature was to make him a working journalist without requiring him to satisfy the two conditions prescribed by the first part. In our opinion, this construction is plainly erroneous. The object of the second clause was to make it clear that the employees specified in that clause are journalists and nothing more. The word “journalist” has not been defined in the Act and the legislature seems to have thought that disputes may arise as to whether a particular newspaper employee was a journalist or not. There can, of course, be no difficulty about an Editor or a Leader-Writer, or a News Editor or a Sub-Editor being regarded as a journalist; but it was apparently apprehended that a difficulty may arise, for instance, in the case of a correspondent, a proof reader, a cartoonist, a reporter, a copy tester, or a feature writer and so, the legislature took the precaution of providing specifically that the employees enumerated in the latter clause are to be regarded as journalists for the purpose of the definition prescribed by Section 2(b). The object of the artificial extension made by the including clause is not to dispense with the two main conditions prescribed by the definition before a journalist can be regarded as a working journalist. There can be no doubt that even the employees falling under the extended meaning must be employed as such. It is thus obvious that the second requirement prescribed by the first clause that the journalist must be employed as such in, or in relation to, any establishment for the production or publication of a newspaper, are therein specified, has to be satisfied by the employees falling under the litter clause, because unless there was an employment by the newspaper establishment, no relationship of employer and employee can arise, and the journalists specified in the latter clause could not, therefore, claim the status of working journalist qua the employer, who manages the journal in question. Once it is realised that the test of employment, must govern the employees specified in the latter clause, it would become clear that the High Court was in error in assuming that the extended artificial definition of the working journalist dispensed with both the conditions prescribed by the first part of the said definition. That is why we think the extension was made by the word “includes” only for the purpose of removing any doubt as to whether the persons specified in the said clause are journalists or not. What is true about the condition as to employment is equally true about the other condition that a journalist can be a working journalist only where it is shown that journalism is his principal avocation. In other words, the position is that whenever an employee working in the newspaper establishment claims the status of a working journalist he has to establish first that he is a journalist, and then that journalist his principal avocation and he has been employed as such journalist. In proving the fact that he is a journalist, the employees specified in the latter clause need not prove anything more than this that they fall under one or the other category specified in the said clause. But that only proves their status as journalist; they have still further to show that their principal avocation is that of a journalist and that they have been employed as such by the newspaper establishment in question.
10. That takes us to the question as to what is meant by avocation? The High Court thought that the dictionary meaning of the word “avocation” which showed that it meant “a distraction or diversion from one’s regular employment”, could be adopted in the context of Section 2(b). In support of this view, the High Court has cited a passage from Fowler in Modern English Usage. Fowler says “Avocation originally a calling away, an interruption, a distraction, was for some time commonly used as a synonym for vocation or calling, with which it is properly in antithesis. This misuse is now less common, and the word is generally used in the plural, a person’s avocations being the things he devotes time to, his pursuits or engagements in general, the affairs he has to see to; his vocation as such is neither excluded from, nor necessarily included in his avocation”. Applying this dictionary meaning of the word “avocation” the High Court has held that even if the respondent has to satisfy the first condition prescribed by the first part of Section 2(b), it can be held that he satisfied the said test, because the work of a correspondent in his case can be safely said to be his principal avocation in the sense of distraction or diversion from his regular employment. In our opinion, in applying mechanically the dictionary meaning of the word “avocation” without due regard to the context of Section 2(b) the High Court has adopted a somewhat pedantic approach. One has merely to read the definition to realise the word “avocation” used in Section 2(b) cannot possibly mean a distraction or diversion from one’s regular employment. On the contrary, it plainly means one’s vocation, calling or profession. The plain idea underlying Section 2(b) is that if a person is doing the work, say of a correspondent, and at the same time is pursuing some other calling or profession, say that of a lawyer, it is only where his calling as a journalist can be said to be his principal calling that the status of a working journalist can be assigned to him. That being the plain object of Section 2(b), it would, we think, be, on the whole, inappropriate to adopt the dictionary or the etymological meaning of the word “avocation” in construing Section 2(b). We ought to add that Mr Menon who appeared for the respondent did not attempt to support the approach adopted by the High Court in dealing with this point. Therefore, when a question arises to whether a journalist can be said to be a working journalist, it has to be shown that journalism of whatever kind contemplated by Section 2(b) is the principal avocation of the person claiming the status of a working journalist and that naturally would involve an enquiry as to the gains made by him by pursuing the career of a journalist as compared with the gains made by him by the pursuit of other callings or professions. It is obvious that this test will be merely academic and of no significance in the case of full time journalists, because in such cases the obvious presumption would be that their full time employment is their principal avocation and no question of comparing their income from journalism with income from other sources can arise. In fact, the status of such full time journalists as working journalists will not be affected even if in some cases the income received by them from such employment may be found to be less than, say, for instance, the income from their ancestral property. This test assumes significance and importance only in the case of journalists who are employed on part-time basis.
6.19. He submits that even otherwise for the Journalist Act to Apply, a person must be employed, in present case 3rd respondent is not employed he is on contract therefore the Journalist Act would not apply.
6.20. On the basis of the above submissions, he submits that the petition is required to be allowed accordingly.
7. Smt.B.V.Vidyulatha, learned counsel who appears for respondent No.2 submits that:
7.1. The petitioner which is admittedly a Newspaper has been brought under the purview of the EPF Act and the Scheme,
7.2. It is on account of the petitioner having filed an application under paragraph 26B of the Scheme that the decision on the issue as regards employer-employee relationship was taken up.
7.3. Learned counsel refers to Section 2(f) of the EPF Act to contend that an employee means any person who is employed for wages in any kind of work, manual or otherwise, hence a photographer would be an employee. Section 2(f) of EPF Act is reproduced hereunder for easy reference:
(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 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
7.4. Para 80 of the Scheme which relates to newspaper establishments, defines an employee and relying on the same, she submits that 3rd respondent is an employee as per paragraph 80 of the Scheme. Paragraph 80 is reproduced hereunder for easy reference:
“80. Special provisions in the case of newspaper establishments and newspaper employees The Scheme shall, in its application to newspaper establishments and newspaper employees, as defined in section 2 of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955, come into force on the 31st day of December, 1956 and be subject to the modifications mentioned below : —
1. In Chapters I to IX, references to ‘industry’, ‘factories’ and ’employees’ shall be construed as references to ‘newspaper industry’, ‘newspaper establishments’ and ‘newspaper employees’, respectively;
2. For paragraph 2(f), the following shall be substituted, namely: — “(f) ‘excluded employee’ means,-
(i) an employee who, having been a member of the Fund, has withdrawn the full amount of his accumulations in the Fund under clause (a) or (c) of sub-paragraph (1) of paragraph 69;
(ii) an apprentice.
Explanation : ‘Apprentice’ means a person who, according to the standing orders applicable to the newspaper establishment concerned, is an apprentice or who is declared to be an apprentice by the authority specified in this behalf by the appropriate Government.”
7.5. By referring to contract agreement dated 25.04.2008, she submitted that 3rd respondent was appointed as Senior Newspaper Photographer at Bangalore at a fixed remuneration with House Rent Allowance, Travelling allowance and fixed remuneration included bonus, gratuity and other benefits. Gratuity being a statutory benefit provided under the Payment of Gratuity Act is one extended by the employer to the employees.
7.6. Thus, the contract though tries to make it clear that there is no employer employee relationship but other terms and conditions would indicate that 3rd respondent is a workman of the petitioner and 3rd respondent has been given ID card, his pay slips bear the employment number which could not have been so if 3rd respondent was not an employee of the petitioner.
7.7. The EPF Act and the Scheme being a benevolent piece of legislation aimed at protecting and securing the well being of employees, is required to be considered liberally so as to extend benefits to all employees to the maximum extend permissible. In this case there being employer and employee relationship, the order passed by the 2nd respondent is proper and the petition is required to be dismissed.
8. Sri. H. Pavan Chandra Shetty, learned counsel for 3rd respondent submits that:
8.1. By referring to the offer letter which has been issued, he submitted that 3rd respondent was initially appointed as Senior News Photojournalist and subsequently, his designation changed over a period of time under different contracts. 3rd respondent was employed in the photography section of the petitioner and given an employee ID. Thus, there is an employer-employee relationship recognised by the petitioner but only on account of petitioner not wanting to make payment of the due provident fund amounts, the dispute has arisen between the parties.
8.2. The finding of the 2nd respondent-Authority is proper and correct. The EPF Act and the Scheme would apply not only to regular employees but also those who are employed directly or indirectly through a contractor. He also relies upon the provision of Section 2(f) of the Act in regard to the above.
8.3. The petitioner had issued a letter to the Karnataka Legislative Council seeking for issuance of pass by stating that 3rd respondent is working as Senior News Photo Journalist and it is on that basis that a pass was issued by the Karnataka Legislative Council. If not for the said letter, no such pass would have been issued. This establishes that petitioner took responsibility of 3rd respondent as its employee and held him out as an employee of the petitioner making EPF Act applicable. He relies upon Section 2(c) of the Journalist Act, which is reproduced hereunder for easy reference:
(c) “newspaper employee” means any working journalist, and includes any other person employed to do any work in, or in relation to, any newspaper establishment;
8.4. By relying on Section 3 of the EPF Act, he submits that the petitioner would be covered under the definition of ‘employee’. Section 3 of the EPF Act is reproduced hereunder for easy reference:
3. Power to apply Act to an establishment which has a common provident fund with another establishment.—
Where immediately before this Act becomes applicable to an establishment there is in existence a provident fund which is common to the employees employed in that establishment and employees in any other establishment, the Central Government may, by notification in the Official Gazette, direct that the provisions of this Act shall also apply to such other establishment.]
8.5. He submits that in terms of Section 3, the petitioner would have to make payment of provident fund. By referring to item No.7 of Schedule-I of the EPF Act, he submits that printing is covered under the said Schedule and 3rd respondent would be covered under the same. Item No.7 of Schedule-I of the EPF Act is reproduced hereunder for easy reference:
7. Printing [other than printing industry relating to newspaper establishments as defined in the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955), including the process of composing types for printing, printing by letter press, lithography, photogravure or other similar process or book-binding.]
8.6. He relies upon the decision in M/S. Pawan Hans Limited & Ors. VS. Aviation Karmachari Sanghatana & ORS12., more particularly para 6.3, 6.4 and 7 thereof are reproduced hereunder for easy reference:
6.3 The next issue which arises for consideration is whether the members of the Respondent Trade Union are entitled to the benefit of Provident Fund under the PF Trust Regulations or under the EPF Act.
Clause 1.3 of the Regulations would show that the PF Trust Regulations were made applicable to “all employees” f the Appellant Company.
Clause 2.5 of the Regulations, defines an “employee”, to include any employee who is employed for wages/salary in any kind of work, monthly or otherwise, or in connection with the work of the Company, and who gets his wages/salary directly or indirectly from the Company.
Clause 2.5 excludes only a person employed by or through a contractor in connection with the work of the Company, and any person employed as an apprentice or trainee. In the present case, the Respondent Union submitted that even though the appointment letters refer to the employees as ‘contractual’ employees, they were not engaged through any contractor. They were being paid directly by the Company, which is evidenced from the pay slips issued to them. It was submitted that about 250 contractual employees receive wages directly from the Company, and are eligible to be included under the PF Trust Regulations framed by the Company.
6.4 We find that the members of the Respondent Union have been in continuous employment with the Company for long periods of time. They have been receiving wages/salary directly from the Company without the involvement of any contractor since the date of their engagement. The work being of a perennial and continuous nature, the employment cannot be termed to be ‘contractual’ in nature.
In our considered view, Clause 2.5 of the PF Trust Regulations would undoubtedly cover all contractual employees who have been engaged by the Company, and draw their wages/salary directly or indirectly from the Company.
7. After hearing the parties at length, and in light of the peculiar facts and circumstances of this case, we affirm the Judgment & Order dated 12.09.2018 passed by the Bombay High Court in W.P.No.325/2017 holding that members of the Respondent Union are covered by the EPF Act. However, we modify the direction of the High Court to grant the benefits under the EPF Act, and direct that the members of the Respondent Union and other similarly situated contractual employees be enrolled under the Pawan Hans Employees Provident Fund Trust Regulations so that there is uniformity in the conditions of service of all employees of the Appellant Company.
Furthermore, the direction of the High Court to pay the contribution from the date of their eligibility till the date of remittance is also modified in terms of the directions given in this Judgment.
8.7. By relying on the above, he submits that even contractual employee would be covered under the Act and the Scheme. He refers to paragraph 29 of the Scheme to contend that nature of contribution has categorically been stated in the said paragraph and as such, the said contribution would have to be made by the petitioner. Paragraph 29 of the Scheme is reproduced hereunder for easy reference:
29. Contributions-
(1) The contributions payable by the employer under the Scheme shall be at the rate of [ten per cent] of the [basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (if any)] payable to each employee to whom the Scheme applies:
[Provided that the above rate of contribution shall be [twelve] per cent in respect of any establishment or class of establishments which the Central Government may specify in the Official Gazette from time to time under the first proviso to sub-section (1) of section 6 of the Act.]
(2) The contribution payable by the employee under the Scheme, shall be equal to the contribution payable by the employer in respect of such employee:
[Provided that in respect of any employee to whom the Scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding [ten per cent] or [twelve per cent], as the case may be, of his basic wages, dearness allowance and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act;]
(3) The contributions shall be calculated on the basis of [basic wages, dearness allowance (including the cash value of any food concession) and retaining allowance (if any)] actually drawn during the whole month whether paid on daily, weekly, fortnightly or monthly basis.
(4) Each contribution shall be calculated to [the nearest rupee, 50 paise or more to be counted as the next higher rupee and fraction of a rupee less than 50 paise to be ignored.”
8.8. On the above basis, he submits that the petition is required to be dismissed.
9. Sri. Ashok Haranahalli, learned Senior counsel in rejoinder would submit that:
9.1. The decision in M/S. Pawan Hans Limited & Ors.12 is not applicable inasmuch as the said decision is prospective in nature, the decision having been rendered on 17.01.2020. The petitioner has stopped work from 13.01.2018 having ceased to be an employee of the petitioner, the benefit extended by the Hon’ble Apex Court in M/S. Pawan Hans Limited & Ors.12 case is not available to the petitioner. In this regard, he relies on para 6.6 and 8(vii) which is extracted hereunder for easy reference:
6.6 The question which now arises is the date from which the benefit of provident fund is to be extended to the contractual employees.
This Court vide Order dated 24.10.2019 had passed the following Order:
“Provident Fund is normally managed on actuarial basis;
the contributions received from employer and the employee are invested and the income by way of interest forms the substantial fund through which any payout is made. For all these years the Fund in question was subsisting on contributions made by the other employees and, if at this stage, the benefit in terms of the judgment of the High Court is extended with retrospective effect, it may create imbalance. Those who had never contributed at any stage would now be members of the fund. The fund never had any advantage of their contributions and yet the fund would be required to bear the burden in case any payout is to be made. Even if concerned employees are directed to make good contributions with respect to previous years with equivalent matching contribution from the employer, the fund would still be deprived of the interest income for past several years in respect of such contributions.
In order to have clear perspective in the matter and to see if there could be any solution to the problem as posed above, we call upon the petitioner to depute a person who is well versed in the matter and who has been managing the Provident Fund Scheme of Pawan Hans Limited to have a dialogue with the respondent No.3 before 15.11.2019 (a representative of the respondent(s) is also at liberty to remain present during such discussion) so that a workable solution could then be presented by such person and the representative of respondent No.3 before us on the next occasion.
List the matter on 29.11.2019 at 10.30 a.m.”
8 (VII) The benefit shall not be extended to those employees who have superannuated, expired, resigned, or ceased to be in the employment of the Company on the date of this Judgment ;
9.2. Learned Senior counsel again reiterates that 3rd respondent has not only worked for the petitioner but has also worked for other News Organisation like Deccan Herald and has also set up his own institute to teach photography which could not have been done if the 3rd respondent was a fulltime employee.
9.3. Thus, on the above basis, he submits that the petition is required to be allowed and the order passed by the 2nd respondent be set-aside.
10. Heard Sri.Ashok Haranahalli, Senior counsel along with Sri.Manmohan.P.N, learned counsel for the petitioner, Sri.H.Shanthi Bhushan, Asst. Solicitor General for respondent No.1, Smt.B.V.Vidyulatha A.N, learned counsel for respondent No.2 and Sri.H.Pavana Chandra Shetty, learned counsel for respondent No.3. Perused papers.
11. The points that would arise for consideration are:
1. Whether the EPF Act would apply to persons engaged on contractual basis by an Organisation?
2. Whether insofar as EPF Act is concerned, there is required for an employer- employee relationship to be in existence and employer having supervision and control over employee?
3. Whether the relationship between the petitioner and 3rd respondent is governed by the contract is not that of a master servant requiring application of the Act and Scheme?
4. Whether the order passed by 2nd respondent suffers from any legal infirmities?
5. What order?
6. I answer the above points as under
7. ANSWER TO POINT NO.1: Whether the EPF Act would apply to persons engaged on contractual basis by an Organisation?
7.1. The aims and objects of the EPF Act are as under:
Statement of Objects and Reasons
The question of making some provision for the future of the industrial worker after he retires or for his dependent in case of his early death, has been under consideration for some years. The ideal way would have been provisions through old age and survivors, pensions as has been done in the industrially advanced countries. But in the prevailing conditions in India; the institution of a pension scheme cannot be visualized in the near future. Another alternative may be for provision of gratuities after a prescribed period of service. The main defect of a gratuity scheme, however, is that amount paid to a worker, or his dependents would be small, as the worker would not himself be making any contribution to the fund. Taking into account the various difficulties, financial and administrative, the most appropriate course appears to be the institution compulsorily of contributory provident funds in which both the worker and the employer would contribute. Apart from other advantages, there is the obvious one of cultivating among the workers a spirit of saving something regularly. The institution of a provident fund of this type would also encourage the stablishation of a steady labour force in industrial centres.
2. The subject of legislation for compulsory institution for compulsory institution of contributory provident funds in industrial undertakings was discussed several times of tripartite meetings in which representatives of the Central and State Governments and of employers and workers took part. A large measure of agreement was reached that there should be such legislation. Further, a non-official Bill on this subject was introduced in the Central Legislature in 1948 and was withdrawn only on an assurance given that Government itself would soon consider the introduction of a comprehensive Bill. The view that the proposed legislation should be undertaken was lastly endorsed by the Conference of Provisional Labour Ministers held in January 1951. It may be added that a statutory Contributory Provident Fund already exists for workers in coal mines, covering about 3,00,000 persons. This has been in operation for about five years and is working very satisfactorily.
3. The Bill provides for institution, in the first instance of contributory provident funds in the six major organized industries named in Schedule I, except undertakings owned by the Central or a State Government or by a local authority. There is also a provision empowering the Central Government, by notification, to add other industries to the Schedule or to apply the Act to industrial undertakings employing less than fifty persons.
4. To avoid any hardship to new establishments, a provision has been made for exempting them for a period of three years and similar exemptions are given to other establishments which are less than three years old till they have been in operation for a period of three years in all. The rate of contribution will be 6 per cent of the total emoluments of the worker, the worker, and the employer each contributing these amounts. Further, the scheme could empower payment of a higher subscription by the workers at their option.
5. Where Provident Funds exist in private industry, contributions are usually a percentage of the basic wage. Unlike Government Departments, wages in private industry have not, however, been rationalised and there are very great variations in the level of basic wages in private industry, even in different units in the same industry. If contributions are reckoned on the basis of basic wage only, there will, therefore, be wide changes in the degree of benefit received. This will be unfair to the workers and may also penalize those employers who have brought the level of basic wages more in accord with current requirements. Government appreciates that dearness allowance is a variable factor depending on the cost of living. Nevertheless, for the reasons explained, Government is satisfied that contributions to the Provident Fund should be on the basis of basic pay plus dearness allowance. This should not be construed as in any way implying that dearness allowance on the existing rates are to be recognized as a permanent measure.
6. Most of the details relating to the Fund will be settled in accordance with a Scheme which, in the interest of uniformity, will be framed by the Central Government. The administration will, to a large extent, be decentralized in regard to undertakings falling within the sphere of State Governments.
7. Where Provident funds offering equal or more advantageous terms are operating efficiently, provision has been made for them to continue subject to certain safeguards in the interest of the workers.
8. This Bill when enacted will repeal and re-enact or Ordinance promulgated on the same lines on the 15th November, 1951.
7.2. An ‘employer’ is defined under Subsection (e) of Section 2 of EPF Act, which is reproduced hereunder for easy reference:
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 subsection (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, managing director or managing agent, such manager, managing director or managing agent;
7.3. The term ‘employee’ is defined under Subsection (f) of Section 2 of EPF Act, which is reproduced hereunder for easy reference:
2(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 6 [an establishment], and who gets his wages directly or indirectly from the employer, 7 [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;]
7.4. The term ‘exempted employee’ is defined under Subsection (ff) of Section 2 of EPF Act, which is reproduced hereunder for easy reference:
(ff) “exempted employee” means an employee to whom a Scheme 2 [or the Insurance Scheme, as the case may be,] would, but for the exemption granted under3*** section 17, have applied;
7.5. The term ‘exempted establishment is defined under Subsection (fff) of Section 2 of EPF Act, which is reproduced hereunder for easy reference:
(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 2 [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;
7.6. Thus, from the statement of objects and reasons, it is clear that the State has encouraged contribution to provident fund so as to provide security to an employee upon retirement, more so taking into account that there is no formal pension scheme available in the private sector. The definition of an ‘employer’ in terms of Subsection (e) of Section 2 of EPF Act is only for the purpose of identifying as to on whom the responsibility lies. The definition of employee under Subsection (f) of Section 2 of EPF Act is to identify who an employee is and defines an employee as any person who is employed for wages to do any kind of work, manual or otherwise and, accepts his wages directly or indirectly from the employer and includes any person employed by or through a contractor in connection with the work of the establishment. Thus, in terms of Subsection (f) of Section 2 of EPF Act, even a person who is engaged through a contractor being covered under the EPF act, in my considered opinion that if an employer were to employ a person directly on a contractual basis, the EPF Act would apply to such a relationship also more so when there in no exemption issued under sub-section (ff) or (fff) of Section 2.
8. ANSWER TO POINT No.2: Whether insofar as EPF Act is concerned, there is required for an employer- employee relationship to be in existence and employer having supervision and control over employee?
8.1. Sri.Ashok Haranahalli, learned Senior counsel has addressed arguments contending that unless there is employer and employee relationship or master servant relationship with the master exercising supervision and control, the EPF Act would not apply.
8.2. The contention is that a regular employee could be subject to supervision and control, but a contractual employee could not be. There could be no disciplinary proceedings which could be initiated against the contractual employee while it could be so initiated against a regular employee. As such, any contractual employee would not come under the definition of employee and therefore, would not be subject to EPF Act nor avail the benefits of the EPF Act.
8.3. Having answered Point No.1 holding that EPF Act would apply to a person engaged on contractual basis, I am of the considered opinion that irrespective of whether there is employer employee or master-servant relationship so long as there is contractual relationship between the employer and a person employed, the EPF Act would be applicable.
8.4. The definition of employee is reproduced hereinabove, an employee means any person employed for wages to do any kind of work manual or otherwise, in connection with the work of an establishment and who gets the wages directly or directly from the employer. Thus, if employee were to get wages for work done for the employer or the establishment or in connection with the work of an establishment, such person would qualify to be as an employee in terms of Subsection (f) of Section 2 of EPF Act. The said provision further goes on to include any person, an employee who is employed by or through contractor would be an employee.
8.5. Subsection (f) of Section 2 of EPF Act does not require the employer to exercise supervision or control what is required is that wages are to be paid by the employer to such employee since the EPF Act does not deal with disciplinary proceedings but deals only with the contribution of the employer to the provident fund scheme floated by the Central Government.
8.6. Under the EPF Act, there are no provisions as regards any disciplinary proceedings, violations, provisions relating to transfer or the like which are related to supervision and control as contended by Sri.S.S.Naganand, learned Senior counsel.
8.7. The said definition would apply insofar as employee or workman under the Industrial Disputes Act, 1947 [for short ‘ID Act’] and not under the EPF Act. In fact, all the decisions which have been cited by Sri.S.S.Naganand to contend there has to be relationship of master and servant and there has to be supervision and control are all related to proceedings under the ID Act.
8.8. P.M.Patel’s1 case is one where conditions of workers in terms of clause (1) of Section 2 of the Factories Act was being considered. Naresh Kumar Manilal Parmar’s2 case dealt with declaration of a person employed on a contract basis to be a permanent and regular employee. Sri Mahadev Laxman Raval’s3 case was relating to the applicability of Section 2(oo) of the ID Act. V.V.Lakshminarayanan’s4 case dealt with the definition of workman under Subsection (s) of Section 2 of the ID Act. Thus, those decisions relating to the industrial dispute where certain action is proposed to be taken against the employer/workmen, I am of the considered opinion that in such cases, there is a requirement of master servant relationship to be established with supervision and control vested with the master/employer, since it is only on the basis of such supervision and control that disciplinary proceedings could be initiated.
8.9. In the present case as referred to supra, an employee means any person who is employed for wages to do any kind of work. Thus, it is only the payment and receipt of wages which is important. So long as this dual test is satisfied, any person who is paid wages by the employer would become an employee under the EPF Act whether the said payment is done directly or through a contractor.
8.10. Hence, I answer point No.2 by holding that insofar as EPF Act is concerned, there is no requirement of a master servant relationship with the master exercising supervision and control so long the employee draws wages on account of work done for the employer or establishment, the same would be sufficient for such person to be covered under the definition of employee under Subsection (f) of Section 2 of EPF Act.
9. ANSWER TO POINT NO.3: Whether the relationship between the petitioner and 3rd respondent is governed by the contract is not that of a master servant requiring application of the Act and Scheme?
9.1. In view of answers to Points No.1 and 2, so long as the employee receives wages, he would be covered under the EPF Act. This question is rendered academic. However, since lot of arguments have been advanced on this aspect. I answer the same as under:
9.2. The contention of Sri.S.S.Naganad, learned Senior counsel is that the contract between the petitioner and respondent providing for a consolidated payment of Rs.23,000/- which was increased from time to time and the contract itself making it clear that there is no principal-agent relationship or master servant relationship created by the said contract, the provision of the EPF Act would not apply.
9.3. A perusal of the contract would indicate that the respondent No.3 was initially in the year 2008 appointed as Senior News Photographer and in the year 2017, his designation was changed to Deputy Chief News Photographer, thus, over a period of time, the designation of respondent No.3 is changed.
9.4. Perusal of para 1 indicates that respondent No.3 would work for the Indian Express and other allied publication published by the first party. Thought the said clause is not exclusive but the same does not specifically permit respondent No.3 to work for any other news organisation or any other party. Though Sri.S.S.Naganand, learned Senior counsel has submitted that the petitioner would have no objection for respondent No.3 and similarly situate persons who have been employed by petitioner on a contract basis to render service to any other third party or organisation, despite enquiries having been made the petitioner has been unable to place on record if respondent No.3 has acted for any third party during the time that he was working with the petitioner, except a memo being filed enclosing a publication of Deccan Herald of the year 2008 contending that the said publication contained a photograph taken by respondent No.3 and as such, in the year 2008 when respondent No.3 was working with the petitioner, his photograph having been published in the Deccan Herald would establish that respondent No.3 could furnish his photographs to any third party organisation.
9.5. A careful perusal of the photograph would indicate that in brackets the year 2005 has been mentioned in the photograph, that would mean that the photograph was taken in the year 2005 when Ustad Bismillah Khan performed in the city of Bangalore. The performance having occurred in the year 2005, it cannot be said that the photograph was taken in the year 2008 when it was published in the Deccan Herald. Thus, this photograph referred to and relied upon by the petitioner though published in the year 2008 was captured in the year 2005 when respondent No.3 was not working for the petitioner but was working for Deccan Herald and as such would be irrelevant for this proceeding.
9.6. Sri.H. Pavan Chandra Shetty, learned counsel for respondent No.2 upon instructions from his client who was present in court has categorically stated that respondent No.3 has not furnished any photographs taken by him during the period he was in employment of petitioner to any other organisation whether competitor or not of the petitioner. This assertion made by respondent No.3 has not been rebutted by the petitioner and no document has been produced despite time having been granted except the photograph of Usad Bisimillah Khan referred to above.
9.7. In terms of clause (2) the petitioner was making payment of a sum of Rs.23,000/- per month as promotion charges. What is promotion charges has not been defined nor explained during the course of arguments. The fact remains that Rs.23,000/- was paid in the year 2008 which increased over a period of time to Rs.42,250/- in the year 2017. Thus, there has been a gradual increase in the payments made.
9.8. In terms of clause (3), reimbursement of Rs.3,000/- towards conveyance expenses incurred in the course of official work is provided for. If respondent No.3 were to be working as a freelancer on a contract basis it is not understood as to what official work would mean. Further more, even this amount of conveyance has been increased to Rs.5000/- in the year 2017.
9.9. In terms of clause (4), an amount of Rs.4,000/-was agreed to be paid by the petitioner to respondent No.3 as House Rent Allowance. If a person were to be working as a freelancer on a contract basis, it remains to be explained as to why HRA was being paid to a contract employee. This has not been explained.
9.10. In terms of clause (6) it is provided that respondent No.3 shall not be entitled to any other benefits or amenities like bonus, gratuity, etc since the same is already incorporated in the consolidated amount as mutually agreed upon between the parties.
9.11. It is one thing to say that no bonus and gratuity is liable to be paid, it is another thing to say that bonus and gratuity is included in the consolidated pay. The fact that bonus and gratuity is included in the consolidated amount would also lead to a conclusion that respondent No.3 has been treated as employee but however, for reasons best known to the petitioner, the said relationship is camouflaged under a contract, thus this clause would also not enure to the benefit of the petitioner but would enure to the benefit of respondent No.3.
9.12. From the records it is seen that over a period, contract came to be extended from time to time, there being certain minor changes which have occurred in the contract. Be that as it may, it is the first contract which is relevant since it is under the said contract, that the relationship was established and has continued.
9.13. The petitioner has also issued certificate on 31.03.2018 stating that respondent No.3 was engaged as Deputy Chief photographer on contract basis from 1.4.2017 to 31.3.2018.
9.14. Employee identity card has also been issued by the petitioner to respondent No.3 wherein his employee code has been shown as J3745. The petitioner has also held out respondent No.3 to be a senior photographer working with New Indian Express to cover the proceedings of the State Legislative council in its letter addressed to the Secretary, Karnataka Legislative Assembly Council which has been received and acted upon by the State Secretary and pass/identity card provided to respondent No.3 to enter the Assembly and to take photographs by carrying a camera. If not for the certification by the petitioner, I am sure the Secretary, Karnataka Legislative Assembly would not have issued said pass or ID. The Legislative Assembly being a sensitive location, in a high security area, no person would be permitted that too carrying a camera with paraphernalia of multiple lenses, etc. into the legislative assembly which could be a security risk. The petitioner having held out respondent No.3 to be a Senior Photographer working with the newspaper, respondent No.3 having acted for an on behalf of the petitioner and represented the petitioner, it is now impermissible for the petitioner to contend that respondent No.3 is not an employee and/or that he was purely a freelancer engaged on a contractual basis not amenable to the provisions of EPF Act.
9.15. Though it is contended by Sri.S.S.Naganand, learned Senior counsel that the petitioner can arrange its affairs in such a manner to reduce the cost by relying upon the decision in P.C.Pal’s6 case, the said decision was relating to the strength of the labour force so as to effect retrenchment. The said decision does not deal with engaging a employee under a subterfuge of a contract to overcome the various welfare enactments which have been brought into force for the benefit of the labour.
9.16. Any organisation can arrange its force in such a manner as to derive maximum benefit, but in my considered opinion such arrangement cannot be at the cost of someone else, more particularly, the labour, workmen or employees of that organisation.
9.17. So long as the interest of such labour, workmen and employees or any other persons are not adversely affected, the business entity can organise its business in such a manner as to reduce the cost. But as soon as such an arrangement falls foul of and/or impinges upon the right of a third party, such arrangement cannot be said to be bonafide or valid nor can a business owner under such an arrangement try to ride roughshod over the labour, workmen or employees.
9.18. The other decision relied upon by the petitioner is that in Management of Hindustan Lever Ltd’s7 case where the question involved was whether the employer could be forced to fill up the vacant posts. The Hon’ble Apex court came to a conclusion that merely because the posts are vacant, the employer cannot be forced to fill up that post. The facts in that matter and the present matter are completely different, as such I am of the opinion that the dicta laid down by the Apex Court in Management of Hindustan Lever Ltd’s7 case is not applicable to the present matter.
9.19. The petitioner has relied upon the decision in Ghatge and Patil Concerns Employees’ Union’s8 case and Poopally Foods9 case to contend that a person may arrange his business to avoid any regulatory law and penal consequences. Again the same relates to the penal consequences to such person i.e. the employer, that does not in any manner mean that any employer could arrange his business at the cost of his employees. Thus, I am of the considered opinion that the above decisions would also not be applicable to the present case.
9.20. The decision relied upon by the petitioner in Bajaj Tempo Ltd.10 case, in fact supports the reasoning given by me earlier inasmuch as it was held in that matter that so long as the policy was not actuated by any motive or victimisation or labour practice and there was a bonafide consideration that that it was reasonable and proper an employer could adopt a particular policy in running the business, but in the event if the employer involving himself in unfair labour practice, it cannot be said to be an arrangement of business. In the present case, respondent No.2 being deprived of the employer’s contribution towards provident fund, the employee being willing to contribute would amount to victimisation of respondent No.3, as also unfair labour practice.
9.21. Lastly it is contended that a photographer is not a working journalist in terms of Journalist Act. Subsection (c) of Section 2 of the Journalist Act defines ‘News paper Employee’ as under:
“2(c) Newspaper employee” means any working journalist, and includes any other person employed to do any work in or in relation to any newspaper establishment;”
9.22. The definition includes a working journalist and any other person employed to do any work in relation to any newspaper establishment. Working journalist is defined under subsection (f) of Section 2 of Journalist Act reads as under:
“2(f) Working Journalist” means a person whose principal avocation is that of a journalist and 6[who is employed as such, either whole-time or part-time, in, or in relation to, one or more newspaper establishment], and includes an editor. a leader writer, news- editor, sub-editor, feature-writer, copy-tester, reporter, correspondent, cartoonist, news-photographer and proof-reader, but does not include any such person who- (i) Is employed mainly in a managerial or administrative capacity; or (ii) Being employed in a supervisory capacity, performs, either by the nature of the duties attached to his office or by reason of the powers vested in him, functions mainly of a managerial nature-, (g) all words and expressions used but not defined in this Act and deemed in the Industrial Disputes Act, 1947 (XIV of 1947), shall have the meanings respectively assigned to them in that Act.”
9.23. A reading of the above would indicate that even a newspaper photographer is included in the said definition of Working Journalist. Therefore, I am of the considered opinion that contention of the petitioner that a news photographer is not a working journalist is required to be rejected.
9.24. This is rather a strange case where the 4th estate who is vested with the duty to safeguard the rights of people or bring to light any injustice caused to the citizens has itself indulged in trammelling upon the rights of its own employees, requiring a phot-journalist to approach the Hon’ble Prime Minister for redressal of his grievances.
9.25. In view of the above, I am of the considered opinion that the methodology of a contract made use of by the petitioner is only a subterfuge to cover the employment and to organise the business of the petitioner in such a way as to minimise its payouts by reducing the entitlement of 3rd Respondent which is not permissible. The contract being a subterfuge, respondent No.3 being a person who is drawing wages as detailed hereinabove would be entitled to the benefits under the EPF Act and EPF Scheme. This finding being in addition to the finding above that even a contractual employee engaged directly or indirectly would be entitled for provident fund contribution.
10. ANSWER TO POINT NO.4: Whether the order passed by 2nd respondent suffers from any legal infirmities?
10.1. The contention of Sri.S.S.Naganand is that a notice having been issued under Section 7A of the EPF Act, there was no requirement for respondent No.2 to have given a finding on employer employee relationship under Para 26B of the Scheme which reads as under:
26B. Resolution of doubts– If any question arises as to whether an employee is entitled to, or required to become, or continue as, a member, or as to the date from which he is so entitled or required to become a member, the same shall be referred to the Regional Provident Fund Commissioner who shall decide the same:
Provided that both the employer and the employee shall be heard before passing any order in the matter.
10.2. The said para 26B deals with resolution of doubts in the event of any question arising as to whether an employee is entitled to or required to become a member of the Scheme and provides for employer and employee to be heard before passing any order.
10.3. The letter being addressed by respondent No.3 to the Hon’ble Prime Minister of India, it appears that Hon’ble Prime Minister’s office directed the grievances to the EPFO, in pursuance of which a notice under Section 7A of the EPF Act came to be issued to the petitioner.
10.4. The petitioner filed a petition under paragraph 26B to determine the question of jurisdiction/employer employee relationship before deciding on the merits of the matter in terms of Annexure-B to the petition.
10.5. A clear and categorical statement was made that there was no employer employee relationship and the same was to be determined before embarking upon or taking up the issue of computation of any benefit (para 13 of the petition). Statements were filed by the counsel for the petitioner clearly stating that employer employee relationship was denied and that the fundamental question that is raised under Para 26B of the Scheme viz., whether respondent No.3 is employee or not, whether he is entitled to claim any provident benefit from the management. (PARA 3 of the submissions)
10.6. It is on that basis that various submissions were made, reference was made as made before this court to a plethora of citations which have been referred to hereinabove and a finding was requested to be returned by an order under Para 26B of the Scheme that there is no employer employee relationship between the petitioner and respondent No.3.
10.7. It is on that basis that proceedings under Para 26B took place as is clearly seen from the impugned order. It is only those submissions as relevant to Para 26B which were considered by respondent No.2 in its order. The consideration of the petition under Para 26B being at the behest of the petitioner, it is now impermissible for the petitioner to contend that no one had approached respondent No.2 to deliver a finding under Para 26B and what was required to be considered was the notice issued under Section 7A of the EPF Act.
10.8. I am therefore of the considered opinion that the first contention raised as regards the legal infirmity in the impugned order relating to a finding under Para 26B is completely misconceived and this contention by the petitioner is completely untenable.
10.9. The second contention to challenge the order on the basis of non-existence of a master servant relationship has been answered hereinabove and I have held that it is not necessary for master and servant relationship to be established for a person to claim benefit under the EPF Act, it is sufficient if a person were to be drawing wages as regards the work done for the establishment.
10.10. The third contention that agreement has not been considered properly since respondent No.2 came to a conclusion that the Evidence Act would not applicable and what is applicable is only principles of natural justice is again untenable since as can be seen from unnumbered para 2 of internal page 9 of the impugned order, what the respondent No.2 has said is that the technicalities of the Indian Evidence Act is not strictly applicable, the Authority has considered and examined each and every clause thereof and has come to a conclusion that the terms of contract indicate employer employee relationship. Therefore, the contention raised that the agreement has not been looked into is again bereft of merits and contrary to the available records.
10.11. In view thereof, I answer point No.4 by holding that the impugned order of the respondent No.2 does not suffer from any legal infirmity requiring interference at the hands of this Court.
Notes:-
1 (1986) 1 SCC 32
2 2001 SCC OnLine Guj 289
3 (2006) 13 SCC 15
4 (2007) 1 SCC 214
5 2013 SCC Online P&H 3029
6 (1969) 2 SCR 976
7 ILR (1977) 1 Del 370
8 (1968) 1 SCR 300
9 (1984) 2 LLN 800
10 (2002) 2 LLN 992
11 (1964) 3 SCR 100
12 Civil Appeal No.353/2020
Author Bio
