Case Law Details
A. K. Ahamed & Co. Vs Employees’ Provident Fund Organisation (Madras High Court)
Madras High Court addressed two writ petitions filed by A.K. Ahamed & Co. and its sister company against orders under Section 7-A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. These orders, confirmed by the Employees Provident Fund Appellate Tribunal, mandated the companies to pay contributions for certain allowances, including house rent and conveyance, as well as other expenses. The companies argued that these contributions were not legally required under Section 6 of the Act and challenged the lack of proper identification of employees in the proceedings.
The Court highlighted that neither the original authority nor the appellate tribunal verified whether the demanded contributions were tied to specific employees of the companies. It noted that failure to identify beneficiaries undermines the basis for determining liabilities under the Act. Referring to precedents from the Supreme Court and High Courts, the Court stressed that contributions could not be arbitrarily imposed without necessary inquiries to establish their applicability.
Regarding house rent allowance (HRA) and conveyance allowance, the Court observed that these are explicitly excluded from the scope of Section 6. However, the authorities had failed to address this aspect and proceeded on the assumption that all allowances were subject to contributions, citing the Act’s beneficial nature. The Court found this approach mechanical and unsupported by the law.
Ultimately, the Court set aside the impugned orders and remanded the matter to the authorities for fresh adjudication. It directed them to conduct proper inquiries, identify relevant employees, and ensure compliance with statutory provisions before passing new orders.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
These two writ petitions are by the two sister companies filed against the orders passed by the respondent under Section 7-A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the Act, 1952” for brevity) as confirmed by the Employees Provident Fund Appellate Tribunal, Chennai in the appeals filed by the petitioners under Section 7-I of the Act, 1952.
2. This Court, while admitting W.P.(MD) No.10027 of 2020, passed the following interim order on 25.08.2020 :
“Admit.
2. Issue Rule Nisi.
3. Call for records.
4. The petitioner’s counsel would point out that the respondent passed an order under Section 7A of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 on 19.06.2012 and that the same was question by him by filing appeal. The Tribunal dismissed the appeal on 10.06.2020. Questioning the same, this writ petition has been filed.
5. The primary ground taken by the petitioner’s counsel is that the original authority did not identify the so called 20 employees, who had been left out of coverage. The pointed contention raised by the petitioner’s counsel is that the Hon’ble Supreme Court in the case of Himachal Pradesh State Forest Corporation v. R.P.F. Commissioner reported in (2008) 5 SCC 756 held held that when the beneficiaries have not been identified, the original authority would not be justified in coming to the conclusion that they have been left out.
6. I find prima facie force in the said contention. Even though, the petitioner’s counsel has not inadvertently filed stay petition, there shall be order of interim stay.”
3. Perusal of the orders passed by the Original Authority under Section 7-A of the Act, 1952 and the Appellate Tribunal, do not indicate that the contributions that are required to be paid by the petitioners towards furniture maintenance expenses, godown expenses, stitching coolie etc., in both the writ petitions are relatable to any of the employees of the petitioner-company. But the respondent and the Appellate Tribunal, without verifying as to who are the employees, required the petitioners to remit the contributions determined under Section 7-A of the Act, 1952 as confirmed by the Appellate Tribunal.
4. Learned counsel for the petitioners placed reliance on various decisions of the Hon’ble Apex Court as well as the High Court of Patna in (i) Food Corporation of India vs. Provident Fund Commissioner and Others reported in (1990) 1 SCC 68; (ii) M/s.Roxy Cinema vs. State of Bihar and another reported in 2012 SCC OnLine Pat 1100; and (iii) Raj Kumar Gupta vs. Assistant Provident Fund Commissioner and another reported in 2013 SCC OnLine Pat 1206 and contended that in the absence of identifying the employees by conducting due enquiry, requiring the petitioners to remit the PF contributions is illegal and the same will only amount to enriching the organisations.
5. Then coming to the demand for making contributions in respect of the amounts paid towards house rent allowance and conveyance allowance, prima facie from the perusal of Section 6 read with Section 2(b) of Act 1952, both the allowances are excluded from the purview of Section 6 of the Act, 1952, thereby there is no obligation on the part of the establishment to pay contribution in respect of such amounts. But the Original Authority under Section 7-A of the Act, 1952 and the Appellate Tribunal, without going into these aspects, appears to have passed the impugned orders in a mechanical manner on the premise that the Act, 1952 is on the beneficial legislation and that should be given effect to.
6. After having heard the counsel on either side at length and after elaborate consideration, both the counsel have agreed that it is a fit case for remanding the matter back to the respondent for fresh adjudication by duly conducting necessary enquiry into the matter. As both the counsel have conceded for remand and in the light of the observations made in the paragraphs supra, this Court is also of the considered view that it would be in the best interest of justice to leave it open to the respondent herein to look into the matter afresh by conducting necessary enquiries as required under law and then pass appropriate orders afresh.
7. In the circumstances, the impugned orders passed by the respondent herein under Section 7-A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 as confirmed by the Appellate Tribunal are set aside and the matter is remanded back to the respondent for taking appropriate action in accordance with law by duly affording opportunity to the petitioners.
8. Accordingly, these Writ Petitions are allowed to the extent indicated above. No costs. Consequently, connected miscellaneous petitions are closed.
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