S.K. Nasiruddin Beedi Merchant Ltd. v. Central Provident Fund Commissioner, (SC) BS12484
SUPREME COURT OF INDIA

Before:- S. Rajendra Babu and S.N. Variava, JJ.

Civil Appeal No. 4285 of 1998. D/d. 30.1.2001

S.K. Nasiruddin Beedi Merchant Ltd. - Appellant

Versus

Central Provident Fund Commissioner - Respondents

For the Appellant :- Mr. Basudeo Prasad, Senior Advocate with Mr. Anil Kumar and Mr. Ajit Kumar Sinha, Advocates.

For the Respondents :- Mr. T.L.V. Iyer, Senior Advocate with Mr. Ajay Sharma, Mr. C. Radha Krishna and Mr. Arivind Kumar Sharma, Advocates.

Employees Provident Fund and Miscellaneous Provisions Act, 1952, Section 7A - Home workers - Applicability of the Act - Determination of applicability of Act and liability of employer - The Act is applicable even in respect of home workers engaged through contractors - The applicability of the Act to any class of employees is not determined or decided by any proceedings under Section 7A of the Act - When the Act becomes applicable to the employees in question, the liability automatically arises - Section 7A is only for determination or quantification of the amount of contribution liability - If the employer has not been deducting workmen's contribution from their wages despite notice, he cannot take benefit of his own laches - He is liable to pay the arrears at least from the date it was demanded made from him - Such an employer is not entitled to the benefit of directions issued in District Exhibitors Association Muzaffarnagar & others case by the Supreme Court.

[Paras 5 to 9]

Cases Referred :-

P.M. Patel and Sons v. Union of India, AIR 1987 Supreme Court 447.

Mantu Biri Factory (P) Ltd. v. Regional Provident Fund Commissioner, Civil Appeal 6 of 1993, decided on 8.3.1994.

District Exhibitors Association, Muzaffarnagar v. Union of India, 1991(3) SCT 474 (SC).

Mangalore Ganesh Beedi Works v. Union of India, AIR 1974 Supreme Court 1832.

JUDGMENT

S. Rajendra Babu, J. - The appellant before us is a manufacturer of beedies. He challenged an order made by the respondents under Section 7A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act'). The appellant had not deducted from the wages of the home workers employed through contractors for manufacture of beedis because of pendency of litigation in order to contribute towards the provident fund on the ground that the Act would not be applicable in cases of such employees. Earlier on the receipt of a notice under the Act from the respondents the appellant challenged the notice in the High Court in C.W.J.C. No. 4089 of 1988 on the ground that the Act has no application in respect of home workers engaged in rolling the beedis engaged through independent contractors. An interim stay had been granted by the Court during the pendency of the proceeding. By an order made on July 27, 1989 the said writ petition was dismissed by holding that the provisions of the Act are applicable in respect of home workers engaged in rolling the beedis of the petitioner's establishment through contractors. This decision was questioned before this Court in Special Leave Petition No. 10538 of 1989. In the meanwhile, the Provident Fund Commissioner determined the amount due from the appellant and called upon it to deposit a sum of Rs. 66,84,930.50 being employer's and employees' contribution towards the provident fund from July 1977 to August 1986. By another order made on December 18, 1989 the appellant was called upon to pay a sum of Rs. 28,72,383.85 within stipulated time. These demands were also challenged in two writ petitions, C.W.J.C. No. 1114 of 1990 and C.W.J.C. 1115 of 1990. This Court by an order made on August 22, 1989 disposed of S.L.P. (C) No. 10538 of 1989 observing that the question involved in the matter could be heard and decided in the proceedings pending before the High Court. The two writ petitions, namely, C.W.J.C. No. 1114 of 1990 and C.W.J.C. 1115 of 1990 came to be dismissed on August 19, 1992. A sum of Rs. 46,90,051/- out of a total demand of Rs. 95,57,314.35 was realised by the Provident Fund Commissioner. When the order made by the High Court in C.W.J.C. No. 1114 of 1990 and C.W.J.C. 1115 of 1990 was questioned in Special Leave Petitions (C) Nos. 15312-13 of 1992 filed in this Court, the same were dismissed on May 3, 1993 by stating as follows :

Thereafter the appellant furnished the particulars of home workers stated to be engaged by the contractors to the best of information available with the appellant for final determination of its liability under Section 7A of the Act as noticed by this Court. A claim was made by the appellant for waiver from payment of employees' contribution for the period from October 1985 to May 3, 1993 on the ground that he had not been able to collect the same. But the said claim was disallowed. The Regional Provident Fund Commissioner issued a certificate for recovery of the outstanding liability of Rs. 46,17,538.20 through the Recovery Officer, Bihar. This action of the respondent was called in question before the High Court. Three contentions were raised before the High Court, vis-a-vis :

2. The contesting respondents before the High Court submitted that after the law was settled in P.M. Patel and Sons v. Union of India, AIR 1987 Supreme Court 447, there was hardly any scope for litigation regarding applicability of the Act in respect of home workers employed by the appellant through contractors. When the liability became clear a formal notice as to coverage under the Act had been sent to the appellant in January 1977 to the effect that the notification issued by the Central Government applied to the appellant with effect from July 1976 to December, 1977 and the Code Number is BR/7A- Cell/1365/88/3445 in respect of the establishment of the appellant. Thus it was contended that the formal notice had already been issued as to the coverage and, therefore, it is not open to the appellant to contest their liability arising under the Act by stating that it is the date of determination that will attract the provisions of the Act and not the date of notification extending the application of the Act to the industry in which the appellant is engaged. The learned Single Judge of the High Court concluded as follows :

In this background, the learned Single Judge is of the view that it is inequitable and unfair to saddle the petitioner with the liability to pay the employees' contribution for the period from October 1985 to May 3, 1993 which the appellant could not and did not deduct through its contractors on bonafide ground. In reaching this conclusion, the learned Judge placed reliance upon the decision of Calcutta High Court in Mantu Biri Factory (P) Ltd. v. Regional Provident Fund Commissioner, Civil Appeal 6 of 1993 decided on March 8, 1994. The matter was taken up in appeal before the Division Bench of the High Court in Letters Patent Appeal No. 403 of 1996. The Division Bench did not agree with any of the contentions raised on behalf of the appellant and held that the appellant is liable to make payments. Thus the High Court allowed the appeal and set aside the order made by the learned Single Judge.

3. In this appeal the contentions urged before the High Court are reiterated before us and in support of the same strong reliance is placed on the decision of this Court in District Exhibitors Association, Muzaffarnagar and others v. Union of India and others, 1991(2) SCR 477 : 1991(3) SCT 474 (SC).

4. The contention raised by the appellant is two fold. Firstly, that the Act is not applicable in respect of the beedi rollers engaged through contractors and, secondly, the contention put forth is that even if the Act is applicable, the same cannot be enforced for the period in question inasmuch as on account of various circumstances the appellant has not been able to deduct the employees' contribution towards the provident fund from their wages and, therefore, in terms of para 32 of the Scheme framed under the Act the appellant will not be able to recover the same and the liability under the Act is only to make payment after deduction of the contribution towards provident fund from the wages of the employees and not otherwise.

5. So far as the first contention is concerned, law is clear and this Court in the two decisions in Mangalore Ganesh Beedi Works v. Union of India, AIR 1974 Supreme Court 1832, and P.M. Patel and Sons (supra) held that the Act would be applicable even in respect of home workers engaged through contractors and cannot be cavilled any more.

6. So far as the second contention is concerned, the argument of the learned counsel proceeds on the basis that the liability was not clear in view of the various circumstances and, therefore, deduction could not be made from the wages of the employees and that circumstance leads to anomalous position making the employer to pay the employees' contribution towards provident fund without the facility of deduction from their wages. We do not think that this argument is well founded. The applicability of the Act to any class of employees is not determined or decided by any proceeding under Section 7A of the Act but under the provisions of the Act itself. When the Act became applicable to the employees in question, the liability arises. What is done under Section 7A of the Act is only determination or quantification of the same. Therefore, the contention put forth on behalf of the appellant that their liability was attracted only from the date of determination of the matter under Section 7A of the Act does not stand to reason. Indeed, the coverage was indicated to the appellant as early as in January 1977, as already noticed by us. In fact, the Government issued a clarification that the employees' share of contribution from pre-discovery period which has not been deducted from the wages of employees shall not be recovered and that 'pre-discovery' period is explained in the following terms :

7. Inasmuch as the appellant is protected for the period of coverage by the general stay order given by this Court on the applicability of the Act to the industry in question till the date of the final judgment otherwise steps would have been taken in terms of the formal notice issued to the appellant in 1977 itself. Thus in respect of period from June 1977 to September 1985 there was waiver of the liability by reason of the clarification issued by the Government under para 78 of the Scheme. On the disposed of the matter by this Court in September 1985 the liability to deposit the employees' contribution became very clear. Though in law respondents were entitled to recover even for the period from June 1977 in view of the directions issued by the Government but that was not demanded. For period upto September 1985 and for subsequent period there is no manner of doubt and the dispute raised by the appellant cannot be stated to be bonafide at all. In the circumstances, we fail to understand as to how the appellant can rely upon his own laches in not deducting the wages from 1985 onwards to enable him to make employees' contribution to the fund.

8. The learned counsel relied upon the decision of this Court in District Exhibitors Association, Muzaffarnagar and others (supra) to contend that inasmuch as paragraphs 30 and 32 of the Scheme are not capable of implementation which provided for the employer in the first instant paying both the contributions by him and the employees and Para 32 enabled the employer to recover the employees' contribution that has been paid by him under Para 30 could make it clear that the liability is limited; that no such deduction can be made from any wage other than that which is paid in respect of the period of which the contribution is payable; that from that it is obvious that the employer has to pay the contribution of the employees' share but he has a right to recover that payment by deducting the same from the wage due and payable to the employees; that no deduction can be made from the wages payable for any period but only from the wages for the period in respect of which the contribution is payable; that no deduction can be made from any other wages payable to the employees, that is, the payment of employees'contribution by the employer with the corresponding right to deduct the same from the wages of the employees could be only for the current period during which the employer has also to pay his contribution.

9. This enunciation of law was made in the context of the Scheme having been made applicable with retrospective effect to the employees concerned therein. Therefore, in that context this Court examined the scope of the Scheme and decided the matter But that benefit cannot be availed of by the appellant in the present case inasmuch as it was open to the appellant to avail of the benefit of para 32 of the Scheme in the year 1985 itself when their liability became clear by the declaration of law made by this Court in P.M. Patel and Sons case (supra). Therefore, the appellant cannot take advantage of this decision. The decision of the Calcutta High Court in Mantu Biri Factory (P) Ltd. (supra) is also in line with the decision of this Court in District Exhibition Association Muzaffarnagar and others' case (supra) and, therefore, we are of the opinion that neither the decision of this Court in District Exhibitors Association Muzaffarnagar and others' case (supra) nor of Calcutta High Court in Mantu Biri Factory (P) Ltd. (supra) can be of any assistance to the appellant.

In the circumstances, we think that the view taken by the Division Bench of the High Court appears to be correct. Accordingly, the appeal is dismissed. No costs.

Appeal dismissed.