1962 (3) TMI 117 - SC - Indian Laws

Summary

Issues Involved:
1. Constitutionality of the notifications dated January 15, 1958, and December 2, 1960, under the Employees' Provident Funds Act, 1952.
2. Reasonableness of the restrictions imposed by the notifications under Article 19(6) of the Constitution.
3. Practical difficulties in implementing the notifications for employees employed through contractors.
4. Discrimination between contract labor and direct labor under the Scheme.

Issue-wise Detailed Analysis:

1. Constitutionality of the Notifications:
The petitioners, a company and its directors, challenged the validity of two notifications issued by the Central Government under Section 7(1) of the Employees' Provident Funds Act, 1952. The notifications amended the Employees' Provident Funds Scheme, 1952, to include employees employed through contractors. The petitioners contended that these notifications imposed an unreasonable burden on their business and infringed Article 19(1)(g) of the Constitution.

2. Reasonableness of the Restrictions:
The court examined whether the notifications constituted a reasonable restriction within the meaning of Article 19(6). The notifications aimed to extend provident fund benefits to employees employed through contractors, who were previously excluded. The court acknowledged that the notifications were conceived in the public interest to remove discrimination against contract labor. However, the petitioners argued that the means adopted were unreasonable, as the provisions designed for direct employees were extended to contract labor without considering the differences in their employment situations.

3. Practical Difficulties in Implementation:
The petitioners highlighted the practical difficulties in implementing the notifications for contract labor. They argued that the principal employer had no privity of contract with the employees hired through contractors and was not in a position to know the wages agreed upon between the contractor and the employees. Additionally, the factory or establishment did not maintain muster rolls for contract labor, making it challenging to determine whether an employee was entitled to provident fund benefits under Para 26 of the Scheme.

4. Discrimination Between Contract Labor and Direct Labor:
The court noted that the Scheme required the employer to pay both the employer's and employee's contributions to the provident fund, with the right to recoup the employee's share by deducting it from their wages. However, this was not feasible for contract labor, as the contractor paid their wages. The court found that the notifications imposed an obligation on the principal employer to pay the entire provident fund contribution without providing a mechanism to recoup the employee's share from the contractor. This resulted in discrimination between those who employed contract labor and those who employed direct labor, making the Scheme unreasonable and unfair.

Conclusion:
The court held that the notifications dated January 15, 1958, and December 2, 1960, were unconstitutional and void. The notifications imposed unreasonable restrictions on the petitioners' business and resulted in discrimination between contract labor and direct labor. The petitioners were entitled to their costs, and the petition was allowed.