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2020 (1) TMI 1504 - SC - Companies LawEntitlement to provident fund benefits - contractual employees of the Appellant-Company - statutory obligation to provide the benefit of provident fund - entitled to provident fund benefits under the Pawan Hans Employees Provident Fund Trust Regulations or under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) and the Employees Provident Fund Scheme, 1952 (EPF Scheme) framed thereunder? HELD THAT - This Court in Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School 2006 (10) TMI 509 - SUPREME COURT laid down a twin test for an establishment to seek exemption from the provisions of the EPF Act, 1952. The twin conditions are First, the establishment must be either belonging to or under the control of the Central or the State Government. The phrase belonging to would signify ownership of the Government, whereas the phrase under the control of would imply superintendence, management or authority to direct, restrict or regulate and Second, the employees of such an establishment should be entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits - If both tests are satisfied, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act. Applying the first test to the instant case, the Central Government has a 51% ownership in the AppellantCompany, while the balance 49% is owned by the ONGC, a Central Government PSU - With respect to the second test, it is relevant to note that the Company had its own Scheme viz. the Pawan Hans Employees Provident Fund Trust Regulations in force. The Company however restricted the application of the PF Trust Regulations to only the regular employees. The PF Trust Regulations of the Company were not framed by the Central or State Government, nor were they applicable to all the employees of the Company, so as to satisfy the second test. The Regional Provident Fund Commissioner, Bandra issued letter dated 24.05.2017 addressed to the Company wherein it was stated that the benefit of contributory provident fund was not being provided to contractual/casual employees of the Company; and was directed to implement the provisions of the EPF Act. The Company does not satisfy the second test, since the members of the Respondent Union and other similarly situated contractual workers were not getting the benefits of contributory provident fund under the PF Trust Regulations framed by the Company, or under any Scheme or any rule framed by the Central Government or the State Government. Consequentially, the exemption under Section 16 of EPF Act would not be applicable to the Appellant-Company - the Company has failed to make out a case of exclusion from the applicability of the provisions of the EPF Act. 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? - HELD 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 members of the Respondent Union and all other similarly situated contractual employees, are entitled to the benefit of provident fund under the PF Trust Regulations or the EPF Act. Since the PF Trust Regulations are in force and are applicable to all employees of the Company, it would be preferable to direct that the members of the Respondent Union and other similarly situated contractual employees are granted the benefit of provident fund under the PF Trust Regulations so that there is uniformity in the service conditions of all the employees of the Company. Date from which the benefit of provident fund is to be extended to the contractual employees - HELD THAT - 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 is affirmed - However, the direction of the High Court to grant the benefits under the EPF Act is modified, and the members of the Respondent Union and other similarly situated contractual employees are directed to 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. The interests of justice would be best subserved if the benefit of Provident Fund is provided to the members of the Respondent-Union, and other similarly situated contractual employees, from January 2017 when the Writ Petition was filed before the High Court - appeal disposed off.
Issues Involved: Applicability of the EPF Act to the Appellant Company, entitlement of contractual employees to provident fund benefits under the PF Trust Regulations or the EPF Act, and the effective date for extending such benefits.
Detailed Analysis: 1. Applicability of the EPF Act to the Appellant Company: The main issue was whether the Appellant Company is excluded from the applicability of the EPF Act. The EPF Act applies to establishments employing 20 or more persons, as specified by the Central Government. Section 16(1)(b) of the EPF Act excludes establishments belonging to or under the control of the Central Government if their employees are entitled to contributory provident fund benefits under a scheme or rules framed by the Central Government. The Appellant Company argued that it was excluded from the EPF Act as it was owned and controlled by the Central Government, holding 51% of its shares. However, the PF Trust Regulations framed by the Company were not applicable to all employees, specifically excluding contractual employees. Therefore, the Company did not satisfy the second test for exclusion under Section 16(1)(b) since the contractual employees were not receiving contributory provident fund benefits. Consequently, the EPF Act was applicable to the Appellant Company. 2. Entitlement of Contractual Employees to Provident Fund Benefits: The High Court had directed the Company to extend EPF benefits to contractual employees. The Appellant Company argued that the EPF Act and PF Trust Regulations should not apply to contractual employees retrospectively, as many had ceased employment. The Respondent Union contended that contractual employees, directly paid by the Company, should be covered under the PF Trust Regulations or the EPF Act. The Supreme Court held that the PF Trust Regulations were applicable to all employees, including contractual ones, as defined under Clause 2.5 of the Regulations. The Court found that the members of the Respondent Union had been in continuous employment and were paid directly by the Company, thus qualifying for provident fund benefits under the PF Trust Regulations. 3. Effective Date for Extending Provident Fund Benefits: The High Court had directed the Company to provide EPF benefits from the date of eligibility of the contractual employees. The Supreme Court modified this, directing that the benefits be provided from January 2017, when the Writ Petition was filed, to ensure fairness and manageability of the provident fund. Final Directions: 1. The benefit of Provident Fund is to be provided to the members of the Respondent Union and other similarly situated contractual employees from January 2017. 2. The Regional Provident Fund Commissioner is to compute the amount to be deposited by the Company and the employees for the period from January 2017 to December 2019. 3. The Company is liable to pay Simple Interest @ 12% p.a. on its contribution for the past period. 4. The employees are to deposit their matching contribution with interest @ 6% p.a. after the Company’s contribution is remitted to the PF Trust. 5. From January 2020 onwards, contributions will be made as per the PF Trust Regulations. 6. The benefit shall not extend to employees who have superannuated, expired, resigned, or ceased employment by the date of the Judgment. 7. Costs of ?5,00,000 are awarded to the Respondent Union for litigation expenses. 8. The balance amount deposited in the Court shall be refunded to the Appellant Company after disbursement. The appeal was disposed of accordingly.
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