APPRENTICES ENGAGED UNDER APPRENTICE ACT, 1961 WILL NOT BE AN EMPLOYEE UNDER EPF ACT, 1952.

[Mr. M. GOVINDARAJAN]

                        Section 1(3) of the EPF Act, 1952 provides for the application of the EPF Act, 1952.   It provides that subject to the provisions contained in Section 16, it applies-

(a)    to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed, and

(b)   to any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf.

The Central Government may, after giving not less than 2 months’ notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than 20 as may be specified in the notification.

                        The interpretation of the word ‘persons’ in Section 1(3)(a) leads to litigation which will be discussed in this article.   The word ‘persons’ has not been defined in this Act.  But the term ‘employee’ has been defined in Section 2(f) of the Act.   According to this section ‘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 an establishment, and who gets,  his wages directly or indirectly from the employer, 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 or under the Standings Orders of the establishment.

Section 2(f) clearly excludes the apprentices engaged under the Apprentices Act, 1961 from the definition of ‘employee’ but this has not been taken into account in the case law by the Authorities and the Tribunal in the case law to be discussed in the succeeding paras.

                        In ‘Servarayan Medical & Research Centre V. Assistant Provident Fund Commissioner and another’ – 2012-III-LLJ-133 (Del) the petitioner is a small medical care and research centre employing 11 persons.   The number of employees has never crossed the figure of 20 in its entire period of existence.   In the month of June-July 2004, the petitioner was approached by the Interactor of Town High School requesting the petitioner to engage few Degree/Diploma/Technicians students as apprentices and impart practical training to them as envisaged in the scheme of the Board and the same was agreed to by the petitioner.  12 students were allotted as apprentices to the petitioner establishment.   The apprentices were informed that they would be paid stipend for the one year training period and no provident fund deductions would be made for them. 

                        On 18.01.2005 the Enforcement Officers of PF Commissioner visited the premises of the petitioner and found that there were 29 employees working in the establishment and demanded the employer’s contribution be deposited by 20.02.2005.  The petitioner disputed that there were only 11 employees and made detailed representation.  The petitioner appeared before the Authority on 23.03.2005.  It was held that the apprentices receiving training are persons and therefore they will be regarded as ‘person’ to determine the applicability of the Act.  The petitioner filed appeal before the Tribunal which dismissed the appeal.  

                        The petitioner filed a writ petition before the High Court against the order of the Tribunal.   The petitioner relied on the judgment of Supreme Court in ‘Regional Provident Fund Commissioner, Mangalore V. Central Arecanut and Coca Marketing and Processing Co-op Limited, Mangalore’ – AIR 2006 SC 971 in which it was held that the ‘Apprentice’ engaged under the Apprentices Act or under the Standing Order would be excluded from the definition of the ‘employee’ under the Act.   The High Court disposed the petition directing the Tribunal to take note of the Supreme Court judgment in deciding the appeal. 

                        The Tribunal heard the case as per the directions of High Court.   The Tribunal dismissed the appeal of the petitioner holding to attract the provisions of act it would be sufficient if an establishment is having strength of 20 or more persons.   The word ‘person’ is not defined under the Act whereas the expression ‘employee’ is defined under Section 2(f) of the Act.   It implies that the word person used in Section 1(3)(a) is to be interpreted in a wider sense so that all the persons the human beings engaged in this establishment are to be counted for the purpose of extending the provisions of the Act.    The word ‘persons’ used in Section 1(3)(a) cannot be considered by any stretch of imagination as an employee as defined under Section 2(f) of the Act.   Accordingly in this establishment there were more than 20 persons and accordingly it will fall within the ambit of the Act.

                        The petitioner filed this writ petition against the order of the Tribunal. The petitioner pointed out the directions of High Court to Tribunal to consider the Supreme Court judgment while deciding the appeal.   No reference was made to the said judgment by the Tribunal in the impugned order and no reasoning is given as to why the said judgment is not applicable to the facts of the present case.  The respondent contended that the impugned order is legal and valid in all respects.  In view of the provisions of Section 1(3) of the Act, all the persons engaged in the establishment are to be covered in the establishment for the purpose of the Act. 

                        The High Court held that perusal of the impugned orders and records shows that respondents have not gone to the extent of examining whether the apprentices engaged by the petitioner are apprentices within the meaning of the Apprentices Act, 1961.   It is not the stand of the respondents that such a stand has been taken mala fide by the petitioner to escape from the applicability of the Act.  It has been simply held by respondents that since persons engaged are more than 20, so the Act is applicable.   In view of the above the High Court set aside the order and remanded the matter to the Tribunal with directions to determine the same and thereafter decide the applicability of the Act, if any, on the petitioner.