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TMI Blog2009 (9) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of EPF Scheme, 1952 and EDLI Scheme, 1976. Since the employers failed to pay the said contributions and administrative charges due as required by law for the period from 5/1978 to 11/1989 in WPC No. 3850/1992 and for the period 12/1989 to 4/1992 in WPC No. 3887/1993. Pursuant to the default in payment of the said dues the proceedings under Section 14-B of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 were initiated. On failure of the petitioners to show cause why damages for default in payment of dues within time as mentioned under para 38 of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952, should not be recovered from them, the Regional Provident Fund Commissioner, Delhi, ordered recovery of the damages from the petitioners. Assailing the said order of the Regional Provident Fund Commissioner, Delhi the present petitions have been preferred by the petitioners. 4. The counsel for the petitioners, Mr. Rajender Dhawan, contended that the important question which arises for consideration before this Court is the interpretation of the expression within 15 days of the close of every month used in para 38 of the Employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16th day of each English calendar month ending on the 15th day of the following month and therefore, the deposits made by the company were not late and were within time in accordance with the provision enshrined in para 38 of the Scheme. The counsel averred that in the said reply the petitioner also pointed out that the notice dated 31/5/1990 covered period commencing from May 1978, therefore, the same was hopelessly time-barred. The counsel thus urged that the impugned order levying the damages on the ground that the month mentioned in para 38 means the calendar month commencing from 1st day of each British calendar month and not otherwise, is bad in law and in ignorance of the wage month. The counsel submitted that according to the Scheme of the Act the employer is required to deduct Employee's contributions at the time of making wages, which clearly shows that the contributions are required to be deposited, both by the employer and the employee, after the wages have been disbursed and since the wages are disbursed within seven days of the close of the wage month, therefore, the expression month appearing in para 38 would thus necessarily mean the wage month and not the Bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be liable to make his contribution although the wage month of the employee may begin from 16th day of January to 15th day of February. This will create anomalous situation as per the counsel for the petitioner as the employers cannot be made liable to pay the wages from the 1st day of January to 15th day of January when no wages were earned by the employee. Similarly, Section 32 of the scheme also clearly exemplifies that the employer cannot make any deduction from any wage other than that which is paid to the employee in respect of the period or part of the period in respect of which alone the contribution is payable by the employer. 6. Counsel for the petitioner also referred to Section 4 of The Payment of Wages Act, 1936 in support of his submission which says that every person responsible for the payment of wages shall fix his own period in respect of which such wages shall be payable. Reference was also made by the counsel for the petitioner to Section 19 of the Delhi Shops and Establishments Act and Section 106 of The Transfer of Property Act, 1882. Section 19 of the Delhi Shops Establishments Act, 1954 gives full liberty to the employer to fix any period in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il of contribution is required to be filled w.e.f. the month of April till March and same is the position as far as the form 3A is concerned which also refers to the contribution for the currency period w.e.f. 1st April to 31st March. The same is the effect of the other forms i.e. Form 6A dealing with the Consolidated Annual Contribution Statement wherein also there is a reference to the English calendar month starting from the contribution paid in April and the contribution paid in March in the following year. Reference is also invited by the counsel for the respondent to Section 60 and 73 of the said Scheme. Section 60 of the Scheme deals with the interest which is to be credited to the account of each member on monthly running basis in the manner prescribed in the Section while Section 73 deals with the annual statement of account of the member. The contention of the counsel for the respondent is that the scheme of the Act is such that there cannot be different wage periods for different employers and due to this reason alone the wage period has to be British Calendar month commencing from the 1st day of each English Calendar month ending with the last day of such English Cale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; (iii) Any presents made by the employer; 12. Section 2(1) defines a scheme to mean a scheme under the Employees. Provident Fund Scheme to mean a scheme framed under Section 5 of the Act. Section 5 defines the Employees Provident Fund Schemes as under: 5. Employees' Provident Funds Scheme (1) The Central Government may by notification in the Official Gazette frame a Scheme to be called the Employees' Provident Funds Scheme for the establishment of provident funds under this Act for employees or for any class of employees and specify the establishments or class of establishments to which the said Scheme shall apply and there shall be established as soon as may be after the framing of the Scheme a Fund in accordance with the provisions of this Act and the Scheme. (1A) The Fund shall vest in and be administered by the Central Board constituted under Section 5A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the other provisions of Employees. Provident Fund Act, 1952 which are relevant and were referred to by the counsels are reproduced as under: 2. Definitions (h) Fund means the provident fund established under a Scheme; 38. (1) The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage [of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee, as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the fund by separate bank drafts or cheques on account of contributions and administrative charge]: [Provided that if the payment is made by a cheque, it should be drawn only on the local bank of the place in which deposits are made]: Provided further that where there is no branch of the Reserve Bank or the State Bank of India at the station where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if he so desires, be an amount exceeding [ten per cent] or [twelve per cent], as the case may be, of his basic wages, dearness allowance and retaining allowance (if any ) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act.] 32. Recovery of a member's share or contribution. - (1) The amount of a member's contribution paid by the employer or a contractor+ shall, notwithstanding the provisions in this Scheme or any law for the time being in force or any contract to the contrary, be recoverable by means of deduction from the wages of the member and otherwise: Provided that no such deduction may be made from any wage other than that which is paid in respect of the period or part of the period in respect of which the contribution is payable: Provided further that the employer [or a contractor] shall be entitled to recover the employee's share from a wage other than that which is paid in respect of the period for which the contribution has been paid or is payable where the employee has in writing given a false declaration at the time of joining service with the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year, the total amount of interest credited at the end of the period or debited in the period and the closing balance at the end of the period. (2) Members should satisfy themselves as to the correctness of the annual statement and any error should be brought to the notice of the Commissioner within six months of the receipt of the statement. 15. Section 2(vi) and Section 4 of The Payment of Wages Act, 1936, Sections 2(35) and 3 of the General Clauses Act, 1897, Section 19 of The Delhi Shops and Establishments Act and Section 106 of The Transfer of Property Act, 1882 were also referred to by the counsels during the course of their arguments and the same are reproduced as under: The Delhi Shops Establishments Act Section 19: Time and conditions of payment of wages (1) Every employer or his agent or the manager of any establishment shall fix periods in respect of which wages to the employee shall be payable and such person shall be responsible for the payment to persons employed by him of all wages required to be paid under this Act. (2) No wage period, so fixed, shall exceed one month. (3) The wages of every employee in any shop or establishment shall be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund, the employer shall send a 'NIL' return. (2) Every employer shall send to the Commissioner within fifteen days of the close of each month a return-- (a) [***] in Form 5, of the employees qualifying to become members of the Fund for the first time during the preceding month together with the declarations in Form 2 furnished by such qualifying employees [***], and (b) [***] [in such form as the Commissioner may specify], of the employees leaving service of the employer during the preceding month: [Provided that if there is no employee qualifying to become a member of the Fund for the first time or there is no employee leaving service of the employer during the preceding month, the employer shall send a 'NIL' return. (3) [***] [(4) Every employer shall maintain an inspection note book in such form as the Commissioner may specify, for an Inspector to record his observation on his visit to the establishment.] (5)] Every employer shall maintain such accounts in relation to the amounts contributed to the Fund by him and by his employees as the [Central Board] may, from time to time, direct, and it shall be the duty of every employer to assist the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees' Provident Fund Scheme was accordingly framed under the Act and it came into effect from 1-11-1952. 18. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is applicable to Factories and Establishments engaged in 180 specified industries/classes of establishments. Earlier the Act was applicable to establishments on completion of three years of existence and employing 20 or more persons. This provision was later amended with effect from 22.09.1997 and as such any factory falling in the category of the notified industry/class of establishments employing 20 or more persons from the very date of its set-up is coverable under the Act. Employees' Provident Funds Miscellaneous Provisions Act, 1952 was enacted with the main object of making provision for the future of the industrial worker after he retires or for his dependents in case of his early death . It was then felt, after considering the possible alternatives that the most appropriate course for this purpose was the institution of compulsory contributory provident fund to which both the worker and the employer would contribute. It was recognised that such a scheme would have apart from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption may, however, increase the contribution to the extent of 81/3 per cent 8. The initial responsibility for making payment of the contribution of the employer as well as of the employee, lies on the employer. Para 30 of the Scheme makes it incumbent on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. Under para 8, the employer is authorised before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month i.e. a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with the requirements of Section 6 is punishable with various terms of imprisonment which may extend to a period of six months, or with fine which may extend to one thousand to two thousand rupees, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g defaults in making contributions to the Provident Fund, and in the meanwhile utilising both their own contribution as well as the employees' contribution, in their business. The provision contained in Section 14-B for recovery of damages, therefore, proved to be illusory. Accordingly, by Act 40 of 1973, the words twenty-five per cent of were omitted from Section 14-B and the words not exceeding the amount of arrear were substituted. The intention is to invest the Regional Provident Fund Commissioner with power to impose such damages that the employer would not find it profitable to make defaults in making payments. 20. The aforesaid judgment makes the position explicitly clear that the initial responsibility for making payment of the contribution lies on the employer. 21. As per Section 2(b) of The Employees. Provident Funds and Miscellaneous Provisions Act, 1952 the basic wages means all emoluments which are earned by an employee while on duty and Section 2(6) of the Payment of Wages Act also refers to the wages to mean all remunerations payable to a person employed in respect of his employment or of work done in such employment. Both these provisions clearly show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the removal of the doubt or difficulty, and the order of the Central Government in such cases shall be final. 23. Section 4 of the Payment of Wages Act, 1936 gives unfettered discretion to the employer to fix any period as a wage period subject however to the condition that the same shall not exceed one month. This section nowhere says that the wage period should be as per the British or Gregorian Calendar month. Chapter 5 of The Employees. Provident Funds and Miscellaneous Provisions Act, 1952 deals with the contributions. Section 29 Clause (3) as referred above says that the contribution shall be calculated on the basis of basic wages and dearness allowance after calculating the cash value of any food concession and retaining allowance (if any) actually drawn during the whole month, whether paid on daily, weekly, fortnightly or monthly basis. The words actually drawn refers to the earnings of the employee and the word whole month refers to wage month. Nowhere this section says that the month would be the British Calendar month or the Gregorian Calendar month and therefore, rightly the reference was made by the counsel for the petitioner to the definition of the month, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compact unit of a calendar month, the normal definition would have been as a British Calendar month or a calendar month. The elaborate explanation given in the definition of the term 'month' and particularly the reference to calculation clearly and pointedly suggest that what is intended to be referred to by the term is a space of time between the two dates of the two contiguous months. 26. Mr. Chawla counsel for the respondent strongly placed reliance on the judgment of this Court in the case of Birla Cotton Spinning Weaving Mills Ltd. v. union of India and Ors. decided on 29.8.1983 to support his submission that the Provident Fund Scheme requires deposit to be done within 15 days of close of every month and such a month has to be reckoned strictly as per the British Calendar month. However, I do not find that the interpretation which the counsel for the respondent has advanced is the current interpretation as would be seen after going through the said judgment. Para 9 of the same is reproduced as under: following (Para 10 of the Pension Scheme clearly put a responsibility to pay both the contributions payable to the Family Pension Fund by himself and on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er within 15 days of the close of the month, i.e. January. Thus deposit for January has to be made by 15th of February. This is the only manner by which some kind of certainty and uniformity can be put in the working of the scheme. As a matter of fact this matter stands concluded by the Organo's case (supra) wherein it was said that the deposit of such contribution shall be made by the employer within 15 days of the close of every month that is a contribution for a particular month has got to be deposited by the 15th day of the month following. (para 33. 27. As discussed above, there cannot be any dispute that the initial responsibility for making the contribution lies on the employer and deposit of such contribution is required to be made by the employer within fifteen days of the close of every month i.e. the contribution for a particular month has got to be deposited within fifteen days of the close of the month. It is thus a statutory obligation of the employer in the E.P.F. and Miscellaneous Provisions Act, 1952 and scheme framed thereunder to deposit the said contribution and if the employer makes default in the payment of the Contribution then under Section 14-B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Gregorian calendar month is meant for a period commencing from the first day of English calendar month and ending on the last day of the same month. Taking an overall view of the scheme of the Act and the harmonious construction of the above referred provisions of the EPF Act and the scheme framed thereunder and the provisions of payment of Wages Act and The General Clauses Act, 1897, I find myself in agreement with the contentions raised by the counsel for the petitioner that the employer in its absolute discretion can fix or adopt any wage month for disbursement of salary to its employees and the same necessarily cannot be the month as per the British or Gregorian English Calendar month commencing from the 1st day of each month to end with the last day of such month and then to pay the contribution under Section 38 of the Scheme within 15 days period from the close of such month. Basic wages are emoluments to be earned by an employee for the job assigned to such an employee and therefore, the emoluments cannot be delinked from the earnings for which every employee puts his required labour, be it unskilled, semi-skilled, skilled or other services as are assigned on a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X
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