Dear All,
Please
find below please find below the judgment of Madras high court, where the high
court has held that Provident Fund dues of contractor with independent code cannot
be recovered from the principal employer.
RESERVED ON: 29.01.2015
DELIVERED
ON: 06.02.2015
IN THE HIGH
COURT OF JUDICATURE AT MADRAS
DATED
: 06-02-2015
CORAM
THE Hon'ble Mr.JUSTICE M. DURAISWAMY
W.P.No.391 of 2014 and M.P.No.1 of 2014
M/s Brakes India Ltd.,
(Brakes Division),
Sholinghur - 631 102
rep by its Vice-President (Pers & HRD)
...
Petitioner
vs
The Employees Provident Fund Organisation
Sub Regional Office,
31,Filter Bed Road,vellore
rep by its Regoinal Provident Fund Commisioner
...Respondent
Writ Petition filed
under Article 226 of the Constitution of India praying this court to issue a
Writ of Certiorarified Mandamus to call for the records connected with impugned
order ref No.TN/VLR/38789/SDC/2013 dated 26.12.2013 on the file of the
respondent and quash the same and direct that
the respondent shall not have a
right to proceed against the petitioner under section 14B of the PF Act.
For petitioner :Mr.Sanjay Mohan for
M/s S. Ramasubramanian Associates
For respondent :Mrs.V.J. Latha
ORDER
The petitioner Company has
filed the above writ petition to issue a Writ of Certiorari filed Mandamus to
call for the records connected with impugned order ref No.TN/VLR/38789/SDC/2013
dated 26.12.2013 on the file of the respondent and quash the same and direct
that the respondent shall not have a right to proceed against the petitioner
under section 14B of the PF Act.
2. The brief case of the
petitioner is as follows:
(a) According to the
petitioner Company, in the course of its business, it engages various
Contractors to carry out non-perennial work, who, in turn, employed various
persons to carry out the work. The petitioner Company is a Principal Employer
and the Contractors, wherever required, have obtained licences and are Licensed
Contractors under the Contract Labour (Regulation and Abolition) Act, 1970. The
petitioner Company is registered with the Provident Fund Authorities and has a
separate "exempted trust" under P.F. Code No.TN/4725.
(b) One A. Govindaraj, a
Licenced Contractor has been doing certain contract work for the petitioner
Company, as and when required since 1995. Insofar as the Petitioner Company is
concerned, the Contractor would supply labour, as was required by the
Petitioner Company. The Contractor was given certain civil works to be done
inside the Factory. The said Contractor employed 15 to 20 contract workmen
inside the petitioner's factory and the Petitioner Company never employed the
Contractor continuously.
(c) The contractor applied
for a separate P.F. Code number under the Employees' Provident Funds
and Miscellaneous Provisions Act, 1952, and the same was allotted to him
on 10.1.2003 with the Code No.TN/VL/38789 with retrospective coverage from
25.9.1995.
(d) The Contractor had been
deducting the employees share from December 2002 onwards and has been remitting
it along with employer's share of contribution to the P.F authorities.
(e) The Petitioner Company
learnt that based on the report of the Enforcement Squad, Regional Assistant
Provident Fund Commissioner, the Sub Regional Office, Vellore, initiated
proceedings under Sec.7-A against the Contractor and the Contractor was
directed to produce all the records pertaining to wage payment relating to
workmen from April 1995 to November 2002 and the petitioner Company was
informed that the said Contractor had given a statement that an amount of
Rs.9,66,333/- was payable as contributions and that an amount of Rs.1,00,000/-
was also deposited by the said Contractor during March 2004 and the balance of
Rs.8,66,333/- on 22nd July 2004.
(f) The petitioner Company
also learnt that a letter dated 16.8.2004 was received by the Contractor from
the P.F. Authorities, wherein, it has been stated that the coverage for the
establishment of the Contractor was advanced from 25.9.1995 to 1.6.1994 and a
Show Cause Notice dated 30.8.2004 was issued under Sec.14 of the Act for
prosecuting the Contractor. Further, the PF Authorities granted 15 days time to
the contractor to pay the amount or on his default, had directed the petitioner
Company to pay the amount.
(g) On 31.8.2004 the
petitioner Company received a letter calling upon them to pay the amount within
three days as against the period of 15 days granted under the letter dated
30.8.2004. As no amount was payable by the Petitioner Company to the contractor,
a letter was also sent to the Authorities dated 6.9.2004, informing them that
there was no dues payable by the petitioner Company to the Contractor as per
the books of the petitioner. Subsequently, the contract with that Contractor,
came to an end in October 2004 and was not renewed thereafter.
(h) The petitioner Company
was never a party to the proceedings nor was aware of the same. The respondent
had thereafter assessed the amount payable under Section
14B and Section 7-Q at Rs.28,61,326/-. In none of the
proceedings, the petitioner Company was made as a party and it was not aware of
the proceedings except when the Contractor had approached the Petitioner
Company for an advance after having suffered an order under Sec.7-A. The
petitioner Company received a Notice under Section 8-F dated
23.2.2005, calling upon the petitioner to withhold any amount that may be
payable to the said Contractor and pay over the same to the respondent.
(i) By letter dated
25.2.2005, the respondent informed the petitioner that under Sec.8-A, the
petitioner would also be liable for payment of the amounts as damages and
interest and non-payment would amount to "default" and directing the
petitioner Company to pay the amount immediately to the respondent,
(j) Challenging the impugned
order passed by the respondent, the petitioner approached this Court, by filing
two writ petitions in W.P.Nos.7776 and 7777 of 2005 and this Court, while
admitting those Writ Petitions, granted an order of Interim Stay. On 25.2.2010,
this Court allowed the Writ Petitions and set aside the impugned order.
(k) On 28.10.2011, the
respondent issued a Show Cause Notice under Sec.14 B of the PF Act calling upon
the petitioner to show cause why damages should not be imposed upon the
petitioner. This was followed by a Notice cum levy order dated 31.10.2011. The
petitioner, in their reply dated 12.6.2012, has stated that the proceedings
under Sec.14 B of the Act is not maintainable and this Court had already
quashed the proceedings and had given liberty to the respondent to proceed
against the legal heirs of the Contractor. It was also stated in the reply that
the said Contractor is an independent employer, having separate PF Code and the
petitioner is not liable for any default by the Contractor. In these circumstances,
the petitioner Company has filed the above writ petition to quash the order
dated 26.12.2013.
3. The brief case of the
respondent is as follows:
(a) According to the
respondent, as per the definition of Section 2(f) of the Act, any
person employed directly or through a contractor falls within the meaning of
'employee' and both the Principal employer and the Contractor are jointly and
severally legally responsible for non-compliance of the Scheme provisions.
(b) Therefore, an employee,
even if engaged through or by a contractor explicitly falls under the meaning
of 'employee' for the purpose of the EPF and allied Schemes and the statutory
contributions / administrative charges in respect of such employees ought to be
remitted in time by the employer/contractor.
(c) The allotment of code
numbers to the contractors is meant for administrative convenience only for
facilitating remittance and accounting of the contributions etc., and in case
of any default by the Contractor, the principal employer is also liable for
action and he cannot absolve himself of his responsibilities under the Act.
(d) As per paragraph 30 of
Clause (2) of the EPF Scheme shows that in respect of empoyees employed, by or
through a contractor, "the contractor shall recover the contribution
payable by such employee in this Scheme referred to as the member's
contribution so deducted together with an equal amount of contribution in this
Scheme referred to as the employer's contribution and also administrative
charges".
(e) In terms of Clause (3)
of paragraph 30, it is the responsibility of the principal employer to pay both
the contributions payable by himself in respect of the employees directly
employed by him and also in respect of the employees employed by or through a
contractor and also administrative charges.
(f) According to the
respondent, the proceedings under Sec.7(A) of the Act is meant for
assessment of dues payable in respect of workers. It is a quasi-judicial
inquiry and the officer, who is conducting such enquiry, is the sole authority
to decide upon whom to be summoned. The mere fact that the principal employer
viz., the petitioner was not summoned for Sec.7A inquiry cannot have the effect
of nullifying the statutory responsibilities casted upon the petitioner
Company.
4. In these circumstances,
the respondent prayed for dismissal of the writ petition.
5. Mr.Sanjay Mohan, learned
counsel for the petitioner submitted that since the contractor was allotted a
separate PF Code number, the petitioner Company is not liable to pay any amount
to the respondent. Further, the learned counsel for the petitioner submitted
that since this Court had already allowed the writ petitions in WP Nos.7776 and
7777/2005, giving liberty to the respondent to initiate appropriate recovery
proceedings as against the legal heirs of the contractor, the respondent cannot
initiate proceedings against the petitioner Company. The learned counsel
further submitted that the present proceedings, which was initiated against the
petitioner Company after a lapse of several years, is liabe to be set aside.
6. In support of his
contention, the learned counsel for the petitioner relied on the following
judgments:
(i) CDJ 1992 BHC 198 (K.T.
Rolling Mills Pvt Ltd vs R.M. Gandhi and Others), wherein the Bombay High Court
has held as follows:
19. In the instant case,
the delay is 8 to 17 years. There is no explanation whatsoever for this delay
from the Regional Provident Fund Commissioner. There is nothing to show how
this case remained unattended for such a long time and how it suddenly came to
surface except the plea that no period of limitation being provided in the law,
action may be taken at any time".
(ii) (2012) LLR 22 ( Group
4 Securitas Guarding Ltd vs Employees Provident Fund Appellate Tribunal
& ors), wherein the High Court of Delhi held that " a separate PF Code
number is for direct compliance of the provisions of the Act and it is allotted
only to the employees and not to the contractors. Therefore, the clients cannot
be termed as principal employer as security guards provided by Company".
(iii) 2012 LLR 702 (The
Madurai District Central Co-operative Bank Ltd rep by its Special Officer
vs Employees' Provident Fund Organisation), wherein this court has held in the
case of a separate code number was allotted, the employees of the contractor,
by no stretch of imagination can be treated to be employees of the principal
employer, but as rightly conceded by the learned counsel for the petitioner,
the liability of unregistered contractors, would fall on the petitioner, in
view of clause 30 of the Employees' Provident Fund Scheme, 1952.
Further this Court has held
that "
with respect to the
contractors, who are registered with the Provident Fund Department, having
independent code number, they are to be treated as "independent employer.
The petitioner, therefore, cannot be treated to be "principal
employer"for the purposes of those contractors".
7. Countering the
submissions made by the learned counsel for the petitioner, Ms.V.J. Latha,
learned counsel for the respondent submitted that earlier writ petitions were
allowed on the ground that the petitioner herein was not a party before the
respondent and therefore, the order passed by the respondent was set aside.
According to the learned counsel for the respondent, the order passed by this
Court in WP Nos.7776 and 7777 of 2005 shall not have any binding on the present
order passed by the respondent.
8. Further, the learned
counsel submitted that as per Sec.2(f) of the Act, an employee, even if engaged
through or by a contractor explicitly falls under the meaning of 'employee' for
the purpose of the EPF and allied Schemes and the statutory
contributions/administrative charges in respect of such employees ought to be
remitted in time by the employer/contractor.
9. The learned counsel
relied on paragraph-30 of Clause-3 of the EPF Scheme and submitted that the
responsibility of the Principal employer to pay both the contributions payable
by himself in respect of the employees directly employed by him and also in
respect of the employees employed by or through a contractor and also
administrative charges.
10. On a careful
consideration of the materials, the submissions made by the learned counsel on
either side and the judgment relied on by the learned counsel for the
petitioner, it is not in dispute that one A. Govindaraj is a licenced
Contractor and he employed about 15 to 20 contract workmen inside the
petitioner factory for doing certain civil work.
11. Earlier, the petitioner
Company was not made a party and in their absence, proceedings were initiated
against the Contractor and the petitioner Company came to know about the
proceedings only when the Contractor contacted for an advance after having
suffered to an order under Sec.7-A. The petitioner Company received a Notice
under Section 8-F dated 23.2.2005, calling upon the petitioner to
withhold any amount that may be payable to the said Contractor and pay over the
same to the respondent.
12. On 25.2.2005, the
petitioner Company sent a reply stating that no amounts were payable to the
contractor by them. After receiving the reply dated 25.2.2005 on 26.2.2005, the
respondent informed the petitioner that under Sec.8-A, the petitioner would
also be liable for payment of the amounts as damages and interest and
non-payment would amount to "default" and directing the petitioner
Company to pay the amount immediately to the respondent.
13. Challenging the order
passed by the respondents, the petitioner Company filed two writ petitions in
W.P.Nos 7778 and 7777 of 2005 before this Court and this Court, while admitting
the writ petition, granted an order of interim stay and thereafter, on
25.2.2010, after hearing all the parties, this Court allowed the writ petition,
giving liberty to the respondent to initiate appropriate recovery proceedings
against the legal heirs of the Contractor in accordance with law.
14. After dismissal of
those writ petitions, the respondent, by their letter dated 12.10.2010
requested the petitioner to inform the details of the legal heirs of the
Contractor. On 24.11.2010, the petitioner Company informed the details of the
legal heirs of the contractor.
15. On 28.10.2011, the
respondent issued a Show Cause Notice under Sec.14 B of the PF Act, calling
upon the petitioner to show cause why damages should not be imposed upon the
petitioner Company. Such Notice was followed by a Notice cum levy order dated
31.10.2011. Thereafter also, the petitioner received some more notices from the
Department.
16. The petitioner Company
sent their reply on 12.6.2012 stating that the fresh proceedings under Sec.14 B
of PF Act is not maintainable and also stated that the Contractor is an
independent employer having separate PF Code and the petitioner is not liable
for any defult by the contractor.
17. This court in the
judgment reported in 2012 LLR 702 (The Madurai District Central Co-operative
Bank Ltd rep by its Special Officer vs Employees' Provident Fund
Organisation), cited supra has clearly held that with respect to the
contractors, who are registered with the Provident Fund Department, having
independent code number, they are to be treated as "independent
employer".
18. In the case on hand,
the Contractor was allotted with EPF allotment number vide
No.TN/VLR/38789/SDC/2013 in the year 2003 itself. As per the ratio laid down in
the judgment of this Court, the Contractor viz., Mr.A. Govindaraj should be
treated as an independent employer.
19. That apart, when this
Court had already set aside the orders passed by the respondent in WP Nos.7776
and 7777 of 2005 and gave liberty to the respondent to initiate recovery
proceedings as against the legal heirs of the contractor viz., Mr.A.
Govindaraj, the present proceedings initiated againsts the petitioner Company
cannot stand.
20. That apart, the
respondent has not challenged the order passed by this Court in those writ
petitions. Therefore, the order passed by this Court in the writ petitions have
become final.
21. In the absence of any
appeal having been filed by the respondent against the observations made in
those writ petitions, the proceedings initiated by the respondents against the
petitioner Company under Sec.14 B of the Act cannot stand and it is liable to
be set aside.
22. The reasoning of the
respondent interpreting the order of this Court made in the writ petitions in
W.P.Nos.7776 and 7777 of 2005 is erroneous and this Court has given liberty to
the respondents only to proceed against the legal heirs of the contractor. If
this Court was of the opinion that the proceedings can be initiated against the
Petitioner Company also, this court would have given such liberty to the
respondent to proceed against the petitioner Company, which was not given in
the writ petition. Therefore, the interpretation of the respondent with respect
to the observation of the writ petitions cannot stand.
23. It is pertinent to note
that this Court is not sitting on an appeal over the orders passed in WP
Nos.7776 and 7777 of 2005 or on review of the orders passed in those writ
petitions.
24. Following the ratio
laid down and the judgments relied on by the learned counsel for the
petitioner, I am of the considered view that the impugned order dated
26.12.2013 on the file of the respondent is liable to be set aside and
accordingly, the same is set aside.
25. In the result, the writ
petition is allowed. No costs. Consequently, connected Mp is closed.
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