-1- mgj IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION Writ Petition No. 7340 of 2006 Nashik Municipal Corporation having its office at Rajiv Gandhi Bhavan, Sharanpur Road, Nashik ..Petitioner vs. 1. M/s Leaf Biotech Private Limited, having their registered office at Dvijesh Niwas, S.N.Road, Mulund (West) Mumbai 400 080 2. The Assistant Provident Funds Commissioner, Sub Regional Office, having his office at P-11, "Bhavishyanidhi Bhavan" M.I.D.C., Satpur, Nashik 422 007 3. Nashik Mahangarpalika Kamgar karmachari Sangathana, through its President, Nashik having its office at B.T.Randive Bhavan Trimbak Road, Satpur, Nashik-2 ..Respondents Shri V.A.Gangal for petitioner Shri S.A.Joshi ib Shri S.M.Oka for respondent no.1. None for respondent nos.2 and 3. CORAM: CORAM: CORAM: J.N.PATEL & J.N.PATEL & J.N.PATEL & S.J.KATHAWALLA S.J.KATHAWALLA S.J.KATHAWALLA JJ. JJ. JJ. DATE : 1ST DECEMBER,2008. DATE : 1ST DECEMBER,2008. DATE : 1ST DECEMBER,2008. P.C. 1. Rule. By consent rule made returnable forthwith. Learned Advocate for respondent no.1 waives service. -2- 2. This writ petition is filed by the petitioner Nashik Municipal Corporation which is established under the Bombay Provincial Municipal Corporation Act, 1949, inter alia, seeking an appropriate writ to quash and set aside the impugned orders dated 3rd September, 2004, 9th March, 2005 and 11th September, 2006 (Exh. A, B and D to the petition). Respondent No.1 is the Assistant Provident Fund Commissioner, which is the Competent Authority under the Employees Provident Fund and Misc. Provisions Act, 1952 (the Act). Respondent no.2 is a private company which was working for the petitioner Corporation at the compost plant at Pathardi, District Nashik. Respondent no.3 is the complainant organisation of employees of Respondent No.1 3. The petitioner Corporation had started a Municipal Solid Waste Conversion Plant where the process is made on Municipal Solid Waste and the fertilizer is produced which is useful for agricultural purposes. The petitioner had, at the beginning appointed M/s Leaf Biotech Private -3- Limited, respondent no.2, to manage, operate and maintain the said plant. For this purpose, respondent no.2 had employed its own technical as well as non technical workers on the plant. 4. The petitioners have submitted that there was no written contract entered into with respondent no.1 The respondent no.1 worked for a period of about one and half years and thereafter left the said job in the year 2002. The petitioners had fully paid to respondent no.1 their dues for the work done by them. 5. The petitioners have further submitted that when respondent no.1 was managing the said plant all the employees in the said plant were under the direct control and supervision of respondent no.1 and the petitioners were not responsible for the payment of the said workers or any statutory dues including the employees’ provident fund. It appears that respondent no.1 had failed to remit the provident fund, pension fund deposit link, insurance fund contribution and administration charges towards the provident fund and deposit linked insurance fund due for the period from -4- September, 2001 to January, 2004 in accordance with the provisions of the Employees Provident Funds and Misc. Provisions Act, 1952, Employees Provident Funds Scheme, 1952, Employees Pension Scheme, 1995 and Employees Deposit Linked Insurance Scheme, 1976. The proceedings were, therefore, initiated by respondent no.2 under section 7A of the said Act against respondent no.1 for determination of the dues for the period from September, 2001 to January, 2004. 6. For the purpose of determining the amount due, respondent no.2 had issued summons to respondent no.1 to represent their case on 17th October, 2004 along with the summoned documents/record. However, no one appeared for respondent no.1. Despite giving one more opportunity to respondent no.1 to appear before respondent no.2, respondent no.1 failed to do so. Respondent No.2, therefore, under exercise of the powers conferred upon him under section 7A of the said Act on the basis of the facts of the case and documents available on record, determined that the amount of Rs.15,53,721/- (Rupees Fifteen lacs, fifty three thousand seven hundred and twenty one only) is due -5- from respondent no.1 on account of provident fund, pension fund and insurance fund contribution and administrative charges towards provident fund and insurance fund for the period from September, 2001 to July, 2004 and ordered respondent no.1 to pay the same within a period of 15 days from the receipt of the order dated 3rd September, 2004 passed by respondent no.2. However, admittedly at the time of assessment of dues no enquiry was conducted by respondent no.2 with the petitioners. The petitioners were not even aware of the said proceedings since no notice was served upon the petitioners at any time before passing the assessment order dated 3rd September, 2004. 7. The petitioners have submitted that on 9th March, 2005 a prohibitory order was issued by respondent no.2 bearing No. MH/52027/PF/Compliance/Circle-71/467. By this order the petitioners were directed by respondent no.2 to remit the amount of dues forthwith by way of Demand Draft in the name of respondent no.2. 8. The petitioners submitted that since no opportunity of hearing was given to the petitioners -6- under section 7A of the said Act of 1952, the petitioners did not deposit the said dues. However, respondent no.2 in an high handed and illegal manner directly credited the amount of provident fund dues from the account of the petitioners Corporation. 9. The petitioners being aggrieved filed an appeal before the Employees Provident Fund Commissioner, Appellate Tribunal at New Delhi against the orders dated 3rd September, 2004 and 9th March, 2005 passed by respondent no.2. The appeal was dismissedby the Tribunal by its order dated 4th May, 2005. As regards the order dated 9th March,2005 it was held that under section 7-I of the said Act, no appeal has been provided against the recovery certificate or any order passed under section 8 of the said act and, therefore the Appeal filed by the petitioners was not maintainable. As regards the order dated 3rd September, 2004 it was held that the appeal was filed after the period of limitation. It was held by the Tribunal that even on merits the appeal would not be maintainable against the order dated 3rd September, 2004 because the order was not passed against the appellant but -7- was passed against Respondent No.1 company, a covered establishment. It was also held that the petitioner cannot espouse the cause of respondent no.1 Company. The Tribunal upheld the action of recovery by respondent no.2 and granted liberty to the petitioners to recover the amount from respondent no.1. 10. The petitioners have submitted before us that the respondent no.2 further passed an order dated 11th September, 2006 directing the petitioners Corporation to remit the dues of Employees Provident Fund for the period from August, 2004 to December, 2006. At this time the petitioners were heard by the Asstt. Provident Fund Commissioner but when the petitioners challenged the applicability of the E.P.F.Act to the Corporation, the Asstt. Commissioner by its order dated 11th September, 2006 came to an erroneous conclusion that the E.P.F.Act 1952 is applicable to the petitioners. 11. In the background of the aforesaid facts, the petitioners have submitted that the impugned orders passed by respondent no. 2 dated 3rd September, -8- 2004 and 9th March, 2005 are passed exparte without joining the petitioners as party respondents, though the petitioners were necessary party to the proceedings. It is submitted that the said orders are ex facie illegal and need to be quashed and set aside because the basic principle of natural justice was not followed at the time of passing of the said order. It was submitted that the Employees Provident Fund Appellate Tribunal in his order dated 4th May, 2005 has failed to appreciate that the orders dated 3rd September, 2004 and 9th March, 2005 were passed without following the principles of natural justice. Therefore, the said order dated 4th May, 2005 is also bad in law. It was, therefore, submitted that all the three orders deserve to be quashed and set aside. The petitioners have also submitted that the contention raised by the Asstt. Provident Fund Commissioner in his impugned order dated 11th September, 2006 that the petitioners Corporation is covered under the E.P.F. Act is not correct. As per section 16 of the E.P.F. Act, 1952 the scheme of E.P.F.Act 1925 is not applicable to the petitioners Corporation. It is submitted that the petitioners are a local authority which is covered and governed -9- by the provisions of the Provident Fund Act, 1925. All the units working under the Corporation i.e. Water Supply Pumping Station, Water Supply Treatment Plant are treated as factory, but despite that, are receiving Govt. Provident Fund as per the Provident Fund Act, 1925 and not the E.P.F. It is, therefore, submitted that the impugned order dated 11th September, 2006 is also bad in law and is passed without application of mind. 12. The petitioners have also drawn our attention to the decision of the Hon’ble Apex Court in Bharat Bharat Bharat Heavy Electricals Ltd. Vs. Employees’ State Heavy Electricals Ltd. Vs. Employees’ State Heavy Electricals Ltd. Vs. Employees’ State Insurance Corporation reported in (2008) 3 Insurance Corporation reported in (2008) 3 Insurance Corporation reported in (2008) 3 S.C.C.247 S.C.C.247 S.C.C.247. That case arose under sections 45-A, 45-B, 41 and 44 of the Employees State Insurance Act, 1948. In that case, in the proceedings initiated under section 45A, only the principal employer was impleaded as party respondent. However, the immediate employer i.e. contractor was not joined as a party respondent. When the appellant i.e. the principal employer received a notice under sec.45A of the Employees State Insurance Act, 1948 on the premise that it had not deposited the ESI contribution for the period 19th -10- July, 1991 to 30th September, 1991, the principal appellant/principal employer pleaded before the ESI Corporation to implead the contractor being the immediate employer, which prayer was rejected. The High Court held that in accordance with the provisions of section 44 it was within the powers of the ESI Corporation to determine the contribution payable in respect of the contractors’ employees against the principal employer without looking for immediate employer. The Division Bench of the High Court distinguished the decision of the Hon’ble Apex Court in Food Corporation of India Vs. Provident Fund Commissioner reported in 1(1990) 1 SCC 68 and held that the provisions of section 7A of the Employees Provident Funds and Misc. Provisions Act, 1952 are not in pari materia with the provisions of the Employees State Insurance Act, 1948. 13. The Hon’ble Apex Court while allowing the appeal in Bharat Heavy Electricals Ltd. (supra) held that it failed to notice any significant difference in the purport and object of both the provisions and that the purport and object of both the statutes, for all intent and purport, in their -11- opinion, is the same. It was further held that in the proceedings initiated under section 45A of the ESI Act an immediate employer or principal employer may also show that they are not liable to deposit any contribution on behalf of the employees as the establishment in question did not come within the purview thereof. The purpose of the proceedings, both under the ESI Act as also the Employees’ Provident Funds Act is to determine the amount due from any employer in respect of the employees under the statutory schemes. Both the Acts envisage compliance with principles of natural justice. The proviso appended to section 45-A of the ESI Act provides for a statutory mandate of giving a reasonable opportunity of being heard. It was held that section 45-A of the ESI Act enables the appropriate authority to recover the dues both from the principal as also the immediate employer. It provides for an opportunity of hearing to both of them. The Hon’ble Supreme Court in conclusion has observed that it appears that the determining authority did not give the opportunity of hearing to the petitioners/principal employer in regard to the names and other particulars of the contractors. The Hon’ble Supreme Court therefore held that the -12- impugned judgment cannot be sustained and, therefore, set aside the same. The matter was remitted to the ESI Corporation/determination authority for considering the matter afresh with a direction that the authority shall either implead the contractors as parties and/or summon them for producing necessary records for the said purpose. 14. As set out hereinabove the Hon’ble Apex Court has in the aforesaid decision held that section 7A of the Employees Provident Fund Act and Misc. Provisions Act, 1952 are in pari materia with the provisions of section 45-A of the E.S.I. Act,1948. 15. Sub-section (1) of section 7A of the Employees Provident Fund and Misc. Provisions Act, 1952 empowers the Central Provident Fund Commissioner, any Additional Central Provident Fund Commissioner, any Deputy Provident Fund Commissioner, any Regional Provident Fund Commissioner or any Assistant Provident Fund Commissioner in a case where the dispute arises regarding applicability of the Act to an establishment to decide such a dispute and determine the amount due from any -13- employer under any provision of the Act, scheme or the pension scheme or insurance scheme, as the case may be, and for any of the aforesaid purposes to conduct such an enquiry as he may deem necessary. Sub-section (3) of section 7A categorically provides that no order shall be made under sub-section (1) unless the employer concerned is given reasonable opportunity of representing his case. Since the Act admittedly enables the appropriate authority to recover such dues both from the Principal as also the immediate employer, in our view, the words "employer concerned" include the principal as also the immediate employer. 16. In the case in hand , the immediate employer was respondent no.1 and the principal employer is the petitioner. Despite the petitioner being treated as principal employer by respondent no.2 who by its prohibitory order dated 9th March, 2005 called upon the petitioner to pay the amount recoverable from respondent no.1, Respondent no.2 did not give any notice to the petitioner before determining the amount due by respondent no.1 by its order dated 3rd September, 2004. The said order dated 3rd September, 2004 passed by -14- respondent no.1 is, therefore, illegal having been passed without following the mandatory rules of natural justice. The consequential prohibitory order dated 9th March, 2005 served on the petitioner is also bad in law. The Employees Provident Fund Appellate Tribunal also failed to take cognisance of the grievance of the petitioners and dismissed the appeal. The said order is also, therefore, bad in law. In view thereof, the impugned order dated 3rd September, 3004, 9th March, 2005 and 9th May, 2005 Exh.A, B and C respectively annexed to the plaint are quashed and set aside. Though the subsequent order pertaining to the subsequent period i.e. August, 2004 to December, 2005 is passed after hearing the parties the same appears to be cryptic and needs to be set aside since all the issues raised by the petitioners would need to be considered while hearing the petitioners on the issue of determining the amount in the proceedings under sec.7A of the said Act pertaining to the prior period i.e. September, 2001 to January, 2004. In view thereof the order dated 11th September, 2006 is also quashed and set aside. -15- 17. The matter is, therefore, remitted to respondent no.2 for considering the matter afresh after issuing notice to the petitioners as well as respondent no.1 as well as respondent no.3 and after going through all the necessary records which the petitioners and/or respondent no.1 may produce for the said purpose. 18. Rule made absolute in the above terms. Writ Petition is accordingly disposed of with no order as to costs. (S.J.KATHAWALLA J.) A(J.N.PATEL J.) (S.J.KATHAWALLA J.) A(J.N.PATEL J.) (S.J.KATHAWALLA J.) A(J.N.PATEL J.)