*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY + Writ Petition Nos.9274, 23117, 23121, 23129 & 25573 of 2011 COMMON ORDER: % 05-11-2011 # E. Satyanarayna Reddy & others ..petitioners And $ The Regional Provident Fund Commissioner (Exemption), Barkatpura, Hyderabad & others ..Respondents !Counsel for the petitioners: Sri D.V. Chalapathi Rao ^Counsel for respondents . : Sri R.N. Reddy, SC for R-1 Sri K. Madhava Reddy, SC for RRs 2 to 4 < Gist: > Head Note: Citations: THE HON’BLE MR JUSTICE L. NARASIMHA REDDY Writ Petition Nos. Writ Petition Nos.9274, 23117, 23121, 23129 & 25573 of 2011 COMMON ORDER: The petitioners in this batch of writ petitions are owners of Buses, which are hired by the Andhra Pradesh State Road Transport Corporation (for short ‘the Corporation’), to be operated on its routes. Agreements are entered into by the Corporation with the owners of the buses, stipulating various conditions. The owner of a hired bus is under obligation to put a bus in good condition together with the Driver(s) at the stipulated times. The Corporation would allot the Conductor to issue tickets by collecting fares. The owners of the buses are paid hire charges once in a month. In the year 2008, the Corporation directed its Depot Managers to deduct the provident fund contributions for the drivers on the hired buses, from the hire charges. Challenging such directions, some of the owners filed W.P.No.11619 of 2008 and batch. The directions issued by the Corporation were set aside by this Court through judgment dated 12-08-2009 on the ground that they were issued in violation of the principles of natural justice. It was left open to the Corporation to take necessary steps by issuing show cause notices. The Regional Provident Fund Commissioner, Hyderabad received complaints from the drivers of the hired buses to the effect that P.F contributions, with reference to their services were not being remitted. Acting on that, the Regional Provident Fund Commissioner (for short ‘the Commissioner’) initiated proceedings under Section 7-A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (for short ‘the Act’). Treating the Corporation as the principal employer, the Commissioner required the Corporation to explain as to why the contributions be not recovered. The Corporation entered appearance and pleaded that the drivers are not its employees and that the owners of the buses are liable to pay the contribution, if at all. The Commissioner passed an order dated 05-03-2006, holding that the Corporation, in its capacity as the principal employer of the drivers of the hired buses, is liable to extend all the benefits under the Act and Schemesl from the date of joining of the employees, for the purpose of working, in connection with the Corporation. Direction was issued to make the contributions under the relevant schemes, within the stipulated time. Based upon the orders of the Commissioner, the Corporation issued circulars dated 17-05-2010 requiring its Regional Managers to issue notices to the owners of the hired buses. The circular was challenged in W.P.No.11791 of 2010 and batch. The writ petitions were disposed of leaving it open to the petitioners therein to submit explanations to the notices. Accordingly explanations were submitted. The concerned Regional Mangers issued proceedings dated 25-09-2010, directing deduction of the PF contribution in respect of the drivers from the hire charges payable to the owners. He has also quantified the contribution, kilometer-wise. The petitioners challenge the orders passed by the Regional Managers directing deduction/recovery of PF contribution. They contend that the obligation to pay the PF contribution arises, only if they have engaged more than 20 persons, and that the liability can be fastened upon them by the Commissioner, only after issuing specific notice under the relevant provisions of law. It is urged that any determination or adjudication that has taken place between the Corporation, on the one hand, and the Commissioner, on the other hand, does not bind them. They also contend that there was no basis for the Corporation to demand or levy the PF contribution for each kilometer ,and that such a course is totally impermissible in law. Counter-affidavits are filed by the Corporation, on the one hand, and the Commissioner, on the other hand. The Corporation states that the hire charges that are determined by it have the component of the salary payable to a driver, and the salary of the driver in turn, is arrived at by taking into account the minimum wages for the post, the contributions towards P.F, E.S.I., etc., and that hire charges for each kilometer have a definite component of P.F also. It is further submitted that the owner of a hired bus answers the description of “principal employer” occurring in paragraph 30(3) of the Scheme, and the “employer”, as defined under Section 2(e) of the Act. Reference is also made to the definition of ‘employee’, which takes in its fold, the one, engaged through a contractor also. Heard the learned counsel for the petitioners, learned Standing Counsel for the 1st respondent-Commissioner, and learned Standing Counsel for the respondents 2 to 4. This is the third round of litigation, in relation to the efforts made by the respondents to deduct the employees provident fund contributions from the hire charges payable to the petitioners. At the first instance, deductions were sought to be made straightaway. A batch of writ petitions challenging the same was allowed on the ground that principles of natural justice were not observed. Then came an administrative adjudication by a Commissioner, and the resultant orders passed by the Regional Managers of the Corporation. A bunch of writ petitions filed, challenging the same, was disposed of, leaving it open to the petitioners herein to submit representations. The Regional Managers passed orders after considering the representations made by the petitioners. Left to itself, the Corporation has no role to play, in the context of recovering the contributions of provident fund. This is particularly so, when the drivers in question were not employed by it directly. Basically, the Act imposes obligation upon an employer to make contribution, in case the establishment of the employer is the one, where 20 persons or more are employed. The petitioners contend that they are not covered by the provisions of the Act, since the number of persons employed by them is less than 20. However, the definition of the word, ‘employer’ and ‘employee’, under Section 2(e) and (f), respectively of the Act, widened the scope and in a given case, the principal employer would be held liable, even if the contractor who supplied the employees, is not covered by the Act, independently. Whether the deduction of contribution is made by the Corporation on its own accord, or on the insistence of the Commissioner, the burden thereof is ultimately felt by the petitioners. Though the authorities of the Corporation have issued notices to the petitioners, the ultimate determination has taken place in the hands of the Commissioner. A perusal of the order dated 05-03-2006 passed by the Commissioner, which constituted the basis, discloses that he recorded a finding to the effect that the drivers, employed by the petitioners herein, and working on the buses, hired by the Corporation, need to be treated as contract employees. Before arriving at such a conclusion, he ought to have heard the petitioners, duly issuing a notice in accordance with the relevant provisions of law. The defence offered by the Corporation cannot be treated as the one on behalf of the owners of the hired buses. Further the nature of the plea that can be raised by the owners of the hired buses would be substantially different from that of the Corporation. Further, the Corporation has nothing to lose, whatever be the result of the proceedings. The brunt thereof is immediately felt by the petitioners. Viewed from this angle, the order passed by the Commissioner deserves to be treated as violative of principles of natural justice, vis-à-vis the petitioners. Though learned counsel for the parties have cited certain precedents in support of their respective contentions, this Court is not inclined to deal with the same, in detail, since, no adjudication is undertaken on merits. Hence, the writ petitions are allowed, and the impugned orders, to the extent they relate to the cases of the petitioners are set aside. The petitioners shall continue to furnish the Bank guarantee, as directed by this Court, at the interlocutory stage in these writ petitions, till the respondents and in particular, the Regional Provident Fund Commissioner issue notice to the petitioners and determine the obligation to make contributions, either directly by the petitioners, or by the Corporation. This exercise shall be completed within a period of three months from the date of receipt of a copy of this order. There shall be no order as to costs. _______________________ L. NARASIMHA REDDY, J. Dt.05 -11-2011. Note: L.R. copy to be marked. (B/O) KO