* THE HON’BLE Ms. JUSTICE G. ROHINI + WRIT PETITION No.28153 OF 2008, AND WRIT PETITION No.14508 OF 2009. % 30/04/2010 # M/s. B.V. Rao & Co. Chartered Accountants and others. … Petitioners Vs. $ 1. The Regional Provident Fund Commissioner-II And Officer-in-charge, Employees’ Provident Fund Organisation, Sub-Regional Office, 56-16-86, VUDA Layout, Marripalem, NAD Post, Visakhapatnam-29 And others. … Respondents < Gist > Head Note: ! Counsel for the petitioners : Sri C.R. Sridharan Sri A.Ramasubbaiah ^ Counsel for the respondents : Sri R.N. Reddy Smt. K.Rajyalakshmi Sri K. Rajanna Cases referred : [1] 1976 (32) FLR 30 2 1990 (2) LLN 630 3 2005 (1) LLJ 224 (APHC) 4 2008 (1) CLR 859 5 2002 (III) LLJ 145 (APHC) 6 1992 (1) LLJ 475 (SC) = 1992 (1) SCC 441 7 2005 (II) LLJ 181 (APHC) 8 1993 (2) ALT (Crl.) 305 THE HON’BLE Ms. JUSTICE G. ROHINI WRIT PETITION No.28153 OF 2008, AND WRIT PETITION No.14508 OF 2009. Dated: 30.04.2010 In W.P.No.28153 of 2008: Between: M/s. B.V. Rao & Co. Chartered Accountants and others. … Petitioners And 1. The Regional Provident Fund Commissioner-II And Officer-in-charge, Employees’ Provident Fund Organisation, Sub-Regional Office, 56-16-86, VUDA Layout, Marripalem, NAD Post, Visakhapatnam-29 And others. … Respondents In W.P.No.14508 of 2009: Between: 1. M/s. Umakanth & Co., Chartered Accountant (rep. by E. Umakanth Setty), 18/40, Manasa Mansions, I Floor, Nehru Road, Kurnool, Kurnool District., And 6 others. … Petitioners And 1. Employees Provident Fund Organization, (Govt. of India Ministry of Labour), rep. by its Regional Provident Fund Commissioner-II, Sub-Regional Office, 1/30, R.S. Road, Cuddapah, Cuddapah district and others. … Respondents THE HON’BLE Ms. JUSTICE G. ROHINI WRIT PETITION No.28153 OF 2008, AND WRIT PETITION No.14508 OF 2009. COMMON ORDER: Since common questions of fact and law are involved, these two writ petitions are heard together and decided by this common order. At the outset, it would be necessary to give the brief facts of each case. W.P.No.28153 of 2008 : The petitioners are practising Chartered Accountants and Chartered Accountant Firms. The erstwhile A.P. State Electricity Board (APSEB) in or about 1985 entrusted the work relating to collection of revenues from its consumers by engaging the petitioners as Private Accounting Agencies. Even after incorporation of the APTRANSCO consequent to the enactment of A.P. Reforms Act, 1999, the same procedure has been followed by the Distribution Companies of the APTRANSCO and the petitioners herein have been continued with the Eastern Power Distribution Company of AP Limited (APEPDCL). The APEPDCL through the Superintending Engineer of the concerned Circle, entered into periodical agreements with the petitioners entrusting the work relating to LT bi-monthly services i.e., collection of revenues from the consumers. Various duties and responsibilities relating to generation of outputs after spot billing and regular accounting were entrusted to the petitioners under the agreements. As per Part-A of the Agreement, the petitioners were required to process and generate reports such as Bills analysis, Demand abstract, Bill book abstract, Pre-printed receipts and Reports relating to demand analysis. Under the agreements, the petitioners are called Private Accounting Agencies (PAAs) and they are entitled for remuneration for the works executed at the rates specified in the agreement. It is stated that the writ petitioners are getting the said work executed through the Articled Clerks / Assistants engaged by them as per the provisions of the Chartered Accountants Act, 1949. While so, a compliant dated 4.5.2005 was said to have been made by one Dadi Venkata Appa Rao, the Divisional Secretary of APSEB Employees Union, Paderu, complaining that the workers engaged by the APEPDCL through the Chartered Accountant Firms allegedly on contract basis were not being extended the benefits under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (for short, ‘EPF Act’). In pursuance thereof, the Regional Provident Fund Commissioner, Visakhapatnam called upon the APEPDCL to enrol all such contract workers from the date of coverage of the establishment (APEPDCL) or from the date of their employment with the Chartered Accountant Firms whichever is applicable. The APEPDCL took a stand that its arrangement with the professional Chartered Accountant firms was only for utilization of professional consultancy services in the areas of billing, and book keeping and for rendering suitable professional services for the benefit of its consumers and therefore the personnel engaged by the professional Chartered Accountants would not be employees of APEPDCL within the definition of ‘employee’ under Section 2 (f) of the EPF Act. Accordingly APEPDCL refused to enrol the contract workers engaged by the Chartered Accountant Firms/PAAs. Having regard to the stand taken by the APEPDCL, the Regional Provident Fund Commissioner initiated enquiry under Para 26-B of the Employees’ Provident Fund Scheme, 1952 (for short, ‘EPF Scheme’) and issued notices to the APEPDCL as well as the petitioners. All of them appeared before the Regional Provident Fund Commissioner, Visakhapatnam contending inter alia that the enquiry under Para-26-B itself was without jurisdiction since the provisions of the EPF Act were not at all attracted. However, the Regional Provident Fund Commissioner, Visakhapatnam by order dated 16.7.2008 concluded that the personnel engaged by the petitioners/ Private Accounting Agencies for the execution of the work of the APEPDCL were employees within the meaning of Section 2 (f) of the EPF Act and as such they were entitled to become members under the EPF Act and the Scheme framed thereunder with effect from the first day of their employment by the Private Accounting Agencies. Challenging the said order, W.P.No.28153 of 2008 has been filed by PAAs (Chartered Accountants and Chartered Accountant Firms) W.P.No.14508 of 2009 : The petitioners herein are also practising Chartered Accountants and Chartered Accountant Firms. They are attached to the AP Central Power Distribution Company Limited (for short, ‘APCPDCL’) which has entered into periodical agreements with the petitioners entrusting the work relating to LT bi-monthly services which included (1) Bills analysis (2) Demand abstract (3) Bill book abstract (4) Pre-printed receipts (5) Reports relating to demand analysis. The terms and conditions of the agreement and the nature of the services rendered by the petitioners herein are similar to that of the petitioners in W.P.No.28153 of 2008. On the basis of certain complaints said to have been received from the Contract Labour Unions alleging that the employees engaged by the APCPDCL through the Chartered Accountant Firms on contract basis were not being extended the benefits envisaged under the EPF Act and the Schemes framed thereunder, the Regional Provident Fund Commissioner called upon the APCPDCL to enrol all such contract employees from the date of coverage of the establishment or from the date of their employment with the Private Accounting Firms whichever is later. Since APCPDCL failed to enrol the said employees, an enquiry under Section 7-A of the EPF Act was initiated by the Assistant Provident Fund Commissioner to determine the dues payable in respect of the contract employees allegedly engaged by APCPDCL. Notices were also served on the petitioners and having participated in the enquiry it was contended by the petitioners that the employees engaged by them for doing the work of APCPDCL did not come within the definition of ‘employee’ under Section 2 (f) of the EPF Act. The matter was then referred to the Regional Provident Fund Commissioner-II, Guntur, for enquiry under Para 26-B of the EPF Scheme. Subsequently the matter was transferred to the Regional Provident Fund Commissioner-II, Kadapa and notices were issued to the APCPDCL, the complainants as well as the petitioners. After hearing all the parties, by order dated 30.01.2009 the Regional Provident Fund Commissioner-II, Kadapa held that the personnel engaged by the PAAs for carrying out the work of the APCPDCL were employees within the meaning of Section 2 (f) of the EPF Act and they were entitled to become members under the Schemes framed under the said Act with effect from the date of their employment by PAAs. Accordingly, the petitioners as well as the APCPDCL were directed to enrol the contract workers and remit the dues. Aggrieved by the same, W.P.No.14508 of 2009 has been filed by PAAs. Counter-affidavits filed on behalf of the respondents : On behalf of the Employees Provident Fund Organisation, counter-affidavits have been filed in both the Writ Petitions taking an identical stand as under : The respective Distribution Companies (APEPDCL and APCPDCL) are establishments covered under the provisions of the EPF Act. They failed to enroll the employees employed by them through the PAAs. Hence after making an enquiry under Para 26-B of the EPF Scheme, 1952, the impugned orders were rightly passed. While asserting that the PAAs were doing the work of Distribution Companies and thus the employees employed by the PAAs fall within the scope of the definition under Section 2 (f) of the EPF Act, it is contended that the employees were entitled for enrolement as members of PF. It is further contended that since the PAAs were not covered independently, their plea that they had employed less than 20 was irrelevant. In W.P.No.14508 of 2009 the Private Accounting Collection and Contract Labour Union (hereinafter referred to as ‘the Contract Labour Union’) was arrayed as the 2nd respondent and in the counter- affidavit filed on its behalf it is stated that the members of the said Union were working with the petitioners 3 and 4 in W.P.No.14508 of 2009 and that they were paid lumpsum amount of Rs.3,000/- per month. It is contended that the auditing work was different from billing and accounting work in the Power Distribution Company, which was a work charged establishment and was covered by the provisions of the Industrial Disputes Act, 1947 and also A.P. Shops and Establishments Act, 1988. It is further contended that since the Power Distribution Company had included the contract workers within the purview of E.P.F. Scheme, 1952 as long back as in 1994, it is not open for the PAAs to contend that the members of the 2nd respondent Union- Contract Labour would not come under the purview of EPF Scheme, 1952. It is further contended that the agreements between the Power Distribution Company and PAAs were purely business contracts for execution of certain work of the company and for the purpose of the said work the PAAs had engaged the members of the Contract Labour Union. While denying the plea that the works entrusted by the APCPDCL were executed by the Chartered Accountants in their respective offices through the Articled Clerks/ Trainees or Personnel as regular employees, it is stated that as far as petitioners 3 and 4 were concerned they had engaged the members of the Contract Labour Union on contract basis exclusively for doing accounting work and billing work of APCPDCL. No counter-affidavits have been filed on behalf of the APEPDCL and APCPDCL. Contentions: I have heard Sri C.R. Sridharan, the learned counsel appearing for the petitioners in W.P.No.28153 of 2008 and Sri A. Ramasubbaiah, the learned counsel for the petitioners in W.P.No.14508 of 2009 as well as Sri R.N. Reddy, Smt. K. Rajyalakshmi and Sri K. Rajanna, the learned counsel appearing for the Employees’ Provident Fund Organisation, the Power Distribution Companies, and the Contract Labour Union (2nd respondent in W.P.No.14508 of 2009) respectively. It is contended by the learned counsel for the petitioners that the very enquiry under Para 26-B of the EPF Scheme is without jurisdiction since the question whether a person is an “employee” within the meaning of Section 2 (f) of the EPF Act cannot be decided in such enquiry under Para 26-B of the EPF Scheme. On merits, it is contended by the learned counsel for the petitioners that the personnel engaged by the PAAs for the work of the APEPDCL and APCPDCL were not the employees of the said Power Distribution Companies within the meaning of Section 2 (f) of the EPF Act and therefore they were not required to be enrolled as members of the Fund. On the other hand, the learned counsel appearing on behalf of the Employees Provident Fund Organisation while seeking to justify the orders under challenge and while pointing out that as per Clause- 34 of the Agreements, the PAAs were responsible for EPF in respect of the workers engaged by them, contended that the conclusion of the Regional Provident Fund Commissioners that the personnel engaged by the PAAs were employees within the meaning of Section 2 (f) of the EPF Act and that they were entitled to become members of the EPF Act did not suffer from any legal infirmity warranting interference by this Court. The learned counsel appearing for Private Accounting Collection and Contract Labour Union (respondent No.2 in W.P.No.14508 of 2009) while adopting the stand taken by the EPF Organisation, further contended that the finding of fact arrived at by the competent authority for the purpose of extending the beneficial legislation to the members of the Contract Labour Union warrants no interference by this Court on any ground whatsoever. Analysis of the contentions: The contention that the Regional Provident Fund Commissioner had no jurisdiction under Para 26-B of the EPF Scheme to decide the question whether a person was an employee or not within the meaning of Section 2 (f) of the EPF Act was raised on behalf of the PAAs as a preliminary objection before the Regional Provident Fund Commissioner who was the authority empowered to make the enquiry under Para 26-B of the EPF Scheme. The preliminary objection was rejected by the Regional Provident Fund Commissioner holding that the authority under Para 26-B of the EPF Scheme had an inherent power to decide the question whether a person was an employee or not for the purpose of Section 2 (f) of the EPF Act. The said conclusion of the Regional Provident Fund Commissioner has been assailed in these two writ petitions reiterating the contention that the enquiry contemplated under Para 26-B of the EPF Scheme was confined only to resolution of the doubts as to whether an employee was entitled or required to become or continue as a member of the Fund or as regards the date from which he was so entitled or required and the scope of the said enquiry cannot be enlarged to go into the question whether a person was an employee or not within the meaning of Section 2 (f) of the EPF Act. In support of the said contention, the learned counsel for the petitioners relied upon a decision of the High Court of Delhi in GLAMOUR v. RPFC (Del. H.C.)[1]. At the outset, it is to be noticed that the Employees Provident Funds and Miscellaneous Provisions Act, 1952, has been enacted to provide for the institution of provident funds for the employees in factories and other establishments. It is a beneficial legislation enacted for the benefit of the employees engaged in the factory or the establishment mainly with the object of instituting compulsorily of contributory provident funds in which both the worker and the employer would contribute so as to make some provision for the future of the industrial worker after he retires or for his dependents in case of his early death. The EPF Act is made applicable 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 to any other establishment employing 20 or more persons or class of such establishment which the Central Government may by notification in the Official Gazette specify. Section 5 of the EPF Act, 1952 empowers the Central Government to frame Employees Provident Fund Scheme for the establishment of provident fund under the Act for employees or for any class of employees and specify the establishment or class of establishments to which the said Scheme shall apply. Section 5 may be extracted hereunder: 5. Employees' Provident Fund Scheme (1) The Central Government may, by notification in the Official Gazette, frame a Scheme to be called the Employees' Provident Fund 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. (1B) Subject to the provisions of this Act, a Scheme framed under sub-section (1) may provide for all or any of the matters specified in Schedule II. (2 ) A Scheme framed under sub-section- (1) may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified in this behalf in the Scheme. In exercise of the said power conferred under Section 5, the Employees Provident Funds Scheme, 1952, has been framed and Paragraphs 26, 26-A and 26-B of the said Scheme, which are relevant for the purpose of the present case, run as under: Para 26. Classes of employees entitled and required to join the Fund:- (1)(a) Every employee employed in or in connection with the work of a factory or other establishment to which this Scheme applies, other than an excluded employee, shall be entitled and required to become a member of the Fund from the day this paragraph comes into force in such factory or other establishment. (b) Every employee employed in or in connection with the work of a factory or other establishment to which this scheme applies, other than an excluded employee, shall also be entitled and required to become a member of the fund from the day this paragraph comes into force in such factory or other establishment if on the date of such coming into force, such employee is a subscriber to a provident fund maintained in respect of the factory or other establishment, or in respect of any other factory or establishment (to which the Act applies) under the same employer: Provided that where the Scheme applies to a factory or other establishment on the expiry or cancellation of an order of exemption under section 17of the Act, every employee who but for the exemption would have become and continued as a member of the fund, shall become a member of the fund forthwith. …. … … …. …. …. …. … … …. …. …. …. … … …. …. …. Para 26-A. Retention of membership:- (1) A member of the Fund shall continue to be member until he withdraws under paragraph 69 the amount standing to his credit in the Fund or is covered by a notification of exemption under section 17 of the Act or an order of exemption under paragraph 27 or paragraph 27-A. Explanation:- in the case of claim for refund by a member under sub-paragraph (2) of paragraph 69, the membership of the Fund shall be deemed to have been terminated from the date the payment is authorised to him by the authority specified in this behalf by Commissioner irrespective of the date of claim. (2) Every member employed as an employee other than an excluded employee, in a factory or other establishment to which this Scheme applies shall contribute to the Fund, and the contribution shall be payable to the Fund in respect of him by the employer. Such contribution shall be in accordance with the rate specified in paragraph 29: Provided that subject to the provisions contained in sub-paragraph (6) of paragraph 26 and in sub-paragraph (I) of paragraph 27, or sub-paragraph (I) of paragraph 27-A, where the monthly pay of such a member exceeds six thousand and five hundred rupees the contribution payable by him, and in respect of him by the employer, shall be limited to the amounts payable on a monthly pay of six thousand and five hundred rupees including dearness allowance, retaining allowance (if any) and cash value of food concession. Para 26-B. Resolution of doubts:- If any question arises whether an employee is entitled or required to become or continue as a member, or as regards the date from which he is so entitled or required to become a member, the decision, of the Regional Commissioner shall be final. As per para 1 (3) (a) of the Employees Provident Funds Scheme, 1952 (hereinafter referred to as ‘EPF Scheme’) the said Scheme shall apply to all factories and other establishments to which the EPF Act applies subject to the exemptions under Section 16 and Section 17 of the EPF Act. Section 5(1) of the EPF Act read with Para 26 of the EPF Scheme makes it clear that a “Fund” shall be established in respect of all such factories and establishments in accordance with the provisions of the EPF Act and the EPF Scheme and that every employee employed in or in connection with the work of such factory or other establishment to which the scheme applies, other than an excluded employee, shall be entitled to become a member of the Fund. As per Para 26-A (2) of the EPF Scheme, such member shall contribute to the Fund and the contribution shall be payable to the Fund in respect of him by the employer in accordance with the rates specified in Paragraph 29. In case any dispute arises as to the entitlement of any employee to become or continue as a member of the Fund or with regard to the date of such entitlement, Para 26-B provides that such dispute shall be decided by the Regional Provident Fund Commissioner. For proper appreciation of the purport of the above referred provisions, it is necessary to see how the word “employee” is defined under Section 2(f) of the EPF Act. Section 2(f). "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 Apprentice Act, 1961, or under the standing orders of the establishment. As could be seen, every person who is employed for wages in any kind of work or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer is brought within the meaning of employee under Section 2 (f) of the EPF Act. That apart a person employed by or through a contractor in or in connection with the work of establishment as well as a person engaged as an apprentice are also expressly included within the meaning of employee under Section 2 (f) of the EPF Act. Paras 26, 26-A and 26-B of the EPF Scheme, if read in the light of the definition of “employee” under Section 2(f) of the EPF Act, there can be no dispute that every person employed in or in connection with any kind of work of an establishment and gets his wages directly or indirectly from the employer shall be entitled to become a member of the Fund under Para 26 of the EPF Scheme. Every such person, under Para 26-A (2) of the EPF Scheme, shall contribute to the Fund which shall be payable in respect of him by the employer. Similarly if the definition of “employee” under Section 2 (f) of the EPF Act is applied to Para 26-B of the Scheme, it reads that in case any dispute arises whether a person employed in or in connection with any kind of work of the establishment and gets his wages from the employer is entitled to become a member of the Fund or not, such dispute has to be resolved by the Regional Provident Fund Commissioner. It automatically follows that the decision under Para 26-B of EPF Scheme with regard to entitlement of an employee to become a member of the Fund includes the enquiry into the