IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 07.06.2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.Nos.15823, 22480, 25442 and 25443 of 2010, 3427 of 2011, 19751 of 2010, 970, 3986,1853 and 2908 of 2011 and M.P.Nos.1,1,1 and 1 of 2010, 1 of 2011, 1 of 2010, 1,1,1 and 1 of 2011 The Management of Reynolds Pens India Pvt. Ltd., Plot No.C21, SIPCOT Industrial Partk, Irrugattukottai, Pennallur Post, Sriperumbudur Taluk, Kancheepuram-602 105 rep by its Director. .. Petitioner in W.P.No.15823 of 2010 The Management of Hinduja Foundries Limited, Plot No.K2,SIPCOT Industrial Park, Arneri Village, Sriperumbudur-602 105 rep by its Managing Director. .. Petitioner in W.P.No.22480 of 2010 The Management of Mando India Ltd., F64, Sipcot Industrial Park, Irrungattukottai, Sriperumbudur Taluk, Deputy General Manager-HR .. Petitioner in W.P.No.25442 of 2010 The Management of Saint-Gobain Glass India Limited, Plot No.A1, SIPCOT Indl. Park, Sriperumbudur, Kanchipuram Dt., Pin : 602 105 rep by its Managing Director. .. Petitioner in W.P.No.25443 of 2010 Prakruthi Associates, rep by its Partner Mr.R.Sivakumar A3, First Floor, Lloyds Road, Royapettah, Chennai-600 014. .. Petitioner in W.P.No.3427 of 2011 https://hcservices.ecourts.gov.in/hcservices/ The Madras Advertising Company (P) Ltd., 861,Anna Salai, Chennai-600 002. rep by its Wholetime Director .. Petitioner in W.P.No.19751 of 2010 The Management of Vetri Software India Pvt. Ltd., 'DOWLATH TOWERS, No.59, 9th Floor, Taylors Road, Kilpauk, Chennai-600 010. rep by its Deputy General Manger-Legal .. Petitioner in W.P.Nos.970 and 3986 of 2011 The Management of Chennai Gemini Soft Consultants (P) Ltd., 16/13, Jain Vatika, Wason Street, T.NAgar, Chennai-600 017 represented by its Director Mr.P.B.Ramoji.. Petitioner in W.P.No.1853 of 2011 The Management of L.M.Van Moppes Diamond Tools India Ltd., P.B.No.853, Hozur Gardes, Sembium, Chennai-600 011. .. Petitioner in W.P.No.2908 of 2011 Vs. 1.The Regional Provident Fund Commissioner-II, Employees' Provident Fund Organisation, Sub Regional Office, Ambattur Ministry of Labour, Government of India, No.R-40A, TNHB Office-cum-Shopping Complex, Mugappair, Chennai-600 087. 2.The Assistant Provident Fund Commissioner, Employees' Provident Fund Organisation, Sub Regional Office, Ambattur, Ministry of Labour, Government of India, No.R-40A, TNHB Office-cum-Shopping Complex, Mugappair, Chennai-600 087. .. Respondents in W.P.No.15823 of 2010 https://hcservices.ecourts.gov.in/hcservices/ The Regional Provident Fund Commissioner, Employees' Provident Fund Organisation, Sub Regional Office, Ambattur, T.N.H.B. Shopping Cum Office Complex, Chennai-600 037. .. Respondent in W.P.Nos.22480, 25442 and 25443 of 2010 The Assistant Provident Fund Commissioner, Employees' Provident Fund Organization, 37,Royapettah High Road, Royapettah, Chennai-600 014. .. Respondent in W.P.No.3427 of 2011 and 2nd respondent in W.P.No.19751 of 2010, 1853 and 2908 of 2011 1.The Presiding Officer, Employees' Provident Fund Appellate Tribunal (Ministry of Labour and Employment, Government of India), Scope Minar, Core-II, 4th Floor, Laxmi Nagar District Centre, Laxmi Nagar, New Delhi-110 092. .. 1st respondent in W.P.Nos.19751 of 2010, 1853 of 2011 1.The Presiding Officer, Employees' Provident Fund Appellate Tribunal (Ministry of Labour and Employment) Core-II, 4th Floor, Laxmi Nagar Distance Centre Laxmi Nagar, Delhi Camp : Coimbatore. .. 1st Respondents in W.P.Nos.970, 3986 and 2908 of 2011 2.The Regional Provident Fund Commissioner, EPF Organisation, Regional Office, 37,Royapettah High Road, Chennai-600 014. .. 2nd Respondents in W.P.Nos.970 and 3986 of 2011 W.P.No.15823 of 2010 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records of the first respondent in proceedings No.TN/SRO/AMB/48845/CC(Area 1) 2010, dated 30.06.2010 and the notice of the second respondent dated 8.7.2010 in proceedings No.TN/AMB/Circle : 5/TN/48845/1120 and to quash the same. https://hcservices.ecourts.gov.in/hcservices/ W.P.Nos.22480, 25442 and 25443, of 2010 are preferred under Article 226 of the Constitution of India praying for the issue of a writ of mandamus to forbear the respondent from holding the proceedings claiming contribution in respect of "other allowances" pursuant to the notices of the respondent dated 19.8.2010 in proceedings No.TN/AMB/Circle:5/TN/66282/1141, in respect of "expatriate allowances and other allowances" pursuant to the proceedings dated 6.10.2010 and 21.10.2010 in even Nos.TN/SRO/AMB/39514/Intl. Workers/2010, in respect of various allowances as referred to in its proceedings dated 21.10.2010 in TN/SRO/AMB 40002/Intl. Workers/2010 and in terms of respondent notice dated 2.9.2010 in proceedings No.TN/AMB/Circle:5/TN/40002/1149 and to direct the respondent to confine the enquiry under Section 7A of the Employees' Provident Fund and Miscellaneous Act and to determine the contribution only on the basic salary paid or payable to the employees who are required to be covered or covered under the Employees' Provident Fund and Miscellaneous Scheme. W.P.No.3427 of 2011 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of mandamus to direct the respondent to reopen the enquiry in terms of its notice dated 21.09.2010 in proceedings No.CHN/TN/CC-II (26)/ 54896/Eng/Regl/2009-10, to decide the preliminary issue raised by the petitioner in its communication dated 7.2.2011 and pass orders after providing adequate opportunity to the petitioner. W.P.Nos.19751 of 2010, 970, 3986, 1853 and 2908 of 2011 are preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records of the first respondent in ATA No.882 (13) 2008, ATA No.771 (13) 2004, ATA No.400 (13) 2009, ATA 659 (13)/2005 and ATA No.674 (13) 2010 and to quash its order dated 22.07.2010, 29.12.2010, 28.01.2011, 08.12.2010 and 31.12.2010 respectively. For Petitioners : .Mr.AL.Somayaji, SC for M/s.T.S.Gopalan and Co. in all W.Ps. For Respondent 2 : Mr.K.Gunasekar, ACGSC in W.P.Nos.22480, 25442,25443 &,19751/2010, 3427/11 For Respondents 1 & 2 Ms.V.J.Latha in W.P.Nos.15823 of 2010, 3986, 970, 1853 and 2908 of 2011, https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER In these 10 writ petitions, the petitioners are different employers covered by the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (for short PF Act). Some of the petitioners are also multi national companies doing their business in India. 2.A common question that arises for consideration in all the 10 writ petitions is that various allowances paid by the petitioners to their employees under different heads, such as conveyance, educational allowances, food concessions, medical, special holidays, night shift incentives, city compensatory allowances were amounting to wages within the meaning of the term 'basic wage' as per Section 2(b) of the PF Act covered for deductions towards the Provident Fund. 3.In W.P.Nos.15823, 22480, 25442 and 25443 of 2010 and 3427 of 2011, the petitioners have come forward to challenge the notices issued under Section 7-A of the PF Act on various dates and it had not culminated into final orders. The petitioners were merely directed to produce various records to decide the question whether particular payment made by the petitioners to their employees would be covered by the term "basic wage" for the purpose of deduction towards Provident Fund subscription. 4.Under Section 7-A(3), no orders can be passed unless the employer concerned is given a reasonable opportunity of representing their case. Even if an adverse order is passed, the aggrieved employer can file a review under Section 7-B with the same authority. Thereafter, a further appeal lies to the EPF Appellate Tribunal under Section 7-I. When there is hierarchy of authorities in deciding the matters raised herein, including comprehensive appeal to the judicial tribunal, it is unthinkable as to how the petitioners can file writ petitions even at the stage of show cause notice under Section 7-A. The issues raised herein are not purely legal issues, but mixed questions of facts and law involved. 5.The petitioners' stand is that they are seeking this court to give an authoritative ruling by holding certain allowances will not constitute wages under Section 2(b), then it will be binding on the authorities and that the employers can arrange their affairs based on the said ruling. The said request may look attractive. However, this court exercising powers under Article 226 of the Constitution of India cannot clutch on to a jurisdiction which it does not have. The limited power of the judicial review can be exercised only when statutory authorities make an order and still it required an appropriate correction by way of judicial review. The petitioners cannot construe the High https://hcservices.ecourts.gov.in/hcservices/ Court exercising power under Article 226 as an advance ruling authority as provided in some taxing statutes. In fact, by the exercise of power under Article 226, the Court cannot give ruling based on apprehension or on academic issues. It is preciously for this reason, the authorities have been created under the Act and also a judicial appellate Tribunal has been constituted. 6.In none of the cases cited by the petitioners, the Court had directly entertained a writ petition even before facts could be marshalled and findings given by the PF Commissioner. Before the amendment made to the PF Act by Amending Act 33/1988 (with effect from 1.7.1997), there was no scope for any appeal. Only the Central Government was given powers to remove difficulties under Section 19-A and to determine the matters in cases of doubt. But, with the introduction of Amending Act 33 of 1988, extensive amendments have been made, whereby determination by the PF Commissioner can be made only after hearing the parties, but power of review was also given under Section 7-B with a further right of appeal to a judicial Tribunal under Section 7-I. The appeal power is a comprehensive power and the Tribunal constituted under the Act can go into both questions of law and facts. The decisions relied were all cases where the initial determination was made either by the Central Government or by the Tribunal. 7.Therefore, the petitioners cannot invoke the jurisdiction under the spacious plea of getting a binding ruling from this court, so that there is certainty in their carrying on their business. As already observed, the Court cannot given any advance ruling whether a particular payment is a "basic wage" in terms of Section 2(b) and it is essentially a question of fact based on relevant materials. The authorities are empowered to also call for appropriate records and can enforce attendance of persons. They can receive evidence including issuing Commission for examination of witnesses. If it transpired that the employers have adopted subterfuge in rechristening or labelling the allowances so as not to come within the terms 'basic wage', and in effect they are basis wages within the purview of the Act, the authorities can demand subscription towards the escaped payment. In case of deliberate delay, the Act provides for penalty by way of damages and interest on delayed payments. 8.Since the Act provides for determination by quasi judicial authority with power of review and also an appeal before a judicial appellate Tribunal, the petitioners will have to necessarily avail the remedies under the Act. In this context, it is necessary to refer to a judgment of the Supreme Court in Raj Kumar Shivhare v. Directorate of Enforcement reported in (2010) 4 SCC 772, wherein the Supreme Court while dealing with an alternative remedy available under the FEMA Act held that the Act cannot be bypassed and the jurisdiction under Article 226 of the Constitution of India cannot be invoked. In the following passages https://hcservices.ecourts.gov.in/hcservices/ found in paragraphs 31 and 32, the Supreme Court had observed as follows: "31.When a statutory forum is created by law for redressal of grievance and that too in a fiscal statute, a writ petition should not be entertained ignoring the statutory dispensation. In this case the High Court is a statutory forum of appeal on a question of law. That should not be abdicated and given a go-by by a litigant for invoking the forum of judicial review of the High Court under writ jurisdiction. The High Court, with great respect, fell into a manifest error by not appreciating this aspect of the matter. It has however dismissed the writ petition on the ground of lack of territorial jurisdiction. 32.No reason could be assigned by the appellant’s counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum." 9.The Supreme Court in United Bank of India v. Satyawati Tondon reported in (2010) 8 SCC 110 dealt with SARFAESI Act and DRT Act and in paragraphs 55 and 56, it had held as follows: "55.It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. 56.Insofar as this case is concerned, we are convinced that the High Court was not at all justified in injuncting the appellant from taking action in furtherance of notice issued under Section 13(4) of the Act. In the result, the appeal is allowed and the impugned order is set aside. Since the respondent has not appeared to contest the appeal, the costs are made easy. 10.Even under the ESI Act, the Supreme Court has held that if authorities make determination under Section 45A, unless it is challenged in a proceedings under Section 75, it can be deemed to https://hcservices.ecourts.gov.in/hcservices/ become final and the authority can proceed to execute the order vide judgment in ESI Corpn. v. C.C. Santhakumar reported in (2007) 1 SCC 584. The following passages found in paragraphs 17, 25, 28, 30 and 31 of the said judgment may be usefully reproduced below: "17. Prior to the incorporation of Section 45-A under Act 44 of 1966, the only resort available to the Corporation was Section 75, for recovery of contribution through the court. Since this procedure was found to be impracticable and delayed process involved, a special provision was contemplated whereunder adjudication is to be made by the Corporation itself. By reason of incorporation of Section 45-A with effect from 17-6-1967, it became possible for the Corporation to have determination of the question, binding on the principal employer, without resorting to the ESI Court. In regard to the order under Section 45-A, the same is enforced, as envisaged under Section 45-B, which was similarly brought into the Act, by which the contribution may be recovered as arrears of land revenue. With regard to the decision reached by the ESI Court in the application under Section 75, the said decision is enforced, as envisaged in sub-section (4) of Section 75 as if it is a civil court. The mode of recovery under Section 45-B of the Corporation and the mode of recovery as per Section 75(4) by the ESI Court as the civil court are entirely different as both Sections 45 and 75 operate in different spheres.” 25.Section 45-A of the Act contemplates a summary method to determine contribution in case of deliberate default on the part of the employer. By Amendment Act 29 of 1989, Sections 45-C to 45-I were inserted in the Principal Act, for the purpose of effecting recovery of arrears by attachment and sale of movable and immovable properties or establishment of the principal or immediate employer, without having recourse to law or the ESI Court. Therefore, it cannot be said that a proceeding for recovery as arrears of land revenue by issuing a certificate could be equated to either a suit, appeal or application in the court. Under Section 68(2) and Sections 45-C to 45-I, after determination of contribution, recovery can be made straightaway. If the employer disputes the correctness of the order under Section 45-A, he could challenge the same under Section 75 of the Act before the ESI Court. 28.What Section 75(2) empowers is not only the recovery of the amounts due to the Corporation from https://hcservices.ecourts.gov.in/hcservices/ the employer by recourse to the ESI Court, but also the settlement of the dispute of a claim by the corporation against the employer. While this is so, there is no impediment for the Corporation also to apply to the ESI Court to determine a dispute against an employer where it is satisfied that such a dispute exists. If there is no dispute in the determination either under Section 45-A(1) or under Section 68, the Corporation can straightaway go for recovery of the arrears. 30.The legislature has provided for a special remedy to deal with special cases. The determination of the claim is left to the Corporation, which is based on the information available to it. It shows whether information is sufficient or not or the Corporation is able to get information from the employer or not, on the available records, the Corporation could determine the arrears. So, the non-availability of the records after five years, as per the Regulations, would not debar the Corporation to determine the amount of arrears. Therefore, if the provisions of Section 45-A are read with Section 45-B of the Act, then, the determination made by the Corporation is concerned. It may not be final so far as the employer is concerned, if he chooses to challenge it by filing an application under Section 75 of the Act. If the employer fails to challenge the said determination under Section 75 of the Act before the Court, then the determination under Section 45-A becomes final against the employer as well. As such, there is no hurdle for recovery of the amount determined under Section 45-B of the Act, by invoking the mode of recovery, as contemplated in Sections 45- C to 45-I. 31.In ESI Corpn. v. F. Fibre Bangalore (P) Ltd.2 it was observed that it is not necessary for the Corporation to seek a resolution of the dispute before the ESI Court, while the order was passed under Section 45-A. Such a claim is recoverable as arrears of land revenue. If the employer disputes the claim, it is for him to move the ESI Court for relief. In other cases, other than cases where determination of the amount of contributions under Section 45-A is made by the Corporation, if the claim is disputed by the employer, then, it may seek an adjudication of the dispute before the ESI Court, before enforcing recovery." https://hcservices.ecourts.gov.in/hcservices/ In view of the above, this court is not inclined to entertain at the stage of notice under Section 7A these five writ petitions, i.e., W.P.Nos.15823, 22480, 25442 and 25443 of 2010, 3427 of 2011. 11.In the other five writ petitions, the petitioners have moved the EPF Appellate Tribunal against orders under Section 7A and having failed in their attempts, have come before this Court. Therefore, it is necessary to deal with each one of the cases on merits. 12.In W.P.No.19751 of 2010, the petitioner was an Advertisement Company. They were given a show cause notice dated 24.9.2008. The petitioner had sent a reply stating that the food and entertainment allowances given by them cannot be considered on par with the basic wages. It was stated that their employees were not provided canteen facilities. They were paying food and entertainment allowances and the amounts were paid in terms of contract of employment and hence, it will not attract contribution by treating it as a basic pay. Similarly the educational allowance and conveyance allowances are paid for specific purposes in terms of contract of employment. Since they were already paying contributions on the basic wages paid, the question of payment of contribution on these allowances will not arise. The authorities after hearing the parties had issued an order dated 11.11.2008 holding that the petitioner is liable to pay contribution in respect of education allowance, special allowance, conveyance allowance and food concession. The authority had treated those allowances as part of basic wages. Aggrieved by the same, the petitioner had preferred an appeal under Section 7-I before the EPF Appellate Tribunal. It was taken on file as ATA No.882 (13) 2008. After notice to the authorities, by a final order dated 22.7.2010, the appeal was dismissed. The Tribunal found that the wages are universally, necessarily and ordinarily paid to all across the Board and such emoluments are basic wages. Since allowances are paid to all employees and no PF was deducted, the Company was bound to pay subscription on the basic wages. The writ petition was admitted on 27.8.2010 and an interim stay was granted. 13.W.P.Nos.970 and 3986 of 2011 : Both writ petitions were filed by the same Software Company. In the first writ petition, the challenge is to an order of the EPF Appellate Tribunal made in ATA No.771 (13) 2004, dated 29.12.2010. The Tribunal held that the special allowance, medical allowance and other allowances paid by the Company would also amount to basic wage. It is the stand of the Company that the conveyance, special allowance, leave on loss of pay conveyance, leave on loss of pay special allowance, holiday allowance, night shift allowance were not coming within the term of 'basic wage' under Section 2(b). 14.In the second writ petition , by an order dated 28.1.2011, the petitioner Company's appeal in ATA No.400(13)2009 for the subsequent period was rejected and identical contentions were https://hcservices.ecourts.gov.in/hcservices/ raised by the petitioner company. In the first writ petition, on 20.1.2011, private notice was given to the Standing Counsel. Pending the same, an interim stay was granted. In the second writ petition, notice was taken by the counsel for the respondent Department and an interim stay was also granted. 15.In W.P.No.1853 of 2011, the petitioner is also a Software company. They have come forward to challenge an order of the ERP Appellate Tribunal made in ATA No.659(13) 2005, dated 8.12.2010. The Tribunal by its order had dismissed the petitioner's claim for exclusion of special allowances from calculation of basic pay. When this writ petition came up on 31.1.2011, the Standing Counsel for the PF Department was directed to take notice and an interim stay was also granted. 16.In W.P.No.2908 of 2011, the petitioner is running a machine tool factory. They have come forward to challenge an order of the EPF Appellate Tribunal made in ATA No.674(13)2010, dated 31.12.2010. The Tribunal by a final order had refused to accept the case of the petitioner Company to exclude the special allowance, medical allowance and other allowances from making contribution towards payment of subscription for PF. In this writ petition, notice of motion was ordered on 08.02.2011 and an interim stay was also granted. 17.Since in all these five writ petitions, the common question arises for consideration is regarding the true meaning of 'basic wage' as per Section 2(b) of the PF Act, they were grouped together and a common order is passed. 18.Attacking the order of the Tribunal, Mr.A.L.Somayaji, learned Senior Counsel submitted that the authorities exercising power under Section 7A cannot on their own held that the special allowance can be treated as dearness allowance. In this context, the learned Senior Counsel referred to a judgment of a division bench of this Court in Regional Commissioner, EPF, Tamil Nadu and Pondicherry Vs. Management of Southern Alloy Foundries (P) Ltd. Reported in 1982 (1) LLJ 28. Reliance was placed upon the following passage found in paragraph 2 which reads as follows: "2....Needless to say that an officer like the appellant has no power to deem something to be something else which it is not, it being the prerogative only of the Legislature...." Therefore, the order including special allowance as basic wage passed by the authority and confirmed by the Tribunal was erroneous. 19.In the very same judgment, the division bench took care to state that the authority in the absence of giving reason and clear finding, cannot rely upon Section 6 to include special allowance as basic wage. In the very same paragraph, it was stated as https://hcservices.ecourts.gov.in/hcservices/ follows: "2...As a matter of fact, even the appellant merely stated that as per section 6 of the Employees Provident Funds and Miscellaneous Provisions Act the special allowance should also be deemed to be dearness allowance. But he has not given any reason as to why the same should be deemed to be dearness allowance. It is not the finding of the appellant that the special allowance formed part of