IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30.10.2009 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM W.P.No.11953 OF 1999 Messrs. Suprem Textiles Processing Ltd. Regd. Office 'Suprem' P.B.No.3888 17, Race Course Coimbatore - 641 018 ... Petitioner Vs 1. The Presiding Officer Employees' Provident Fund Appellate Tribunal, 7th Floor No.60, Skylark Buildings Nehru Place, New Delhi - 110 019 2. The Regional Provident Fund Commissioner, Dr.Balasundaram Road Coimbatore - 641 018 ... Respondents Writ petition under Article 226 of the Constitution of India praying for a writ of Certiorari to call for the records from the file of the first respondent herein in Appeal No.ATA.13(96)98/1332 dated 13.05.1999 and quash the same. For Petitioner : Mr.S.Jayaraman For Respondents : Mr.V.Vibhishanan O R D E R The petitioner is a Textile Unit and has filed the above writ petition challenging the order passed by the first respondent dated 13.05.1999, confirming the order passed by the second respondent dated 17.08.1998. 2.The matter arises under The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "the Act"). https://hcservices.ecourts.gov.in/hcservices/ 3.The petitioner industry is covered under the Provisions of the Act with effect from 22.09.1997. A notice of coverage was issued to the Establishment on 04.03.1998 and the Enforcement Officer visited the Establishment on 02.04.1998 and 15.04.1998 and reported that the employer has enrolled only five persons as EPF members and other 141 persons are not enrolled, on a plea that they are apprentices. Therefore, the Enforcement Officer by a proceeding, dated 27.04.1998, requested the petitioner to enroll the other employees. The petitioner requested for an opportunity of personal hearing and the same was given and the hearing was fixed for 06.07.1998. On the said date, the petitioner represented by the Company Secretary appeared for hearing and filed a written statement of their defence enclosing copies of documents relied on by them. The contentions which were raised by the petitioner before the Authority could be summarized as follows:- (a) The Unit is a new Unit and engaged one and only category of persons with the nomenclature Apprentices. (b) The apprentices are not covered under the scheme of the Act, since section 2(f) of the Act excludes apprentices. (c) Apprentices have signed contracts and are engaged for a period of 36 months and during that period of training they are paid stipends. (d) The settlement under Section 18(1) of the Industrial Disputes Act has been entered into with the apprentices. 4.The second respondent, after taking into consideration the contention raised by the petitioner, by an order dated 17.08.1998 held that the 135 persons categorized as apprentices by the petitioner are only employees of the Establishment, who are liable for E.P.F. membership. Aggrieved by the said order, the petitioner preferred an appeal to the first respondent under Section 7(I) of the Act. The same grounds which were raised before the second respondent were reiterated and eight documents were filed in support of their contentions. A counter statement was filed by the second respondent in the appeal petition. A rejoinder affidavit along with an application for raising additional grounds was filed before the first respondent. In the application for raising additional grounds the following contentions were raised:- (a) The petitioner unit started commercial production on 11.04.1997 and under Section 16(1)(d) of the Act and the unit was entitled for infancy protection till 11.04.2000. Therefore the respondents are not justified in demanding contribution. (b) Though Section 16(1)(d) of the Act was repealed and such protection was denied from 22.09.1997, the same would not affect the vested right in favour of petitioner and in view of the provision of Section 6 of the General Clauses Act, they are entitled for infancy protection from 11.04.1997 to 11.04.2000. On the above grounds, the https://hcservices.ecourts.gov.in/hcservices/ petitioner prayed for allowing the appeal petition filed before the first respondent. 5.The first respondent passed an order dated 13.05.1999 rejecting the appeal by holding that the so-called apprentices are employees of the appellant and they are bound to comply with the provisions of the Act. On the question of the infancy protection under section 16(1)(d), it was stated that the appellant ought to have raised this issue before the second respondent during the course of enquiry under Section 7A of the Act and that there is no vested right in favour of the petitioner for claiming the benefit of infancy protection. 6.Mr.S.Jayaraman, learned counsel appearing for the petitioner would assail the correctness of the orders impugned on two grounds. Firstly, on the ground that the petitioner is entitled for the protection under section 16(1)(d) of the Act. The second ground being that the petitioner is a Modern Textile Unit and large number of apprentices ought to have been trained and sent abroad for further training and they have produced agreements entered into between apprentices and the management and the same cannot be disbelieved. It is further contended that once the second respondent accepts there is a contract between management and the apprentices, the number of apprentices is of no consequence. Therefore, the learned counsel contended that the respondents concurrently erred in rejecting the plea raised by the petitioner. 7. Mr.V.Vibhishanan, learned counsel appearing for the respondents / Organization resisted the arguments advanced by the learned counsel for the petitioner by stating that the Enforcement Officer in his inspection report dated 15.04.1998 stated that the employer has enrolled only 5 employees as EPF members and 141 employees were not enrolled on a plea that they are apprentices. 8.The learned counsel further submits that under Section 2 (f) of the Act, apprentices, who are not engaged, either under the Apprentices Act, 1961 or under the Standing Orders of the Establishment, are to be treated as employees. The settlement under Section 18(1) of the Industrial Disputes Act (hereinafter referred to as "the I.D. Act") between the Management and so-called apprentices is not a standing order referred to under the Act. In the absence of certified standing order, the petitioner cannot claim that the employees are apprentices. Further, the learned counsel would contend that the proportion of apprentices to that of the permanent employees is unreasonably high and it is not known how five regular employees can impart training to 135 apprentices in various Departments. The learned counsel by relying upon the averments made in the counter affidavit would contend that as per the inspection report given on 28.06.1999, i.e., after the impugned orders were passed, the https://hcservices.ecourts.gov.in/hcservices/ Enforcement Officer has reported that 254 persons called as apprentices are employed in the petitioner unit and they have not been enrolled as P.F. members and in view of the stay granted in the present writ petition, no action has been taken. On the above grounds, the learned Counsel, would submit that the writ petition is liable to be dismissed. 9.I have carefully considered the submissions on either side and perused the materials available on record. 10.The question as regards the applicability of the Act and as to whether the petitioner would be entitled to the infancy protection under Section 16(1)(d) of the Act for a period of three years from 11.04.1997 to 11.04.2000, even though the said provision was repealed by Act 10 of 1998 with effect from 22.09.1997, is no longer res-integra. A Division Bench of Bombay High Court in the case of Magic Wash Industries (P) Ltd. & Ors. V. Asstt. Provident Fund Commssioner & Ors., reported in 1999 II LLJ 792 BOM (DB) was considering the effect of Section 16(1)(d), after the period of infancy protection was reduced from five to three years by Act 10 of 1998. In the said decision, the Division Bench has held as follows:- ".... that there is no doubt that the vested rights or benefits under the legislation would be retrospectively taken away by legislation, but then statute taken away such rights or benefits must expressly reflect its intention to that effect. The infancy period prior to the amended provision of Section 16(1)(d) was five years in the case of establishments employing 20 to 50 workers and in the event this infancy benefit was to be withdrawn, it was necessary that the intention of the Legislature should have been clearly reflected in the amended provision itself that the rights and benefits which had already accrued stood withdrawn. The amended Clause 16(1)(d) came on the statute book on June 2, 1988, when it was assented by the President of India but the amended Section 16 was put into operation only with effect from August 1, 1988, in terms of Section 16(2) of the Amendment Act, 1988 which empowered the Central Government to appoint different dated for the coming into force of different provisions of the Act. Thus, though the amended Section 16(1)(d) came on the statute book on June 2, 1988, but it was brought into force on August 1, 1988, in the intervening period, the establishments would be set up, that is to say before the coming into force of Section 16(1)(d) and these establishments would come within the expression, "or has been set up" used in Section 16(1)(d), since these establishments would be treated as newly set up for the purpose of the Act". It was further ruled therein that https://hcservices.ecourts.gov.in/hcservices/ "this means that the Central Government is empowered to specify other establishments to which the provisions of the Act shall extend subject to the provisions contained in Section 16 of the Act. The notification of such establishments, may come after the amended provision Section 16(1)(d) to whom the benefits may be extended and such establishments would also fall within the latter part of the expression, "or has been set up" used in Section 16 (1)(d) of the Act. Section 16(1)(d), essentially applies to establishments newly set up after the coming into effect of the said provision on the statute book, though the enforcement of the same was effective from a later date. This is the only way in which a harmonious construction can be put to Section 16(1)(d) In view of the significant change made in the amended provision by adding "newly set up". It was further held that "we find it difficult in the circumstances, to conclude that the intention of the Legislature was to take away the benefit of infancy period which had already accrued to the existing establishments and this benefit has not been expressly taken away or by implication by the amended provision of Section 16(1)(d)". The said Division Bench Judgment was followed by the Bombay High Court in a subsequent case in OM SAI HOTELSADN RESTAURANTS V. REGIONAL PROVIDENT FUND COMMR., reported in 2004-I-LLJ 895. which has been relied on by the learned counsel for the petitioner. One of the question which came out for consideration in the said case was regarding the claim of infancy protection for a period of three years from the date of commencement of production of said unit. After following the Division Bench judgment in the case of Magic Wash Industries (referred to supra), the Bombay High Court held as follows:- 12.Hence, following the decision of a Division Bench in Magic Wash Industries's case (Supra) and considering the scope of the amendment brought about by deletion of clause (d) of Section 16(1) of the Said Act, the petitioner is justified in contending that it would be entitled for benefit of three years' infancy period starting from September 5, 1995. Merely because the petitioner had approached the respondents under letter dated October 20, 1997, that would not estop the petitioner from claiming such infancy period as the said rule has not application in cases where a statutory right is created in favour of the party." 11.The Hon'ble Supreme Court in SANGAM SPINNERS V. REGL. PROVIDENT FUND COMMR.I reported in 2008(1) SCC 391 considered the https://hcservices.ecourts.gov.in/hcservices/ question of the temporal effect of omission (retrospective or prospective) after the provision, namely Section 16(1)(d), was omitted with effect from 22.09.1997. The Hon'ble Supreme Court after analyzing the position of Section 16 at different points of time and after referring to the judgments of the Hon'ble Apex Court on the question of effect of amendment of statute on the existing rights, and after referring to the following judgments:- 1. Jayantilal Amrathlal v. Union of India reported in (1972) 4 SCC 174 : AIR 1971 SC 1193 2. In Govind Das v. ITO reported in (1976) 1 SCC 906 : 1976 SCC (Tax) 133 : AIR 1977 SC 552 and the judgment of the Division Bench of the Bombay High Court in Magic Wash Industries (referred as supra) held that the appellant therein shall be entitled to protection for the period of three years starting from the date of Establishment was setup irrespective of repeal of the provision for such infancy protection. In a recent decision, in the case of The Management of Sterling Spinners Limited Vs. The Union of India and another W.A.No.1702 of 2000, dated 24.07.2009, the Hon'ble Division Bench of this Court had an occasion to consider the similar question. The Hon'ble Division Bench of this Court by applying law laid down by the Hon'ble Supreme Court held that the petitioner / the appellant therein was entitled to infancy protection irrespective of the repeal. 12.Thus, in view of the law laid down by the Hon'ble Supreme Court and the Hon'ble Division Bench by the Bombay High Court as well as in the Hon'ble Division Bench of this Court, I am of the considered view that the petitioner shall be entitled to the infancy protection for the period of three years starting from the date on which the establishment was setup irrespective of the repeal of the provision, for such infancy protection. 13.Coming to the next question as regards whether the claim made by the petitioner that except five employees the remaining are apprentices, in my view, this is essentially a question of fact, as rightly pointed out by the learned counsel for the respondents, the definition of employee under Section 2(f) of the Act states that an employee shall include any person engaged as an apprentice not being an apprentice engaged under the apprentices Act, 1961 or under the standing orders of the Establishment. Thus, the onus is on the management to prove that the "employees" are not covered within the definition of "employee" that has been laid under Section 2(f) Act. However, in view of the finding rendered on point No.1 holding that the petitioner is entitled for infancy protection, I am of the view that the issue relating to the claim that the major chunk of employees are apprentices could be relegated back to the authorities for fresh decision on merits. Since the petitioner would be entitled https://hcservices.ecourts.gov.in/hcservices/ to protection up to 11.04.2000 and it is the period thereafter which has to be considered. In that view of the matter, I deem it appropriate that liberty should be granted to the second respondent to issue a fresh notice under Section 7A of the Act for the purpose of determining whether the persons engaged by the petitioner in their unit would fall within the definition of Section 2(f) of the Act and decide the matter after conducting a thorough enquiry as contemplated under Section 7A of the Act after affording sufficient opportunity to the petitioner, to lead oral and documentary evidence in support of their claim on the fresh proceeding and the same shall be commenced by the second respondent within a period of six weeks from the date of receipt of copy of this order and the Enquiry shall be completed within a period of three months, after the petitioner submits their objections to the notice to be issued under Section 7A. 14.In view of the above, the writ petition is allowed on the above terms. No costs. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar rns To 1. The Presiding Officer Employees' Provident Fund Appellate Tribunal, 7th Floor No.60, Skylark Buildings Nehru Place, New Delhi - 110 019 2. The Regional Provident Fund Commissioner, Dr.Balasundaram Road Coimbatore - 641 018 +1cc to Mr.S.Jayaraman, Advocate Sr 57582 +1cc to Mr.V.Vibhishanan,Advocate Sr 57735 CKN(CO) km/5.11. W.P.No.11953 OF 1999 https://hcservices.ecourts.gov.in/hcservices/