IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE R.BASANT THURSDAY, THE 3RD APRIL 2008 / 14TH CHAITHRA 1930 Crl.MC.No. 2497 of 2007() ------------------------- CC.767/2005 of JUDL.MAGISTRATE OF FIRST CLASS-I, KOTTARAKKARA .................... PETITIONER: ACCUSED NO.1 AND 2 ------------------------------- 1. M/S. KOTTATHALA HANDLOOM WEAVERS INDUSTRIAL CO-OPERATIVE SOCIETY LTD.NO.Q.H-4, KOTTATHALA P.O., KOTTARAKKARA, KOLLAM DISTRICT, REPRESENTED BY ITS SECRETARY K.THULASEEDHARAN. 2. K.THULASEEDHARAN, SECRETARY, M/S. KOTTATHALA HANDLOOM WEAVERS INDUSTRIAL CO-OPERATIVE SOCIETY LTD.NO.Q H-4, KOTTATHALA P.O., KOTTARAKKARA, KOLLAM DISTRICT. BY ADV. SRI.PREMCHAND R.NAIR RESPONDENTS: COMPLAINANT & STATE --------------------------------- 1. ENFORCEMENT OFFICER, EMPLOYEES PROVIDENT FUND ORGANISATION, DISTRICT OFFICE, HOSPITAL ROAD, KOLLAM. 2. STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM. BY ADV. SMT.T.N.GIRIJA, SC,EPF ORGANISATION PUBLIC PROSECUTOR THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 03/04/2008, ALONG WITH CRMC NOS. 2498, 2503, 2504, 2505, 2506, 2507, 2508, 2509, 2512, 2179, 2645, 2646, 2647, 2648, 2649, 2650, 2651, 2652, 2659, 2660, 2661, 2653, 2654, 2655, 2656, 2657 and 2658 OF 2007 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: R. BASANT, J. ```````````````````````````````````````````````````````````````````````` Crl. M.C. Nos. 2497, 2498, 2503, 2504, 2505, 2506, 2507, 2508, 2509, 2512, 2179, 2645, 2646, 2647, 2648, 2649, 2650, 2651, 2652, 2659, 2660, 2661, 2653, 2654, 2655, 2656, 2657 and 2658 OF 2007 `````````````````````````````````````````````````````````````````````````` Dated this the 3rd day of April, 2008 O R D E R Does section 1(5) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952(hereinafter referred to as 'the Act') apply to an establishment which gets covered only under section 16(1)(a) of the Act? Does the fall in employment strength below 50 or even below 20 take it out of coverage under the Act ipso facto? These questions come up for decision in this case. 2. The common petitioners in all these Crl.M.Cs. are facing prosecutions under the Act. The allegation is that there has been failure to comply with the statutory obligations regarding filing of returns and payment of contributions. The petitioners, who are the establishment, a co-operative society and its secretary, have come to this Court with the contention Crl.M.C.2497/07 & connected cases : 2 : that on the relevant dates, the statute is not applicable to the petitioners in as much as employment strength of the petitioners had fallen below 50 (and even below 20) which is the number fixed under section 16(1)(a) of the said Act. 3. It is admitted at all hands that the petitioners were covered under the Act earlier. There is no dispute on that aspect. The petitioners contend that the employment strength had fallen below 50 long prior to the relevant dates with reference to which the allegations of non-compliance are now made. The contention is that even before the dates of the alleged offences under the Act, the employment strength had fallen below 50 - nay below 20, and therefore, the prosecutions are not legally correct or sustainable. 4. The learned counsel for the respondent/ complainant submits that the respondent/complainant does not accept the assertion that the employment strength had fallen below 20 or even below 50. But the counsel contends that it is irrelevant whether the employment strength had fallen below 50 or below 20 as the establishment, if it is once Crl.M.C.2497/07 & connected cases : 3 : covered under the Act, shall continue to be covered under the Act whatever be the fall in the employment strength. 5. The petitioners' establishment is a co-operative society. Under section 1(3) of the Act, there are two sub clauses - sub clause (a) and (b), which stipulate the establishments which will come under coverage. Whether under clause (a) or (b), coverage will commence only if 20 or more persons are employed by any establishment. But section 1(3) opens with the words “subject to the provisions contained in section 16” and under section 16(1)(a) a co- operative society will not fall within coverage unless it employs 50 or more persons. The petitioners' establishment came under coverage under section 16(1)(a) and not under section 1(3), it is submitted. 6. Be that as it may, for the purpose of arguments, I shall assume that the petitioners' establishment is a co- operative society which had earlier employed more than 50 persons and that the employment strength has fallen not only below 50 but also below 20. The only question is whether Crl.M.C.2497/07 & connected cases : 4 : such an establishment which is already covered under the provisions of the Act shall cease to be covered when the employment strength falls below 20/50. 7. It will be apposite in this context to note the legislative history behind section 1(5) of the Act. When the Act was originally enacted, it spoke only of the essential requirements to attract coverage. It did not at all refer to cessation of coverage. There were disputes as to whether an establishment would go out of coverage when the employment strength falls below the prescribed number of 20. The High Courts took different views in the matter. The Bombay High Court took the view that in as much as the statute is silent about cessation of coverage and speaks only of the requirements to attract coverage, establishments must be held to continue under coverage notwithstanding the fall in the employment strength. However, it is noted that the said view was not accepted by the Kerala High Court and in the decision in Joseph Vs. Regional Provident Fund Crl.M.C.2497/07 & connected cases : 5 : Commissioner [1961 KLJ 1203], the Kerala High Court took the contra view. The decisions of the Bombay High Court in State Vs. Hathiwala Textile Mills and others [AIR 1957 Bombay 209] and Venkatesh Vs. Union of India and others [1988 (1) LLJ 87] cannot in these circumstances be pressed into service by the respondents though I must confess that the Bombay view does appear to me to rhyme better with the objects and purposes of the statute. Once covered, there must certainly be certainty and the fluctuating employment strength cannot determine coverage and non- coverage later, as that would hamper the implementation of the statutory scheme. In Joseph the Kerala High Court took the definite view that if the employment strength falls below the prescribed number, the establishment will go out of coverage. I am bound to follow that view now. But I must alertly note that in Joseph the Division Bench was only attempting to ascertain the law as it stood prior to the amendment introducing section 1(5). Crl.M.C.2497/07 & connected cases : 6 : 8. Evidently in view of the controversy on this aspect section 1(5) was introduced into the Act in 1960. Section 1(5) as it was introduced read as follows:- “ An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty. Provided that where for a continuous period of not less than one year the number of persons employed therein has been less than 15, the employer in relation to such an establishment may cease to give effect to the provisions of this Act and any scheme framed thereunder with effect from beginning of the month following the expiry of the said period of one year but he shall within one month of the date of such cessation, intimate, by registered post, the fact thereof to such authority as may be specified by the appropriate government in that behalf.” 9. It will be apposite in this context to consider the Crl.M.C.2497/07 & connected cases : 7 : statements of reasons and objects of the Amendment Act in 1960. The relevant portion reads as follows:- “In order to ensure that the establishments once covered under the Act do not go out of the purview of the Act merely due to a small reduction in their strength, provision is being made that an establishment once covered under the Act will continue to be so covered despite a reduction in the employment strength.” However, section 1(5) was later amended in 1972 to delete its proviso. At the moment, therefore, section 1(5) is there on the statute but the proviso stands deleted. 10. The language of section 1(5), according to me, is very clear. It stipulates that once an establishment comes under coverage, it shall continue to be governed by the Act notwithstanding the fall in the employment strength. Section 1 (5) says that it shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below 20. In the instant case, coverage is Crl.M.C.2497/07 & connected cases : 8 : attracted under section 16(1)(a) of the Act and for such coverage, employment of 50 persons by the co-operative society is essential. That it was once covered is not disputed. The employment strength, it is contended, has fallen below 50 initially and later below 20. 11. The stipulation in section 1(5) makes it crystal clear that the coverage shall continue notwithstanding the fact that the number of persons employed at any time falls below 20. Even if the number of persons employed were to fall below 20, the coverage of any covered establishment shall continue. In these circumstances, if the employment strength falls below 50 and not below 20 also, it must be held that section 1(5) operates with equal vigor. Section 1(3) speaks of coverage when 20 persons are employed. Section 16(1)(a) however states that in respect of a co-operative society there must be 50 persons employed to attract coverage. In either case, the coverage shall continue as per the terms of section 1(5) even if the employment strength falls below 20. That is what, according to me, the plain language of section 1(5) conveys. Crl.M.C.2497/07 & connected cases : 9 : 12. The said conclusion appears to be easy and flows directly from the semantics employed by Parliament in section 1(5). Prior to the amendment deleting the proviso if the employment strength falls below 20, there was a provision for establishments to go out of coverage on satisfaction of certain conditions. The dropping of the said proviso by the Parliament later, unmistakably conveys that under no circumstances can the establishment claim that it ceases to be covered on the premise that the employment strength has fallen below 20. Section 1(5) does not of course specifically refer to coverage under section 16(1)(a) where the employment strength required for the coverage is 50 persons. But in as much as section 1(5) says that even if the employment strength falls below 20, the cessation of coverage will not take place, it is not necessary to look for specific words to say that cessation of coverage will not take place when the employment strength falls below 50 and it remains above 20. Even if it falls below 20, the establishment, whether covered under section 1(3) or 16(1) Crl.M.C.2497/07 & connected cases : 10 : cannot go out of coverage. So it was not necessary to again clarify that if the employment is between 20 and 50 an establishment covered under section 16(1)(a) will not go out of coverage. 13. Thus, whether the employment strength be below 20 or below 50, it has to be held that the establishment which is once covered whether under section 1(3) or under section 16(1) shall continue to be covered and the fall in employment strength cannot be advanced as a ground to justify the claim that cessation of coverage takes place automatically. The said contention cannot be accepted. 14. The learned counsel for the petitioners relies on the observations in the decisions in Regional Provident Fund Commissioner Vs. T.S.Hariharan [1971 (2) SCC 68] and Mohmedalli Vs. Union of India [AIR 1964 SC 980]. Those decisions have no direct bearing on the interpretation of section 1(5). Section 1(5) makes it very clear now that once covered an establishment shall remain a covered by one Crl.M.C.2497/07 & connected cases : 11 : notwithstanding the fall in employment strength. Such a stipulation is essential for a proper implementation of the Act and the scheme. That is why the statute was amended to incorporate section 1(5). The dropping of the proviso by the subsequent amendment makes the legislative intention eloquent. In these circumstances, the said observations cannot be said to be of any assistance to the petitioners. 15. It follows from the above discussions that the petitioners' establishment continues to be covered under the provisions of the Act notwithstanding the alleged fall in strength below 50 or below 20. 16. These Crl.M.Cs. cannot, in these circumstances, succeed. These Crl.M.Cs. are, in these circumstances, dismissed. Needless to say, the dismissal of these petitions will not in any way fetter the rights of the petitioners to raise all relevant and appropriate contentions before the learned Magistrate in the pending prosecutions. I make it clear that I have only chosen to take the view that the prosecutions do not deserve to be quashed invoking the powers under section Crl.M.C.2497/07 & connected cases : 12 : 482 Cr.P.C. in view of the interpretation of section 1(5) of the Act above. 17. The learned counsel for the petitioners submits that as per the directions of this Court in WPC.18533/07, the petitioners have already remitted substantial part of the outstanding liability. The petitioners shall certainly be entitled to bring this fact to the notice of the criminal court in the prosecutions pending against them. (R.BASANT, JUDGE) aks