IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 24-03-2008 CORAM THE HONOURABLE MR. JUSTICE P.K. MISRA AND THE HONOURABLE MR. JUSTICE K. MOHAN RAM W.P.NOs.15728, 15606, 15782, 15743, 15766, 16673, 17453 OF 2000, 8106 OF 2001 & 740 OF 2003 Bharat Overseas Bank Limited, 'Habeeb Towers', Erode Road, 756, Anna Salai, Chennai 600 002 rep. by its Chief Manager (Pers.) .. Petitioner in WP.No.15728 of 2000 City Union Bank Ltd., Kumbakonam rep by Mr.R. Kuppuswamy Asst. General Manager (Personnel and Investments) ... Petitioner in W.P.15606/2000 Bank of Madura Ltd., 758 Anna Salai Chennai-2, rep by its Assistant Vice President ... Petitioner in W.P.15782/2000 The Karur Vysya Bank Ltd., Central Office Erode Road, Karur rep by General Manager ... Petitioner in W.P.15743/2000 The Lakshmi Vilas Bank Ltd, personnel Department Administrative Office Salem Road, Kathaparai Karur- 639 006 rep by its Assistant General Manager ... Petitioner in W.P.15766/2000 https://hcservices.ecourts.gov.in/hcservices/ Tamilnadu Mercantile Bank Ltd Regd.Office 57 V.E. Road, Thoothukudi 628 002 rep by its Chief General Manager ... Petitioner in W.P.16673/2000 Karur Vysya Bank Employees Union rep by its President Thambu Chetty Street, Chennai-1 ... Petitioner in W.P.17453/2000 Standard Chartered Grindlays Bank No.1, Haddows Road, Chennai-6 rep by its Area Manager ER ... Petitioner in W.P.8106/2001 Citi Bank NA No.2 Club House Road, Chennai-2 rep by Assistant Vice President Human Resources ... Petitioner in W.P.740/2003 Vs. The Government of India, rep. by the Secretary, Ministry of Labour, New Delhi Union of India ... ISt Respondent in W.P.15728/00,15606/2000, 15782/ 2000, 15743/ 2000, 15766/ 2000, 16673/ 2000, 17453/ 2000, 8106/2001, 740/03 The Enforcement Officer, Employees Provident Funds CH.XVI Division, Chennai 600 014. ... 2nd Respondent in W.P.15728/2000, 8106/01, 740/03 and 3rd respondent in W.P.15782/2000 https://hcservices.ecourts.gov.in/hcservices/ The Assistant Provident Fund Commissioner Office of the Regional Provident Fund Commissioner, Employees Provident Fund (Tamil Nadu & Pondicherry), No.20, Royapettah High Road, Chennai 600 014. .. 3rd Respondent in WP.NO.15728 of 2000, 8106/01, 740/03 The Regional Provident Fund Commissioner Sri Complex Madurai Road, Tiruchirapalli-8 ... 2nd Respondent in W.P.15606/2000 The Enforcement Officer E.P.F. Kamaraj Road, Kumbakonam ... 3rd Respondent in W.P.15606/2000 Regional Provident fund Commissioner Tamilnadu 20, Royapettah High Road, Chennai-14. ... 2nd Respondent in W.P.15782/2000 The Enforcement Officer Employees provident funds Municipal Shopping Complex Azad Road, Karur ... 2nd respondent in W.P.15743/2000, 15766/2000, 17453/2000 The Regional Commissioner of Provident Funds, Tirunelveli ... 2nd Respondent in W.P.16673/2000 Petition presented to this Court under Article 226 of the Constitution of India to issue a Writ of I. Certiorari calling for the records of the first respondent 1. leading to the issue of Notification dated 25-2-2000 and 9-3-2000 and quash the notification dated 9-3-2000 (W.P.15728/2000, 15782/2000, 15743/2000, 15766/2000, 16673/2000, 8106/01 and 740/03) https://hcservices.ecourts.gov.in/hcservices/ 2. connected with the notification dated 25.2.2000 called "The Employees provident Fund Amendment) Scheme 2000 and to quash the same in so far as clause 2 (i) is concerned (W.P.15606/2000). II. Declaration declaring the Notification of the Ist respondent dated 25.2.2000 under the employees provident Fund Scheme 1952 and the notification dated 9.3.2000 under the employees provident Fund and miscellaneous Provision Act 1952 as unconstitutional and null and void. (W.P.17453/2000) For Petitioners in WP.NOs. Mr.A.L. Somayaji 15728, 15743, 15766, : Senior Counsel 16673/2000, 8106/2001 Assisted by & 740/2003 M/s.V. Karthic & G. Ananthakrishnan for M/s.T.S.Gopalan For Petitioners in WP.15606 & Mr. Sanjay Mohan 15782 of 2000 : Senior Counsel for M/s.S.Ramasubramaniam & Associates For Petitioner in : Mr.R. Yashod Vardhan WP.No.17453 of 2000 For Respondents : Mr.V. Vibhishanan COMMON JUDGMENT P.K. MISRA, J All these writ petitions, except W.P.No.17453 of 2000, have been filed by commercial banks having branches in Tamil Nadu as well as in other States for quashing the notification dated 25.2.2000 issued by the Union of India and raising the question of applicability of the provisions contained in the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Scheme made thereunder. W.P.No.17453 of 2000 is filed by the Karur Vysya Bank Employees' Union essentially for the very same purpose. 2. Under the Sastri Award, while considering the demand relating to introduction of Provident Fund, certain recommendations had been made regarding introduction of Provident Fund for employees in various Banks having branches in more than one State. Accordingly, such provisions were made by the Banks concerned. Initially Banks were not coming within the scope of the Employees https://hcservices.ecourts.gov.in/hcservices/ Provident Fund, in short "EPF", until notification dated 18.12.1965 in respect of Banks "... doing business in one State or Union Territory and having no departments or branches outside that State or Union Territory." was issued under the Employees' Provident Funds and Miscellaneous Provisions Act (hereinafter referred to as "the Act"). Thus the Banks having branches in more than one State were not coming within such coverage. Such Banks, which were thus outside the purview of the provisions of the Act, had their own scheme for payment of EPF as per the Sastry Award. Various petitioner banks having branches in more than one State, were either not covered under the Act or were subsequently excluded from such operations. However, all such banks have their own Employees' Provident Fund Rules as well as Bank Employees' Pension Schemes in the place in accordance with various awards or settlements. It is claimed that the provisions relating to the Provident Fund as well as payment of Pension are much more beneficial to the employees. As per such provisions, for payment of Provident Fund, those who opt for such Fund are given the benefit, and other employees who opt for pension are given the benefit of the pension. While the matter stood thus, the Central Government, in exercise of powers conferred by Sections 5 and 7 (1) of the Act, amended the Employees Fund Scheme, 1952 by substituting in the notification dated 18.12.1965 the expression "banks other than the nationalised banks established under any Central or State Act" in the place "the banks doing business in one State or Union Territory and having no departments or branches outside that State or Union Territory", which was published in the Gazette dated 9.3.2000. This amendment issued by the Central Government is being questioned by the various petitioner banks which having branches in more than one State and also by the Union. 3. The main basis for the challenge is to the effect that, while extending the applicability of the provisions of the Act in the notification dated 25.12.1965, which came into effect from 1.1.1966, the Banks doing business in one State or Union Territory and having no departments or branches outside that State of Union Territory were only covered and the Banks having such branches outside the State or the Union Territory were not covered. Whereas, under the amendment effected, as per the impugned notification dated 9.3.2000, the Act and the Scheme have been made applicable to the Banks other than the Nationalised Banks established under any Central or State Act, which has resulted in discrimination between the Nationalised Banks and other Banks like the petitioners, who are also having branches in more than one State, and there is no basis for such discrimination. It is further contended that at any rate the provisions made by the concerned petitioner Banks providing for payment of Provident Fund or the Pension being more beneficial to the employees, the respondent should not have amended the notification. https://hcservices.ecourts.gov.in/hcservices/ 4. Counter affidavits have been filed in all the writ petitions. It is admitted in the counter affidavit that the petitioner banks were having branches in more than one State and therefore were excluded from operation of the Act either from the inception or by the subsequent orders. It is also admitted that the petitioner banks had their own Provident Fund Scheme and they had also introduced Pension Scheme pursuant to the settlement made between the management of the banks and the workmen, as per which benefit of pension has been made available to those who opted for pension scheme. It is further stated that, by notification dated 25.2.2000, the Union of India has amended the Employees' Provident Funds Scheme, amending clause (a) of paragraph 1(3) substituting for the words "banks doing business in one State or Union Territory and having no departments or branches outside that State or Union Territory" with the words "banks other than the nationalised banks established under any Central or State Act". The net result of which is that only the Nationalised Banks are outside the coverage and the petitioner banks and other private banks having branches in more than one State which were not hitherto covered under the Act, were brought under the purview of the Act and the EPF Scheme. It has been further stated that the provisions contained in the Act and the Scheme being beneficial provisions, have been made applicable. It is further stated that the Nationalised Banks stand on a different footing and, therefore, the allegation of discrimination cannot hold good. 5. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is an Act to provide for the institution of provident funds, pension fund and deposit-linked insurance fund for employes in factories and other establishments. As per Section 1 (3)(a), the Act applies to every establishment, which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed. However, such provision has got no relevance for the present case as the Banking service is not one of the industries specified. As per Section 1(3)(b), the Act applies to any other establishment employing twenty or more persons or class of such establishments which the Central Government by notification in the Official Gazette specify. Under Section 1(5), an establishment to which the Act applies shall continue to be governed by the Act notwithstanding that the number of persons employed in such establishment falls below twenty at any time. As per Section 2(kB) "Pension Scheme" means the Employees' Pension Scheme framed under sub-section (1) of Section 6A and under Section 2(l) "Scheme" means the Employees' Provident Funds Scheme framed under Section 5. https://hcservices.ecourts.gov.in/hcservices/ Section 4 empowers the Central Government to add to Schedule-I any other industry, if it is of the opinion that a Provident Fund Scheme should be framed in respect of such employees. However, as per Section 4(2), all notifications under sub-section (1) shall be laid before Parliament as soon as may be, after their issue. As per Section 5(1), the Central Government may frame Employees Provident Fund Scheme for the establishment of provident funds under the Act for employees or for any class of employes and specify the establishments or class of establishments to which the said Scheme shall apply. As per Section 5(1B), the Scheme framed under Section 5(1) may provide for all or any of the matters specified in Schedule II. Pursuant to the aforesaid enabling provision, the Employees Provident Funds Scheme, 1952 has been notified. Section 5(1) also contemplates that as soon as after framing of the Scheme, the Central Government shall establish a Fund in accordance with the provisions of the Act and the Scheme and as per Section 5(1A), the Fund shall vest in and be administered by the Central Board constituted under section 5A. Section 6 provides for payment of contribution by the employer to the Fund. Similarly Section 6A empowers the Central Government to frame an Employees' Pension Scheme providing for superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments and the pension payable to widower or children of such employees. Similarly, under Section 6A(2), a Pension Fund is required to be established. Under Section 6C, the Central Government may frame Employes' Deposit-linked Insurance Scheme for the purpose of providing life insurance benefits to the employees and under Section 6C(2), a Deposit-linked Insurance Fund is required to be established. Under Section 6D, every Scheme framed under Sections 5, 6A and 6C are required to be laid before each House of Parliament. Under Section 7, the Central Government is empowered to amend either prospectively or retrospectively any of the Schemes by notification which is again required to be placed before the Parliament. Section 16(1)(a) contemplates that the Act shall not apply to any establishment registered under the Co-operative Societies Act, 1912 or any other law in force in any State relating to co- operative societies employing less than fifty persons and working without the aid of power and under Section 16(1)(b), the Act shall not apply to any other establishment belonging to or under the control of the Central Government or a State government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits. Under Section 16(1)(c), the Act shall not apply to any other establishment set up under any Central, Provincial or https://hcservices.ecourts.gov.in/hcservices/ State Act and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any Scheme or rule framed under that Act. Under Section 16(2), the Central Government may exempt any particular class of establishments from the operation of the Act for such period as may be specified in the notification having regard to the financial position of any class of establishments or other circumstances and the Central Government is of the opinion that it is necessary or expedient to exempt such class of establishments. Under Section 17, the appropriate Government is empowered to exempt from operation or all or any of the provisions of the Scheme, any establishment, if in the opinion of the appropriate Government, the rules of its provident fund with respect to the rates of contribution are not less favourable than those specified in Section 6 and the employees are also in enjoyment of other provident fund benefits which are not less favourable to the employees as compared to the benefits provided under the Act or the Scheme in relation to the employees in any other establishment of a similar character. Similarly, under Section 17(1)(b) it may exempt any establishment, if the employees of such establishment are in enjoyment of benefits in the nature of provident fund, pension or gratuity, which are on the whole not less favourable to such employees as compared to the benefits provided under the Act or the Scheme in any other establishment of a similar character. However, as per the proviso, before granting such exemption, the Central Board is required to be consulted. However, where even such exemption is granted under Section 17(1A), certain provisions such as Sections 6, 7A, 8 and 14B shall apply to the employer so far as may be and in case of default the penal provision of Section 14 is also applicable notwithstanding such exemption. 6. The main contention of the learned counsels appearing for the petitioners are to the effect that as per the previous notification, the Banks which were not having any branch outside the State were coming within the scope of the Act and the Banks which were having branches outside the State were not coming within the purview of the Act. It is contended that in the above background and particularly keeping in view the fact that all the Banks are required to provide for provident fund as per the Sastry award, there is no justification to amend the notification issued under Section 1(3)(b), whereunder the Act is made applicable to all the Banks except the nationalised banks. It is submitted that there is no basis to treat the banks having branches outside the State on a different footing as compared to the nationalised banks and this would amount to discrimination and violative of the provisions contained in Article 14 of the Constitution of India. In support of such contention, the learned counsels have placed strong reliance upon a decision of the single Judge of Karnataka https://hcservices.ecourts.gov.in/hcservices/ High Court reported in 2007-I-LLJ 116 (KARNATAKA BANK LTD., MANGALORE AND OTHERS v. UNION OF INDIA) (cited supra). In the aforesaid decision, the very same question was posed. There it was observed by the learned single Judge as follows :- "13. There is no serious dispute as to the service conditions of the employees of the petitioners and that of Nationalised Banks being alike in all respects. Nor is there any dispute of the petitioners being governed by the provisions of the Banking (Regulation) Act, 1949 and their business, management and administration being controlled by the Reserve Bank of India under the provisions of the Banking (Regulation) Act and the Reserve Bank of India Act, 1934. 14. There are no material and characteristic difference between the petitioners and Nationalised Banks for purposes of implementation of the Provident Fund and Pension Schemes under the Provident Fund Act and Schemes. There is therefore, no basis for exclusion of the nationalised Banks under the impugned notifications." 7.The Sastry Award indicates that one of the issues referred to such Tribunal was relating to 'Provident fund'. The banking companies having branches in more than one State were parties to such reference. The Sastry Award gave clear direction that the banks should have an appropriate Provident Fund Scheme and accordingly all such banks, which had branches in more than one State, had introduced Provident Fund Schemes in terms of the Award. That was obviously the basic reason why as per the Notification dated 31.01.1966 the Government of India had extended the provisions of the Act only to the banks having branches “within one State”, because, obviously, the banks having branches in more than one State had already introduced Provident Fund Schemes in accordance with the Sastry Award. It is, of course, true that in 1969 certain banks were nationalised. However, those nationalised banks having branches in more than one State, like the other banks having branches in more than one State, continued to be outside the purview of the Act. It is also not in dispute that subsequently Pension Scheme has been introduced in such banks having branches in more than one State pursuant to different bi-partiate settlements. 8.Keeping in view the above aspects, the question is whether the Notification now applicable to non-nationalised banks having branches in more than one State, including such banks within the purview of the Provident Fund Scheme, can be held to be arbitrary and discriminatory when compared to the nationalised banks which obviously have branches in more than one State. https://hcservices.ecourts.gov.in/hcservices/ 9.Since hitherto all the banks having branches in more than one State were treated alike and had not been included within the Scheme obviously because of their own Provident Fund Scheme as per the Sastry Award and Pension Scheme as per the subsequent settlements. 10.In the absence of any justification given by the respondents, the Notification appears to be arbitrary, discriminatory and not based on any justifiable consideration. In this context, it is to be noticed that in the counter affidavit filed on behalf of all the respondents, except highlighting the objects and reasons of the Act and the beneficial purpose it seeks to achieve, nothing has been indicated as to why, out of all the banks having branches in more than one State, only non-nationalised banks have been included in the Notification and the nationalised banks will continue to be outside the Scheme. There is no ineligible basis for the classification nor there is any nexus, far less, any reasonable nexus for the object to be achieved and the classification made. In such view of the matter, we are in respectful agreement with the views expressed by the learned Single Judge of the Karnataka High Court in the decision relied upon by the petitioners. 11.Apart from the above, as per the analysis of the provisions made, it is apparent that when adequate provisions are made for the payment of Provident Fund comparable to the benefits available under the Act, a provision for exemption has been made as per Section 16 or Section 17 of the Act, as the case may be. In the present case, the Employees Union of many of the Banks concerned have either filed independent writ petition challenging the Notification or have filed affidavits supporting the stand of the Management regarding the Notification. In other words, the employees are obviously convinced that more beneficial provisions are available under the Provident Fund Scheme or Pension as introduced by the concerned banks. Even though this may not be the sole guiding factor for considering the question as to whether the Notification is arbitrary, it is obviously relevant factor. If the above factor can be taken for consideration for applying exclusion, obviously the factor can be considered for deciding about the arbitrary inclusion. 12.Similarly, keeping in view the provisions contained in Section 16, the fact that the concerned banks have already made provisions for payment of Provident Fund or Pension which apparently appear to be beneficial to the employees, the contention that the inclusion of such banks by amending the Notification appears to be arbitrary. https://hcservices.ecourts.gov.in/hcservices/ 13.The petitioners have also highlighted the anomalous position that may emerge among the bank employees if such banks are brought under the purview of the Act and the Scheme as the employees whose pay exceeds particular amount would find themselves out of the umbrella of the benefits presently available. This submission made on behalf of the petitioners also appears to be relevant submission which apparently has not been considered while the impugned Notification was issued. 14.Learned counsel for the respondent placed reliance on various decisions of the Supreme Court upholding the validity of the Act and highlighting the benefits and social purpose. We have not specifically referred to all those decisions as, in our considered opinion, the question is not relating to the validity of the Act or the Scheme made thereunder as such but, relating to justifiability of the amendment where under the banks having branches in more than one State, who were not hitherto coming within the purview of the Act because of their own Provident Fund Scheme as per the Sastry Award, are arbitrarily brought within the provisions of the Act. 15.For the aforesaid reasons, we are unable to sustain the validity of the Notification, where under all the banks except nationalised banks have been brought under the purview of Provident Fund Scheme notwithstanding the fact that all the banks having branches in more than one State have their own Provident Fund Schemes and Pension Schemes which are atleast comparable with the benefits available under the Act and the Scheme made thereunder. 16.For the aforesaid reasons, we allow the writ petitions and quash the impugned Notification. The net result of the above would be that the banks having branches in more than one State would continue to be governed by their own Provident Fund Schemes and Pension Schemes and would not be coming with the coverage of Employees Provident Fund Scheme under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. No costs. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. dpk https://hcservices.ecourts.gov.in/hcservices/ To 1. The Secretary to the Government of India Ministry of Labour, New Delhi. 2. The Enforcement Officer, Employees Provident Funds CH.XVI Division, Chennai 600 014. 3. The Asst. Provident Fund Commissioner Office of the Regional Provident Fund Commissioner, Employees Provident Fund (Tamil Nadu & Pondicherry), No.20, Royapettah High Road, Chennai 600 014. 4. The Regional Provident Fund Commissioner , Sri Complex Madurai Road, Tiruchirapalli-8 5. The Enforcement Officer E.P.F. Kamaraj Road, Kumbakonam 6.The Regional Provident fund Commissioner, Tamilnadu 20, Royapettah High Road, Chennai-14. 7.The Enforcement Officer Employees provident Funds Municipal Shopping Complex Azad Road, Karur 8.The Regional Commissioner of Provident Funds, Tirunelveli 6 ccs to Mr.T.S. Gopalan, Advocate, Sr. 16020 1 cc to Mr.R. Sunilkumar, Advocate, SR. 16342 1 cc to Mr.V. Vibhishanan, Advocate, sr. 16320 2 ccs to Mr.S. Ramasubramaniam, Associates, Sr. 16591 WP.NOs.15728/2000 & batch BV (CO) kk 3/4 https://hcservices.ecourts.gov.in/hcservices/