Case: The Nagpur Glass Works Limited, Nagpur City Vs. The Regional Provident Fund Commissioner &amp; Others

support of this argument he relied upon the provisions of Sec. 83 of the Indian Trusts Act, which runs thus :"83. Where a trust is incapable of being executed, or where the trust is completely executed without exhausting the trust-property, the trustee, in the absence of a direction to the contrary, must hold the trust-property, or so much thereof as is unexhausted, for the benefit of the author of the trust or his legal representative."It is clear that the section in terms cannot apply to our present case. It cannot be said that the trust is incapable of being executed or has been completely executed. The most important point to be noted is that under Sec. 83 the property or so much thereof as remains unexhausted is held for the benefit of the author of the trust or his legal representative. Mr. Phadke contended that even if the section in terms does not apply to the present case the spirit underlying the section may be applicable. Assuming that the spirit underlying the section is applicable to a case where certain amounts remained unpaid to the beneficiary, still the question remains as to whether there is any person who can be called the author of the trust. Mr. Phadke suggests that the employer can be regarded as the author of the trust so far as his own contributions are concerned. We cannot persuade ourselves to accept this argument. The trust in relation to the Employees Provident Fund is not the creation of any individual. It is a statutory trust. The contributions, which an employer makes towards the Fund of the trust are not his voluntary contributions. The employer is under statutory obligation to make those contributions. The employer, therefore, cannot be called the author of the trust without doing violence to language. In the present case the statute has provided that the moneys remaining undisbursed to the individual employees shall stand to the credit of the reserve account of the Fund. In other wards instead of the individual beneficiary the whole class of employees of a particular establishment will be the beneficiary so far as the undisbursed sums are concerned. This provision is based on the analogy of the doctrine of cypres. In our view, there is no question of the reversion of the amounts remaining undisbursed to the source from which they came. Once the contributions are made, the employer is divested of his dominion over the same. These contributions become vested in the board of trustees of the Provident Fund. All that sub-section (5) lays down is that the sums remaining undisbursed, which originally stood in the account of the individual employee would be transferred to the general reserve account of the Fund.14. Before concluding this topic reference must be made to a case reported in 1958-1 All ER 37 - Re Gillingham Bus Disaster Fund - which was cited by Mr. Phadke in the course of his argument. The facts of that case were as follows :- In December 1951, a motor vehicle ran into a column of cadets, who were marching along a road in Gillingham, killing some of them and injuring others. The mayors of Gillingham, Rochester and Chatham decided to open a memorial fund, and the town clerk of Gillingham wrote a letter to a daily newspaper referring to that decision and stating that the fund was "to be devoted, among other things, to defraying the funeral expenses, caring for the boys who may be disabled, and them to such worthy cause or causes in memory of the boys who lost their lives, as the mayor may determine". Money was contributed to the fund anonymously by means of street collections, and also, but to a smaller extent, by substantial gifts from known persons. After so much of the fund as was required to discharge the primary objects (i.e., the defraying of general expenses and the caring for disabled boys) had been spent for the benefit of the victims of the accident, application was made to the court to determine what should be done with the remainder. It was admitted that the primary objects of the Fund were not charitable. Held, the remainder of the fund was held on a resulting trust in favour of the donors because -(i) treating the town clerks letter as the instrument declaring trusts, the trust for "worthy causes" failed for uncertainty, and(ii) the defect was not cured by the Charitable Trusts (Validation) Act, 1954........We are unable to understand how this decision assists Mr. Phadke in the argument which he has advanced. It seems to have been assumed in the above case that there was an instrument declaring trust and that instrument was provided by the town clerks letter. In the present case, as pointed out, there is no instrument of trust, and the trust is a statutory one. Furthermore the words "trust for worthwhile causes" as appearing in the instrument of trust were vague and, therefore, it was held that the trust failed for uncertainty. The trust having failed, it logically follows that the amount must be held in trust for the original donors. There is no question in the present case of the trust failing for uncertainty. We must, therefore, hold that the amount remaining undisbursed to the particular employees must stand to the credit of the reserve account of the Fund as provided for in paragraph 69 of the Scheme.15. Mr. Phadke finally argued that in any case the administrative charges cannot be levied because no work of administrative character could be done or was done in respect of the contributions which have not been collected. We are unable to accept this argument. We have already held that the petitioner is liable to make his contributions for his share in respect of dearness allowance payable to the employees with effect from 1st November 1952. It that is so, the administrative charges, which are consequential upon the above payment, are admissible and, therefore, can be recovered from the employees.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It is not, however, disputed that the Scheme under the Act i.e."The Employees Provident Fund Scheme, 1952", has been applied to the entire area in which the petitioners factory is situate. We are not prepared to accept the proposition that the application of the Scheme must be in respect of each of the establishments. There is nothing either in the Act or in the Scheme to warrant such an assumption. If that is so, then it can hardly be disputed that the Scheme has been applied to the establishment inis, however, to be noted that paragraph 26 applies to an establishment to which the Employees Provident Fund Scheme, 1952, has been applied for the first time. After the application of the Scheme every employee who fulfils the conditions laid down in paragraph 26, namely, that he has completed one years service and that he is not excluded, shall be required to become a member of the Fund. That means that he will be compelled to subscribe to the Fund which has been newly applied to the establishment. No option will be left to him. All the same Mr. Phadke is right in contending that the employee does not automatically become a member but he becomes such a member only after he subscribes to the Fund, which, of course, he will be compelled to do. Paragraph 26, however, is obviously inapplicable to an establishment where there is already a Provident Fund Scheme in existence. That Scheme may be a Scheme recognised under the Indian Income-tax Act or a Scheme under the Provident Funds Act, 1925. Whatever that may be, if there is already in existence a Provident Fund Scheme then the appropriate paragraph applicable would be paragraphif the member exercises an option in favour of continuing to subscribe to the old Fund, the last proviso to paragraph 27 makes it clear that he will not be allowed to continue to subscribe to the existing Provident Fund unless the authorities are satisfied that the Provident Fund rules are in conformity with or more favourable to the employee, than those specified in the Act or the Scheme. It will thus be clear that the present case will be governed by paragraph 27 because there was already a Provident Fund Scheme in existence, under the Provident Funds Act, 1925. It is not the case of the petitioners that any of the members had exercised their option in favour of continuing to subscribe to the old Fund. If that is so, then it is clear that the employees must be deemed to have become members of the Fund established under the Provident Fund Scheme,are unable to accept this argument. Under Sec. 15(2) the accumulations in the existing Fund are statutorily transferable to the Fund established under the new Scheme. At this stage, we may set out the line of Mr. Peerbhoys reply :- Section 15(2) creates a legal fiction that the accumulation standing in the old Provident Fund stand credited to the Fund established under the new Scheme. It is true that before the accumulations in the Fund are actually transferred, it is necessary that certain steps are taken by the authorities who are in charge of that Fund and these steps have been enumerated in paragraph 28.But if the authorities in charge of the management did not take the necessary steps and kept the matter pending for years together, that does not mean that the Fund under the new Scheme has not been established, nor does it mean that the accumulations do not become vested in the new Scheme. The authorities in charge of the management cannot be allowed to take advantage of their own default. If the authorities prove intransigent then coercive process for making recovery can be started by the Government under Sec. 8 of the Act. It is not necessary to express any opinion on this part of the argument. Even assuming that Mr. Phadkes argument is correct, it will have application only so far as the accumulations are concerned. It may be that the accumulations do not vest in the new Fund so long as they have not been actually transferred and the necessary formalities in effecting the transfer have not been got through. That does not, however, mean that the Fund has not come into being or that so far as the future subscriptions are concerned the liabilities have not accrued due. The distinction suggested above is implicit in the wording of Clause (5) of paragraphour view, that does not mean that the liability to pay contributions arises only after the issue of a notification mentioned in clause (5) of paragraph 28, nor does it mean that membership of the Fund springs into existence only after the issue of the notification. It is one thing to say that the ownership in the accumulations will only become vested in the Board after the accumulations have been transferred to the new Fund and quite another to say that the Fund has not come into existence for any purposeclaim made on the petitioner in respect of contributions on the basic salary as well as the dearness allowance relates to a period from 1st November 1952 to 1st April 1955, which is the date of demand. In our view, the claim is legal and valid and it is not correct to say either that the claim is premature or that it is being made to have retrospectiveis an admitted fact that so far as the dearness allowance is concerned the employer did not make the necessary deductions from the salaries of the employees. Even so, according to the Government, the employer remains statutorily liable to make payment of the employers share of the contributions together with that of the employees. It appears that the Government had made a demand upon the petitioner-establishment on that basis. It further appears that the Government was pleased to exempt the employer from payment of the employees share of contributions so far as the dearness allowance is concerned. This exemption appears to have been granted on equitable considerations. The employer had not recovered the employees share and it was not possible for the employer to make those recoveries with retrospective effect. These considerations may have influenced the Government in allowing thein the present case the exemption granted by the Government has enured to the benefit of the employer because the employer has been exempted from making payment so far as the employees share is concerned, although under the statute the employer is responsible for not only paying his share of the contribution but also the share of theappears that the petitioner was contending that his establishment was not governed by the Provident Funds Act and the Scheme framed thereunder. Even after the decision of the High Court the petitioner seems to have continued to harbour the impression that the Scheme was not applicable with effect from 1st November 1952, and that it would come into operation after the same was extended by a notification. After a demand from him on 17th September 1957, the petitioner started correspondence with the Regional Commissioner. In his letter dated 5th February 1958 he has mentioned the ground on which he disputed his liability. The Regional Commissioner by his letter dated 11th March 1958 informed the petitioner that he may approach the Government of India for clarification since they had the authority to give a decision on disputed points. The Regional Commissioner presumably had section 19-A in his mind. In pursuance of the letter of the Regional Commissioner the petitioner sent a letter dated 18th March 1958 seeking for clarification in respect of the points raised by him. That letter does not in terms refer to Sec. 19-A but we are prepared to assume that the letter or the memorandum was made with a view to call upon the Government to decide the matter by virtue of the powers vested in them under sectionis not necessary for us to consider as to the effect of any decision taken by the Government under Sec. 19-A and whether the order of the Central Government can or cannot be challenged even under Article 226 of the Constitution. The fact remains that in the present case the Government have not taken any decision and the letters written by the petitioner have simply gone unanswered. Merely because the letters have gone unanswered in regard to a difficulty, which is of the making of the petitioner himself, it does not stand to reason to hold that the Regional Commissioner cannot enforce the demand made by him and must stay his hands till the Government have taken a final decision in that respect. In our view, the decision of the Madras High Court is not correct if it is intended to apply to the first clause, namely with regard to the difficulty in giving effect to the Act. We refrain from expressing any opinion as to whether the above decision is correct or not in so far as it relates to specific doubts arising in relation to clauses (i) to (iv), as that question does not arise in the present case, nor are we called upon to consider whether the Central Government is constituted into a tribunal or a simple administrative machinery has been created to try and settle the disputes or clear the doubts referred to in thatfar as the petitioners share in these sums is concerned according to Mr. Phadkes arguments, they must revert back to the employer.These sums cannot be forfeited as is sought to be contended by the respondents. In order to appreciate this argument it is necessary to refer to the provisions of paragraph 69 of the Employees Provident Funds Scheme,forfeiture is one of the matters for which provision can be made in the Scheme. It is not, therefore, correct to say that the provision for forfeiture exceeds the power conferred by Sec. 6 (2) or the items enumerated in Schedule II. The second line of attack against the provision of forfeiture as set out in the petition was that this provision was of an exproprietary character and, therefore, offended the provisions of Article 19 of the Constitution of India. Mr. Phadke however, did not press this aspect of the matter and, therefore, we need not consider the same.Phadke contended that even if the section in terms does not apply to the present case the spirit underlying the section may be applicable.Assuming that the spirit underlying the section is applicable to a case where certain amounts remained unpaid to the beneficiary, still the question remains as to whether there is any person who can be called the author of the trust. Mr.Phadke suggests that the employer can be regarded as the author of the trust so far as his own contributions are concerned.We cannot persuade ourselves to accept this argument. The trust in relation to the Employees Provident Fund is not the creation of any individual. It is a statutory trust. The contributions, which an employer makes towards the Fund of the trust are not his voluntary contributions. The employer is under statutory obligation to make those contributions. The employer, therefore, cannot be called the author of the trust without doing violence to language. In the present case the statute has provided that the moneys remaining undisbursed to the individual employees shall stand to the credit of the reserve account of the Fund. In other wards instead of the individual beneficiary the whole class of employees of a particular establishment will be the beneficiary so far as the undisbursed sums are concerned. This provision is based on the analogy of the doctrine of cypres. In our view, there is no question of the reversion of the amounts remaining undisbursed to the source from which they came. Once the contributions are made, the employer is divested of his dominion over the same. These contributions become vested in the board of trustees of the Provident Fund. All that sub-section (5) lays down is that the sums remaining undisbursed, which originally stood in the account of the individual employee would be transferred to the general reserve account of thethe present case, as pointed out, there is no instrument of trust, and the trust is a statutory one. Furthermore the words "trust for worthwhile causes" as appearing in the instrument of trust were vague and, therefore, it was held that the trust failed for uncertainty. The trust having failed, it logically follows that the amount must be held in trust for the original donors. There is no question in the present case of the trust failing for uncertainty. We must, therefore, hold that the amount remaining undisbursed to the particular employees must stand to the credit of the reserve account of the Fund as provided for in paragraph 69 of the Scheme.Mr. Phadke finally argued that in any case the administrative charges cannot be levied because no work of administrative character could be done or was done in respect of the contributions which have not been collected.We are unable to accept this argument. We have already held that the petitioner is liable to make his contributions for his share in respect of dearness allowance payable to the employees with effect from 1st November 1952. It that is so, the administrative charges, which are consequential upon the above payment, are admissible and, therefore, can be recovered from the employees.