THE OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE & ANR. versus M/S GODAVARI GARMENTS LIMITED
[2019] 9 S.C.R. 1101, Supreme Court of India, 2019
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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THE OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT
FUND OFFICE & ANR.
v.
M/S GODAVARI GARMENTS LIMITED
(Civil Appeal No. 5821 of 2019)
JULY 24, 2019
[ABHAY MANOHAR SAPRE AND INDU MALHOTRA, JJ.]
Employees’ Provident Fund and Miscellaneous Provisions
Act, 1952:
ss. 7-A, 2(f) – Employee – Definition of – Company engaged
in producing garments, employed women workers – Workers
provided raw materials-fabric, thread, buttons, to stitch the
garments at their homes as per the specifications given by the
company and the workers provided them to the company –
Workers, if covered by definition of employee u/s. 2(f) – Held: Defi-
nition of “employee” u/s. 2(f) includes any person engaged either
directly or indirectly in connection with the work of an
establishment, and are paid wages – Women workers were directly
engaged for wages in connection with the work of the company –
They were paid wages directly by the company on a per-piece basis
for every garment stitched – Merely because the women workers
were permitted to do the work off site, would not take away their
status as employees of the company – Further, the Company had
the absolute right to reject the finished product, in case of any
defects – Thus, the women workers are covered by the definition of
“employee” u/s. 2(f) – Order passed by the High Court that
workers are not the employees of the company, set aside – Com-
pany to deposit the amount towards Provident Fund dues of the
workers within the stipulated
period.
Interpretation of the EPF Act – Held: Employees’ Provident
Fund and Miscellaneous Provisions Act is a beneficial social welfare
legislation, enacted by the Legislature for the benefit of the workmen
– Thus, the provisions have to be interpreted in a manner, beneficial
to the workmen.
[2019]  9 S.C.R. 1101
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Allowing the appeal, the Court
HELD: 1.1 The Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952 is a beneficial social welfare
legislation which was enacted by the Legislature for the benefit
of the workmen. Hence, the provisions under the EPF Act have
to be interpreted in a manner which is beneficial to the
workmen. [Para 6.8] [1112-C-D]
Regional Provident Fund Commissioner v. The Hooghly
Mills Company Ltd. and Ors.2012 (1) SCALE
422:[2012] 1 SCR 363; The Daily Partap v. The
Regional Provident Fund Commissioner, Punjab,
Haryana, Himachal Pradesh and Union Territory,
Chandigarh (1998) 8 SCC 90 : [1998] 2 Suppl. SCR
482 -  referred to.
1.2 The definition of “employee” under Section 2(f) of the
EPF Act is an inclusive definition, and is widely worded to
include any person engaged either directly or indirectly in
connection with the work of an establishment, and are paid wages.
[Para 6.1, 6.9] [1107-D-E; 1112-E-F]
1.3 In the instant case, the women workers employed by
the respondent company were provided all the raw materials,
such as the fabric, thread, buttons, etc. from the respondent-
employer. With this material, the women workers were required
to stitch the garments as per the specifications given by the
respondent company. The women workers could stitch the
garments at their homes, and provide them to the respondent
company. The respondent company had the absolute right to
reject the finished
product i.e. the garments, in case of any
defects. The mere fact that the women workers stitched the
garments at home, would make no difference. It is the admitted
position that the women workers were paid wages directly by the
respondent company on a per-piece basis for every garment
stitched. Thus, the women workers employed by the
Respondent Company are covered by the definition of “employee”
under Section 2(f) of the EPF Act. [Para 6.2, 6.3, 6.7] [1107-E-H;
1108-A; 1112-B]
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M/s P.M. Patel & Sons and Ors. v. Union of India and
Ors. (1986) 1 SCC 32 : [1985] 3 Suppl. SCR 55 ; Sil-
ver Jubilee Tailoring House and Ors. v. Chief Inspec-
tor of Shops and Establishments and Ors. (1974) 3 SCC
498 : [1974] 1  SCR  747; Shining Tailors v. Industrial
Tribunal II, U.P., Lucknow and Ors. (1983) 4 SCC 464
- referred to.
1.4 The women workers were certainly employed for wages
in connection with the work of the Respondent Company. The
women workers were directly engaged by the Management in
connection with the work of the respondent company, which was
set up as a ready-made garments industry. The women workers
were paid wages on per-piece basis for the services rendered.
Merely because the women workers were permitted to do the
work off site, would not take away their status as employees of
the respondent company. [Para 6.9] [1112-F]
1.5 The judgment passed by the High Court is set aside.
The order passed by the appellant No. 1 is restored. The
respondent company is directed to deposit the amount assessed
by appellant No. 1 towards Provident Fund dues of the women
workers within the stipulated period. [Para 8] [1113-G]
C.E.S.C. Limited and Ors. v. Subhash Chandra Bose
and Ors. (1992) 1 SCC 441 : [1991] 2 Suppl. SCR 267
- held inapplicable.
Case Law Reference
[1974] 1 SCR 747
     relied on
Para 6.4
(1983) 4 SCC 464
     relied on
Para 6.5
[1985] 3 Suppl. SCR 55     relied on
Para 6.6
[1985] 3 Suppl. SCR 55     referred to
Para 6.6
[2012] 1
SCR 363
     referred to
Para 6.8
[1998] 2 Suppl. SCR 482   referred to
Para 6.8
[1991] 2 Suppl. SCR 267   held inapplicable
Para 7
        OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND
          OFFICE v. M/S GODAVARI GARMENTS LTD.
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5821
of 2019
From the Judgment and Order dated 27.04.2012 of the High Court
of  Judicature at Bombay, Bench at Aurangabad in Writ Petition
No. 1615 of 1993
R. R. Rajesh, Brajesh Kumar, Advs. for the Appellants.
Anoop Kandari, Nishant Ramakantrao Katneshwarkar, Advs. for
the Respondent.
The Judgment of the Court was delivered by
INDU MALHOTRA, J.
Delay condoned.
Leave granted.
1. The present Civil Appeal has been filed to challenge the Order
dated 27.04.2012 passed in W.P. No. 1615 of 1993 by the Bombay High
Court, Aurangabad Bench.
2. The background facts in which the present Civil Appeal has
been filed are briefly stated as under:
2.1. The Respondent Company is a subsidiary of the Marathwada
Development Corporation, which is an undertaking of the
Government of Maharashtra. It was covered under the
provisions of the Employees’ Provident Fund and
Miscellaneous Provisions Act, 1952 (hereinafter referred to
as “the EPF Act”) with effect from 01.01.1979.
2.2. The main objective of the Respondent Company, as per its
Memorandum of Association, was to encourage, promote,
develop, set-up or cause to be set-up a readymade garments
industry in the Marathwada Region, with a view to provide
gainful employment to people possessing skills in stitching,
tailoring, and allied activities, especially to women from the
economically weaker sections of the Society.
2.3. The Respondent
Company engaged women workers who
were provided with cut fabric, thread, buttons, etc. to be
made into garments at their own homes. The sewing
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machines used by the women workers were owned by them,
and not provided by the Respondent Company.
2.4. On 12.03.1991, Appellant No. 1 – Officer In-Charge, Sub-
Regional Provident Fund Office, issued a Show Cause
Notice to the Respondent Company calling upon it to pay
the Provident Fund contributions for the women workers.
The Balance Sheet of the Respondent Company for the year
1988 – 89, revealed large debits towards salary and wages
for direct and indirect workers, but the Respondent
Company made a false statement that it had only 41
employees.
2.5. On 30.11.1992, Appellant No. 1 issued summons to the
Respondent Company for personal hearing under Section
7-A of the EPF Act.
2.6. The representative of the Respondent Company appeared
before Appellant No. 1, and contended that the women
workers who were fabricating garments for the Respondent
Company, were not their employees, and hence not covered
by Section 2(f) of the EPF Act. Therefore, even though
wages were paid to those women workers, the Respondent
Company was not liable to pay Provident Fund contribution
in respect of them.
2.7. The Provident Fund Officer – Appellant No. 1 vide Order
dated 19.04.1993 held that the women workers engaged for
stitching garments were covered by the definition of
“employee” under Section 2(f) of the EPF Act. An amount
of Rs. 15,97,087/- was assessed towards Provident Fund
dues of the Respondent Company for the period from
November, 1979 to February, 1991. The
Respondent
Company was directed to pay the said amount within 7 days.
2.8. The Respondent Company challenged the aforesaid Order
by filing W.P. No. 1615 of 1993 before the Bombay High
Court.
       The Bombay High Court, Aurangabad bench vide Final
Judgment and Order dated 27.04.2012 allowed the Writ
Petition filed by the Respondent Company, and set aside the
      OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND
OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]
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Order dated 19.04.1993 passed by the Appellant No. 1. It
was held that the Respondent Company had no direct or
indirect control over the women workers. The conversion of
cloth into garment could be done by any person on behalf of
the women workers. Hence, the Respondent Company did
not exercise any supervisory control over the women
workers.
2.9. Aggrieved by the aforesaid Judgment, the present Civil
Appeal has been filed by the Provident Fund Office.
3. We have heard the learned Counsel for the parties, and
perused the pleadings and written submissions filed by the parties.
4. Mr. R.R. Rajesh, learned Counsel appearing on behalf of the
Appellants, submitted that the women workers employed by the
Respondent Company fall within the definition of “employee” under
Section 2(f) of the EPF Act.
Reliance was placed on this Court’s decision in M/s P.M. Patel
& Sons and Ors. v. Union of India and Ors.1to contend that the
women workers employed by the Respondent Company were covered
by the definition of “employee” under Section 2(f) of the EPF Act. Hence,
the Respondent Company is liable to pay Provident Fund contribution in
respect of those women workers.
5. Mr. Anoop Kandari, learned Counsel appearing on behalf of
the Respondent Company, submitted that there was no
employer-employee relationship between the Respondent Company and
the women workers. The women workers were not employees under
Section 2(f) of the EPF Act. They
were independent contractors.
It was further submitted that the sewing machines used by the
women workers were owned by them, and not provided by the
Respondent Company. The women workers worked from their homes,
and not at the production centers of the Respondent Company. Hence,
the work performed by them, could be done by their relatives, or any
other person on their behalf. Furthermore, the women workers were not
bound to report to the production centers regularly, nor were they
required to work at the production centers. The Respondent Company
exercised no supervisory control over the women workers.
1(1986) 1 SCC 32.
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6. The short issue which arises for consideration is whether the
women workers employed by the Respondent Company are covered by
the definition of “employee” under Section 2(f) of the EPF Act or not.
Section 2(f) of the EPF Act is set-out hereinbelow for ready
reference:
“(f) “employee” means any person who is employed for wages
in any kind of work, manual or otherwise, in or in
connection with the work of an establishment, and who gets,
his wages directly or indirectly from the employer, and
includes any person,—
(i) employed by or through a contractor in or in connection
with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice
engaged under the Apprentices Act, 1961 (52 of 1961), or
under the standing orders of the establishment;”
   (emphasis supplied)
6.1. The definition of “employee” under Section 2(f) of the EPF
Act is an inclusive definition, and is widely worded to include
any person engaged either directly or indirectly in connection
with the work of an establishment.
6.2. In the present case, the women workers employed by the
Respondent Company were provided all the raw materials, such
as the fabric, thread, buttons, etc. from the Respondent –
Employer. With this material, the women workers were
required to stitch the garments as per the specifications given
by the Respondent Company. The women workers could stitch
the garments at their homes, and provide them to the
Respondent Company. The Respondent Company
had the
absolute right to reject the finished product i.e. the garments,
in case of any defects.
6.3. The mere fact that the women workers stitched the
garments at home, would make no difference. It is the
admitted position that the women workers were paid wages
      OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND
OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]
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directly by the Respondent Company on a per-piece basis for
every garment stitched.
6.4. The issue in the present case is squarely covered by the
decision of this Court in Silver Jubilee Tailoring House and
Ors. v. Chief Inspector of Shops and Establishments and
Ors.2 The appellants therein were engaged in the business of
producing garments. They employed workers who were
provided with the cloth, and were instructed by the appellants
how to stitch it. The workers were paid on piece-rate basis. If
a worker failed to stitch a garment as per the instructions, the
appellants rejected the work, and asked the worker to re-stitch
the garment. This Court held that such workers fell within the
definition of “person employed” under Section 2(14) of the
Andhra Pradesh (Telangana Area) Shops and Establishments
Act, 1956. It was held that:
“35. Quite apart from all these circumstances, as the
employer has the right to reject the end product if it does
not conform to the instruction of the employer and direct
the worker to restitch it, the element of control and
supervision as formulated in the decisions of this Court is
also present.”
  (emphasis supplied)
6.5. On the issue where payment is made by piece-rate to the
workers, would they be covered by the definition of “employee”,
this Court in Shining Tailors v. Industrial Tribunal II, U.P.,
Lucknow and Ors.,3 held that:
“5. We have gone through the record and especially the
evidence recorded by the Tribunal. The Tribunal has
committed a glaring error apparent on record that
whenever payment is made by piece rate, there is no
relationship of master and the servant and that such
relationship can only be as between principal and
principal and therefore, the  respondents were
independent contractors. Frankly, we must say that the
2(1974) 3 SCC 498.
3(1983) 4 SCC 464.
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Tribunal has not clearly grasped the meaning of what is
the piece rate, If every piece rated workmen is an
independent contractor, lakhs and lakhs of workmen in
various industries where payment is correlated to
production would be carved out of the expression
‘workmen’ as defined in the Industrial Disputes Act. In
the past the test to determine the relationship of employer
and the workmen was the test of control and not the method
of payment. Piece rate payment meaning thereby payment
correlated to production is a  well-recognised mode of
payment to industrial workmen. In fact, wherever possible
that method of payment has to be encouraged so that there
is utmost sincerity, efficiency and single minded devotion
to increase production which would be beneficial both to
the employer, the workmen and the nation at large. But
the test employed in the past was one of determining the
degree of control that the employer wielded over the
workmen. However, in the identical situation in  Silver
Jubilee Tailoring House and Ors. v. Chief Inspector of
Shops and Establishments and Anr. (1973) IILLJ 495 SC
Methew, J. speaking for the Court observed that the
control idea was more suited to the agricultural society
prior to Industrial Revolution and during the last two de-
cades the emphasis in the field is shifted from and no
longer rests  exclusively or strongly upon the question of
control. It was further observed that a search for a
formula in the nature of a single
test will not serve the
useful purpose, and all factors that have been referred to
in the cases on topics, should be considered to tell a
contract of service. Approaching the  matter from this
angle, the Court observed that the employer’s right to
reject the end product if it does not conform to the
instructions of the employer speaks for the element of
control and  supervision. So also the right of removal of
the workman or not to give the work has the element of
control and  supervision. If these aspects are considered
decisive, they are amply satisfied in the facts of this case.
      OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND
OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]
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The Tribunal ignored the well laid test in law and
completely misdirected itself by showing that piece rate
itself indicates a relationship of  independent contractor
and error apparent on the record   disclosing a total lack
of knowledge of the method of  payment in various
occupations in different industries. The right of rejection
coupled with the right to refuse work would certainly
establish master servant relationship and both these tests
are amply satisfied in the facts of this case. Viewed from
this angle, the respondents were the workmen of the
employer and the preliminary objection therefore, raised
on behalf of the appellant-employer was untenable and
ought to have been overruled and we hereby overrule it.”
   (emphasis supplied)
6.6. In M/s P.M. Patel & Sons and Ors. v. Union of India and
Ors.,4 the appellants therein were engaged in the manufacture
and sale of bidis. The appellants engaged contractors, and the
contractors engaged workers who rolled the bidis at their own
homes after obtaining the raw materials either directly from
the appellants, or through the contractors. The appellants
contended that those workers were not covered by the
definition of “employee” under Section 2(f) of the EPF Act.
This Court rejected the contentions raised by the appellants
therein, and held that:
“8. … Clause (f) of Section 2 of that Act defines an
“employee” to mean “any person who is employed for
wages in any kind
of work, manual or otherwise, in or in
connection with the work of an establishment, and who
gets his wages directly or indirectly from the employer,
and includes any  person employed by or through a
contractor in or in connection with the work of the
establishment.” It will be noticed that the terms of the
definition are wide. They include not only persons
employed directly by the employer but also persons
employed through a contractor. Moreover, they include
not only persons employed in the factory but also
4(1986) 1 SCC 32.
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persons employed in connection with the work of the
factory. It seems to us that a home worker, by virtue of the
fact that he rolls beedis, is involved in an activity
connected with the work of the factory. We are unable to
accept the narrow construction sought by the petitioners
that the words “in connection with” in the definition of
“employee” must be confined to work performed in the
factory itself as a part of the total process of the
manufacture.
...
10. In the context of the conditions and the circumstances
set out earlier in which the home workers of a single
manufacturer go about their work, including the
receiving of raw material, rolling the beedis at home and
delivering them to the manufacturer subject to the right
of rejection there is sufficient evidence of the requisite
degree of control and   supervision for establishing the
relationship of master and servant between the
manufacturer and the home worker. It must be remembered
that the work of rolling beedis is not of a sophisticated
nature, requiring control and supervision at the time when
the work is done. It is a simple operation which, as
practice has shown, has been performed satisfactorily by
thousands of illiterate workers. It is a task which can be
performed by young and old, men and women, with equal
facility and it does not require a high order of skill. In the
circumstances, the right of rejection can constitute in
itself an effective degree of supervision and control. We
may
point out that there is evidence to show that the
rejection takes place in the presence of the home worker.
That factor, however, plays a merely supportive role in
determining the existence of the relationship of the
master and servant. The petitioners point out that there is
no element of personal  service in beedi rolling and that it
is open to a home worker to get the work done by one or
the other member of his family at home. The element of
      OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND
OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]
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personal service, it seems to us, is of little significance
when the test of control and supervision lies in the right
of rejection.”
   (emphasis supplied)
6.7. The aforesaid judgments make it abundantly clear that the
women workers employed by the Respondent Company are
covered by the definition of “employee” under Section 2(f) of
the EPF Act.
6.8. The EPF Act is a beneficial social welfare legislation which
was enacted by the Legislature for the benefit of the
workmen.5 This Court in The Daily Partap v. The Regional
Provident Fund Commissioner, Punjab, Haryana, Himachal
Pradesh and Union Territory, Chandigarh,6 held that:
“9. … It has to be kept in view that the Act in question, is
a beneficial social welfare legislation meant for the
protection of weaker sections of society, namely,
workmen who had to eke out their livelihood from the
meagre wages they receive after toiling hard for the
same.”
Hence, the provisions under the EPF Act have to be interpreted
in a manner which is beneficial to the workmen.
6.9. In the present case, the women workers were certainly
employed for wages in connection with the work of the
Respondent Company. The definition of “employee” under
Section 2(f) is an  inclusive definition, and includes workers
who are engaged either   directly or indirectly in connection
with the work of the establishment, and are paid wages.
In the present case, the women workers were directly engaged
by the
Management in connection with the work of the Respondent
Company, which was set up as a ready-made garments industry in
Marathwada. The women workers were paid wages on per-piece basis
for the services rendered. Merely because the women workers were
permitted to do the work off site, would not take away their status as
employees of the Respondent Company.
5 Regional Provident Fund Commissioner  v.  The Hooghly Mills Company
Ltd. and Ors. , 2012 (1) SCALE 422.
6(1998) 8 SCC 90.
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7. The Respondent Company placed reliance on this Court’s
decision in C.E.S.C. Limited and Ors. v. Subhash Chandra Bose and
Ors.,7wherein it washeld that:
“14. … In the textual sense ‘supervision’ of the principal
employer or his agent is on ‘work’ at the places envisaged
and the word ‘work’ can neither he construed so broadly to
be the final act of acceptance or rejection of work, nor so
narrowly so as to be supervision at all limes and at each and
every step of the work. A harmonious construction alone
would help carry out the purpose of the Act, which would
mean moderating the two extremes. When the employee is put
to work under the eye and gaze of the principal employer, or
his agent, where he can be watched secretly, accidentally, or
occasionally, while the work is in progress, so as to
scrutinise the quality thereof and to detect faults therein, as
also put to timely remedial measures by directions given,
finally leading to the satisfactory completion and acceptance
of the work, that would in our view be supervision for the
purposes of Section 2(9) of the Act.”
The decision in C.E.S.C. Limited (supra) however, is not
applicable to the facts of the present case. In that case, this Court
interpreted the meaning of the term “supervision” as used in the
definition of “employee” Section 2(9) of the Employees’ State
Insurance Act, 1948. However, the term “supervision” is nowhere used
in the definition of “employee” under Section 2(f) of the EPF Act. The
decision in P.M. Patel(supra) could not be used to interpret the word
“supervision”    under the Employees’ State Insurance Act, 1948
because the said word has not been used in Section 2(f) of the EPF Act.
8. In view of the aforesaid discussion, the judgment passed by the
Bombay High Court vide the Impugned Order dated 27.04.2012, being
contrary to settled law, is set aside.
The Order dated 19.04.1993 passed by the Appellant No. 1 is
restored. The Respondent Company is directed to deposit the amount
assessed by Appellant No. 1 towards Provident Fund dues of the women
workers within 1 month from the date of this Judgment.
      OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND
OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]
7(1992) 1 SCC 441.

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Ordered accordingly.
Nidhi Jain
                                                 Appeal allowed.
The Civil Appeal is allowed in the aforesaid terms. All pending
Applications, if any, are accordingly disposed of.