Case: The Officer In?-Charge, Sub-?Regional Provident Fund Office &amp; Anr Vs. M/s Godavari Garments Limited

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 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 days2.8. The Respondent Company challenged the aforesaid Order by filing W.P. No. 1615 of 1993 before the Bombay High CourtThe 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 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

Court's reasoning:
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 defects6.3. 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 directly by the Respondent Company on a perpiece 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. (1974) 3 SCC 498  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 heldOn 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) 4 SCC 464 . heldThe 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 theCourt in The Daily Partap v. The Regional Provident Fund Commissioner, Punjab, Haryana, Himachal Pradesh and Union Territory, Chandigarh, (1998) 8 SCC 90. held… 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 thethe 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 Respondentn 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) 4 SCC 464 . heldWe 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 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 wellrecognised 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 decades 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 employers 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. 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 appellantemployer was untenable and ought to have been overruled and we hereby overrule it.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 alsoAct.6.8. The EPF Act is a beneficial social welfare legislation which was enacted by the Legislature for the benefit of theRegional Provident Fund Commissioner v. The Hooghly Mills Company Ltd. and2012 (1) SCALE 422.