Case: Modern Transportation Consultation Services Pvt. Ltd. and Ors Vs. Central Provident Fund Commissioner, Employees Provident Fund Organisation and Ors

3. The relevant factual aspects leading to the question aforesaid are not of much controversy and could be briefly summarised as follows:3.1. The appellant No. 1, a Private Limited Company, had been engaged in manning the Captive Railway System of the respondent No. 4-Damodar Valley Corporation (DVC). The appellant No. 2 is said to be a Director of the appellant No. 1-company. The appellants would submit that their only connection with DVC had been a contract to supply the personnel for manning the cabins and gates on the railway-road; and they were receiving the remuneration for supplying the aforesaid personnel, who were retired employees of the Indian Railways and were engaged on a lump sum honorarium basis3.2. By his letter dated 18.02.2002, the Assistant Provident Fund Commissioner Circle-IV, Calcutta informed the appellant-company that the number of employees of its establishment being twenty-eight in the month of May, 1999, the establishment came within the purview of the Act of 1952 with effect from 01.05.1999. In reply, the Director of the appellant-company stated in his letter dated 05.03.2002 that all the persons engaged by the company, except two of them, were the retired Railway employees above 58 years of age; that all of them were working only on retainer basis; and that they were not covered under the Employees Provident Fund Scheme. The said Assistant Provident Fund Commissioner, in his letter dated 03.05.2002, refuted the contentions of the appellants while referring to Paragraph 26 of the Scheme of 1952 and while asserting, inter alia, that on and from 01.11.1990, an employee is eligible for enrolment as a member of the Scheme of 1952 from the date of joining an establishment covered under the Act of 1952; that there was no age bar for an employee to become a member of the Scheme of 1952; and that the employees in question were not excluded employees in terms of the Scheme of 19523.3. It appears that the appellant-company applied for exemption under Section 17 of the Act and Paragraph 27 of the Scheme of 1952 on the ground that the persons concerned were retired Railway employees but then, no decision was taken on such representations. On the other hand, by yet another letter dated 22.05.2002, the appellant-company elaborated on its contentions that the employees in question, being retired employees of Railways, did not come within the purview of the Act of 1952 and were to be treated as excluded employees under Paragraph 26 of the Scheme of 1952. It was stated that these employees, whilst in the service of Railways, were not covered under the Scheme of 1952 but were covered under the General Provident Fund (GPF) Scheme and had withdrawn all the superannuation benefits including Provident Fund (PF) and pension and hence, they were not covered under the Act of 1952. It was also claimed that these employees were in receipt of more favourable benefits than those available under the Scheme of 1952 and had expressed their unwillingness to become the members of the Scheme of 1952. However, the authorities related with the Employees Provident Fund Organisation (the contesting respondents herein) maintained that the employees of an establishment were eligible for enrolment as members of the Scheme of 1952 irrespective of age; and the employees of the appellant company were not excluded employees, as defined in the Scheme of 19523.4. The appellant-company having failed to remit the requisite contribution in relation to the employees concerned, the competent authority under the Act of 1952 commenced proceedings under Section 7A thereof, for determination of the money due from the appellants. By its order dated 31.12.2004, the competent authority, after having heard the appellants, determined the amount payable by the appellant-company under various heads while holding, inter alia, that the provisions of the Act of 1952 were not repugnant to the GPF Scheme; that a person was entitled to draw double or multiple pension/s; and that the retirement of the employees from Railways would not take them within the definition of excluded employees. Aggrieved, the appellants preferred the writ petition before the High Court at Calcutta [W.P. No. 2982(W) of 2005]4. In the impugned order dated 07.04.2006, the learned Single Judge of High Court, though held that the Act was applicable to the establishment of appellants but, thereafter, concluded that on superannuation, the retired employees of the Railways would fall within the definition of excluded employees. The learned Single Judge observed that an employee, who had withdrawn full amount of his accumulation in the fund, on re-employment with any establishment not exempted under Section 17 of the Act, would not be again treated as an employee to be covered under the Act. The learned Single Judge further observed that accepting the submissions of the authorities would create a situation where an employee, after being employed in any establishment and working for some time, may voluntarily retire from service and join another establishment and keep on doing so successively and get the benefit of various provisions of the Act of 1952. According to the learned Single Judge, even though the Act of 1952 is a piece of social benefit legislation, and its provisions are intended to protect the employees, who are considered to be the weaker section of society, yet, the enactment is not intended to create a largesse in favour of the employees at the cost of the employer. In the opinion of learned Single Judge, the retired employees of Railways cannot be compelled to become members of the Fund and else, the object and purpose of the expression excluded employees in the Scheme of 1952 would be rendered nugatory. The learned Single Judge also observed that when an employee earning more than Rs. 6,500/- was treated as an excluded employee because of the scale of pay as per Paragraph 2(f)(ii) of the Scheme of 1952, there was no reason as to why Paragraph 2(f)(i) would not apply in case of an employee who had withdrawn the full amount of his accumulations. The learned Single Judge further observed that in order to decide as to whether the provisions of the Act do not apply in respect of some of the employees, the provisions contained in Paragraph 2(f) of the Scheme of 1952 must be strictly construed; and having taken the benefit of one Scheme, the employees cannot compel the employer to comply with the provisions of the Act. With these observations, the learned Single Judge allowed the writ petition and remanded the matter to the authorities for re-determination of the amount of provident fund payable by the appellants, after treating the retired employees as excluded employees, but after taking into account those employees who were seeking to be included under the Act voluntarily5. Aggrieved by the order so passed by the learned Single Judge, the Central Provident Fund Commissioner and the Regional Provident Fund Commissioner preferred the Letters Patent appeal that has been considered and allowed by the Division Bench of High Court at Calcutta by way of the impugned judgment and order dated 07.05.20085.1. The Division Bench took note of the meaning assigned to the expressions Fund and Scheme in the Act of 1952 as also the definition of excluded employee in Paragraph 2(f) of the Scheme of 1952 and rejected the contentions of the writ petitioners that the employees in question were to be treated as excluded employees while observing as under:We are unable to accept the submission of Mr. Sengupta that the receipt of GPF and the Pension by the retired railway employees would be as if full payment has been received under paragraph 69(1). There can be no addition to the term Fund as defined under Section 2(h). It is also not possible to accept that since the Railway Employees have retired on superannuation and are beyond the age of 55 years, they would be on par with the excluded employees. There is no maximum age limit prescribed in any of the provisions of the Act or the 1952 Scheme for an employee to become a member of the Fund or the Scheme. It is claimed that the term Scheme refers only to the Employees Provident Fund Scheme framed under Section 5. The term excluded employee therefore has to be co-related to the employee who was a member of the fund as defined under Section 2(h) of the Act. Such an employee would be an excluded employee when the full amount has been withdrawn by him on retirement from service after attaining the age of 55 years i.e., in terms of Paragraph 69(1)(a). The provision being crystal clear does not admit of any other interpretation. Paragraph 69(1)(c) deals with an employee who withdraws the full amount standing to his credit immediately after migration from India for permanent settlement abroad and for taking employment abroadIn our opinion, there can be no dissections of these provisions as proposed by Mr. Sengupta. Under paragraph 2(f)(i) a retired employee would be an excluded employee. Under Paragraph 2(f)(ii) an employee who is otherwise entitled to become a Member of the fund becomes an excluded employee as he is earning beyond the stipulated minimum that is required for an employee to become a Member of the Scheme. This provision clearly demonstrates the underlying principle of the Provident Fund Act is to provide social security for those employees who otherwise would not be in a position to save any money from their wages. Paragraph 2(f)(iv) again provides that an apprentice shall be an excluded employee till he becomes a fullfledged employee. There is a qualitative difference between Paragraph 2(f)(i) on the one hand and Paragraph 2(f) (ii) & (iv) on the other. Paragraph 2(f) 1(i) provides exclusion only to the employees who have already received retirement benefits. On the other hand, under Clause 2(f)(ii) and 2(f)(iv) an employee may be an excluded employee at one point and may not be at a subsequent point. But benefit of these provisions cannot be extended to any employees who are not erstwhile members of a fund administered by the Central Board, under Section 5A of the ActThe Fund created by the exempted establishment under Section 17(1)(a) cannot be equated with the Fund which is established by the Central Board under Section 5(1). Nor can it be added to the definition of Fund under Section 2(h) of the Act. It is for this reason that the appropriate Government can only exempt an establishment from the operation of the scheme under Section 17(1) upon forming an opinion that the employees of such an establishment enjoyed benefits which are not less favourable to the employee than the benefits available under the Act or any Scheme made under the Act. In fact, the exemption can only be granted on consultation with the Central Board. This provision is made only to give supervisory control to the Appropriate Government over individual employers seeking exemption. But this provision cannot be put on the same pedestal as Section 5(1) of the Act. It is admitted position that employees of the Railways are not members of the 1952 Scheme. Therefore, these retired employees cannot be treated as excluded employees covered under Paragraphs 69(1)(a) and 26 of the 1952 Scheme. There is a clear distinction between a fund which is created by the Central Government and is administered by the Central Board under Section 5(1)(a) and a fund created by a private employer, exempted under Section 17(1) and administered by Board of Trustees under Section 17(1A) and (b). There can be no intermingling of the two provisions.5.2. In view of the above, the Division Bench concluded on the matter in the following:In view of the above, we find that the judgment of the learned Single Judge is not sustainable in law. We are unable to hold that retired employees of the Railways can be treated as excluded employees. We are also unable to hold that, not including the retired employees in the category of excluded employees would in any manner contravene the provisions of the Act or the Scheme. We are unable to accept that bringing the Railway employees within the purview of the Act and the Scheme would result in unjust enrichment of the retired employees. We are of the opinion that an employee who retires after serving an exempted employer would not fall within the category of excluded employees on re-employment and would be covered by the Act and the 1952 Scheme. We are also unable to accept that since the employees covered under Paragraph 2(f)(i) and (ii) are excluded employees, all employees who had drawn the full amount from any other Provident Fund should also be treated as excluded employeesIn view of the above, we allow this appeal and set aside the order passed by the learned Single JudgeConsequently, the writ petition being W.P. No. 2982(W) of 2005 shall be dismissed.

Court's reasoning:
9. For determination of the question involved in this matter, appropriate it would be to briefly take note of the objects and reasons behind the Act of 1952 as also the relevant provisions thereof and the relevant stipulations in the Scheme framed thereunder i.e., the Scheme of 19529.1. The background aspects had been that, taking note of the need to provide for the institution of contributory provident funds for the purpose of financial security of industrial workers, the Government of India promulgated the Employees Provident Fund Ordinance with effect from 15.11.1951, which was later on replaced by the Act of 1952 . Thus, the concept underlying the enactment had been of providing for compulsory contributory provident funds for safeguarding the future of industrial workers. Elaborate provisions have been made in the Act for creation of a Fund, to be settled in accordance with a Scheme to be framed by the Central Government. However, the Act also provides for continuation of such of the other provident funds, which are offering equal or more advantageous terms to the employees concerned and are operating efficiently11. In the scheme and structure of the Act of 1952, it is but clear that for the specified establishments or class of establishments, the Central Government was to frame a Scheme, to be called the Employees Provident Fund Scheme; and soon after framing of such Scheme, a Fund was to be established, which was to vest in, and administered by, the Board constituted under Section 5A. As noticed, the expression Fund is defined in the Act of 1952 to mean the provident fund established under a Scheme; and the expression Scheme is defined to mean the Employees Provident Fund Scheme framed under Section 5. Indisputably, the Scheme of 1952 is the one framed by the Central Government in exercise of the powers conferred by Section 5 ibid. We shall examine the provisions of the Scheme of 1952 a little later. At this juncture, apposite it would be to take note of another feature of the Act of 1952 emanating from the provisions relating to exemption, as contained in Section 17 thereof12. By virtue of sub-section (1) of Section 17, an establishment could be exempted from the operation of all or any of the provisions of any Scheme if: (a) in regard to the establishment to which the Act applies, the appropriate Government is of opinion that the rules of its provident fund, with respect to the rates of contributions, are not less favourable for the employees than those specified in Section 6 and the employees are in enjoyment of other provident fund benefits which, on the whole, are not less favourable than the benefits available under the Act or under the Scheme in relation to any other establishment of similar character; and (b) in regard to any other establishment, the appropriate Government is of opinion that benefits in the nature of provident fund, pension or gratuity, as available to the employees of such establishment are, on the whole, not less favourable than the benefits provided under the Act or any Scheme in any other establishment of similar character12.1. When an exemption is granted to an establishment under clause (a) of sub-section (1) of Section 17 of the Act of 1952, several duties are cast upon the employer as specified in sub-section (1-A) thereof, with penal provisions in the event of default. We need not elaborate on various other provisions contained in Section 17. Suffice would be to notice for the present purpose that coverage of the employees like the one engaged in the establishment of appellants is the rule; and ordinarily, the employees are expected to be covered by the Scheme framed under Section 5 of the Act of 1952 with the exception being that in case of availability of equivalent or more favourable benefits in an establishment, the appropriate Government could grant exemption. As per sub-section (2) of Section 17, even the Scheme may make a provision for exemption but the basic requirement being again that the persons or the class of persons to be exempted are entitled to such benefits which are, on the whole, not less favourable than the benefits provided under the Act and the Scheme thereunder i.e., the Scheme of 1952 . All the requirements of Section 17 make the position undoubtedly clear that the provisions are intended to ensure optimum benefits for the employees and even the exemption is granted only on the satisfaction of appropriateGovernment about existence of equivalent or more favourable provident fund Scheme for the employees concerned13. The Scheme of 1952 was framed by the Central Government on 02.09.1952 i.e., within 6 months of the enactment of the Act of 1952. The provisions of the Scheme are generally made applicable, subject to the provisions of Sections 16 and 17 of the Act, to all the factories and other establishments to which the Act applies or is applied under sub-sections (3) and (4) of Section 1 or under Section 3 of the Act. The provisions of the Scheme of 1952 have been extended to various establishments from time to time under clause (b) of sub-paragraph (3) of Paragraph 1 thereof. As per Paragraph 26 of the Scheme of 1952, every employee employed in or in connection with the work of the factory or other establishment to which this Scheme applies, is entitled to, and is obliged to, become a member of the Fund from the date the Scheme would come into force for such factory or establishment, except the excluded employees. Significantly, even an excluded employee, on ceasing to be so i.e., on ceasing to be an excluded employee, is entitled to, and is required to, become a member of the Fund from the date of such cessation13.1. In the framework of the Scheme of 1952, exclusion is provided under clause (i) of Paragraph 2(f) thereof to an employee who had been a member of the Fund and had withdrawn full amount of his accumulations in the Fund under clause (a) or (c) of Paragraph 69(1). Now, clause (a) of the said Paragraph 69(1) of the Scheme of 1952 refers to a member who would withdraw the full amount standing to his credit in the Fund on retirement from service after attaining the age of 55 years. Clause (c) is not relevant for the present purpose as the same relates to a member who withdraws the amount before migration from India for permanent settlement or taking employment abroad but then, a comprehensive look at various clauses of paragraph 69(1) makes it clear that reference therein is to a member of the Fund who withdraws full amount standing to his credit for different eventualities like regular retirement; retirement for disablement or incapacity; migration from the country; termination of service; accepting a voluntary retirement scheme; closure of the factory; transfer from a covered factory or establishment to another factory or establishment not covered under the Act etc14. It is not a matter of much debate in this case that the appellants otherwise answer to the description of employer under the Act of 1952 and their establishment is covered thereunder. The basic contention urged in this matter on behalf of the appellants is that the persons engaged by them had been the members of General Provident Fund while working as the employees of Railways and had withdrawn the full amount of accumulations in GPF and are, therefore, to be treated as excluded employees. This contention has fundamental shortcomings as pointed out infra14.1. The crucial aspect to be considered in this matter is as to whether the definition of excluded employees in Paragraph 2(f) as also the stipulation in Paragraphs 26 and 69 of the Scheme of 1952 refer to any provident fund or only to the Fund under the Scheme of 1952? As noticed above, in the setup and structure of the Act of 1952, specific distinction is maintained between the Fund, which is created by the Central Government under Section 5(1) of the Act and any other provident fund, which is created by an employer. Significantly, clause (f) of Paragraph 2 of the Scheme of 1952 refers to the Fund and not to any Fund; and Paragraphs 26 and 69 also refer to the Fund and not to any Fund. The determiner the, as occurring in Paragraph 2(f) as also Paragraph 69 before the expression Fund makes it clear that the reference therein is only to the Fund which is created under the Scheme of 1952 and it is not a general reference to any Fund. The requirement of joining the Fund under Paragraph 26 ibid. is also of joining that Fund which is created under the Scheme of 1952. In other words, obviously and undoubtedly, the Fund referred to in Paragraphs 2(f), 26 and 69 of the Scheme of 1952 is that Fund, which is created under the Scheme of 1952 and the reference is not to any other Fund. Thus, to be covered under the expression excluded employee by virtue of clause (i) of paragraph 2(f) read with clause (a) of paragraph 69(1) ibid., the employee must be such who was a member of the Fund established under the Scheme of 1952 and who had withdrawn full amount of his accumulations in the said Fund on retirement from service after attaining the age of 55 years14.2. On the plain interpretation aforesaid, we have not an iota of doubt that the retired Railway employees, who had withdrawn their accumulations in General Provident Fund or any other Fund of which they were members, could not have been treated as excluded employees for the purpose of the Scheme of 1952 for the reason that such a withdrawal had not been from the Fund established under the Scheme of 1952. In fact, there was no occasion for them to make any withdrawal from the Fund established under the Scheme of 1952 because they were never the members of the said Fund. In other words, the employees in question were not answering to the requirements of clause (i) of paragraph 2(f) read with clause (a) of paragraph 69(1) of the Scheme of 1952 and hence, were not the excluded employees. The Division Bench of the High Court has rightly rejected the contention of appellants that every employee, who had withdrawn full amount from any provident fund, should be treated as an excluded employee. In our view, the answer by the Division Bench of the High Court is in accord with law and deserves to be approved15. We may also take note of and deal with a few ancillary aspects. The appellants, in their initial response to the proposition for coverage of the employees in question under the Scheme of 1952, attempted to state that most of the said employees were above 58 years of age and that they had expressed unwillingness to join the Fund under the said Scheme. It does not appear from the record if the concerned employees categorically made any such expression of unwillingness. Even otherwise, as noticed, the provisions of the Act and the stipulations of the Scheme of 1952 are mandatory in character and the application thereof could not have been averted by the appellants or the said employees except on certain eventualities as mentioned in Section 17 of the Act as also Paragraph 26 of the Scheme of 1952. Such eventualities are indeed non- existent in the present matter. So far the aspect relating to age is concerned, the operation and effect of the Act and the Scheme of 1952 are not restricted with reference to any age limit of the employee. Such a suggestion relating to the age of the employees had been entirely baseless and has rightly been disapproved15.1. Apart from the above, the appellants also alleged that they had applied for exemption and no decision was taken on their representation. In this regard, it is noticed that the appellant had not made any such submission that they had any better and beneficial scheme for their employees. In any case, there is no concept of any holidaying in payment of contribution by the employer by merely moving an application for exemption; and when there was no order of exemption under Section 17 by the competent authority, the appellant-company was under the liability to make payment of its contribution16. Before concluding, we may also point out that the observations by the learned Single Judge of High Court in this matter, that clause (i) of Paragraph 2(f) of the Scheme of 1952 has to be applied in relation to the withdrawal from any provident fund and else, an employee may keep on successively deriving benefits, remain rather unwarranted because the principle underlying the enactment and the Scheme of 1952 is to provide financial security to the employees. The concept of exclusion from the Scheme of 1952 is limited to the class/es of employees mentioned in Paragraph 2(f) only; and the area of operation of this exclusion clause cannot be expanded by way of an assumption about the alleged extra advantage likely to be driven home by an employee. In fact, even the assumption of the learned Single Judge does not appear apt in the framework of the Act and the Scheme of 1952. Whatever an employee gets by virtue of the Act of 1952 is basically the accumulation in his provident fund account, where he and his employer do contribute. The learned Single Judge had gone to the extent of observing that when the employees earning more than the particular amount (Rs. 6,500/- per month at the relevant time) were excluded under clause (ii) of Paragraph 2(f) of the Scheme of 1952, the retired employees who had received their accumulations could also be excluded under clause (i) of Paragraph 2(f). With respect, we are unable to find any logic in these observations because the stipulation in clause (ii) of Paragraph 2(f) relates to an entirely different class of employees with reference to the quantum of their pay; and exclusion of such class of employees as per clause (ii) cannot lead to any corollary that clause (i) be also expanded beyond its plain language. The order passed by the learned Single Judge, being based on entirely irrelevant considerations, has rightly been disapproved by the Division Bench of High Court17. To summarise, in the framework and setup of the Scheme of 1952, the concept remains plain and clear that if a person is member of the Fund created thereunder i.e., under the Scheme of 1952 and withdraws all his accumulations therein, he may not be obliged to be a member of the same Fund under the Scheme of 1952 over again and could be treated as an excluded employees. However, such is not the relaxation granted in relation to an employee who was earlier a member of any other Fund but later on joins such an establishment where he would be entitled to membership of the Fund created under the Scheme of 1952. This framework of the provisions and stipulations appears to be best serving the interest of employees, while providing them with continued financial security. Therefore, we find no reason to take any view different than the one taken by the Division Bench of the High Court in this case.