Case: Mohmedalli &amp; Others Vs. Union of India &amp; Another

The petition is founded on the following allegation. The petitioners, five in number, are citizens of India and are carrying on business of running a restaurant and general stores under the name and style of "George Restaurant and Stores" at 20, Appollo Street. Fort, Bombay-1 since September 1958. They are running this business as a partnership firm, registered under the Indian Partnership Act. The firm employs 43 persons, including cooks, waiters, tea-makers, bill clerks and two store-clerks. Besides paying salary to their employees, the petitioners give them free food and other personal allowances, which it is not necessary to set out in detail. In exercise of the powers conferred by S. 1(3)(b) of the Act, the Central Government issued notification No. G.S.R. 704., dated 16 May 1961, in the following terms :"G.S.R. 704. - In exercise of the powers conferred by Cl. (b) of Sub-sec. (3) of S.1 ofthe Employees Provident Funds Act, 1952(19 of 1952), the Central Government hereby directs that with effect from 30 June, 1961, the said Act shall apply to the following classes of establishments, in each of which twenty or more persons are employed namely :-As a result of the notification aforesaid, the operation of the Act has been extended to hotels and restaurants, including the one run by the petitioners. Subsequently, the Central Government issued a notification under S.5 read with S.7(1) of the Act, the relevant portions of which are in these terms :"G.S.R. 783. - In exercise of the powers conferred by S. 5 read with Sub-sec. (1) of S.7 of the Employees provident Funds Act, 1952 (19 of 1952), the Central Government hereby makes the following scheme further to amend the Employees provident Funds Scheme, 1952, namely :-1. This scheme may be called the Employees Provident Funds (Third Amendment) Scheme, 19612. In the Employees Provident Funds Scheme, 1952, in Cl. (b) of Sub-para. (3) of Para. 1, Sub-cl. (xvii) shall be renumbered as Sub-cl. (xix) thereof and the following shall be inserted as Sub-cls. (xvii) and (xviii), namely :-"(xvii) as respects hotels and restaurants covered by the notification of the Government of India in the Ministry of Labour and Employment No. G.S.R. 704, dated 16 May, 1961, come into force on 30 day of June, 1961."The said notification introduced the scheme known as the Employees Provident Funds (Third Amendment) Scheme, 1961. The petitioners challenge the constitutionality of the scheme aforesaid, and the sectionof the Act in pursuance of which it was brought into existence. The petitioners pray for a writ or order or direction quashing the said notifications and for issue of a mandamus to the respondents not to apply the said scheme to the petitioners establishment.

Court's reasoning:
It would appear from the terms of the relevant portion of S. 17 that the exemption to be granted byte appropriate Government is not in the nature of completely absolving the establishments from all liability to provide the facilities contemplated by the Act. The exemptions are to be granted by the appropriate Government only if in its opinion the exempted establishment has provisions made for provident fund, in terms at least equal to, if not more favourable to its employees. In other words, the exemption is with a view to avoiding duplication and permitting the employees concerned the benefit of the pre-existing scheme, which presumably has been working satisfactorily, so that the exemption is not meant to deprive the employees concerned of the benefit of a provident fund but to ensure to them the continuance of the benefit which at lest is not in terms less favourable to them. As the whole scheme of provident fund is intended for the benefit of employees, S. 17 only saves pre-existing schemes of provident fund pertaining to particular establishments. Hence, the provisions of Sub-sec. (3) of S. 1, read along with those of S. 17, quoted above, cannot be said to have conferred uncontrolled and uncanalized power on the appropriate GovernmentClause (a) of S. 16, as it now stands, has exempted establishments registered under the Co-operative Societies Act, because it is well-known that it is the settled policy of the Government to foster co-operative societies with a view to their development and growth in the interest of the community. It is not necessary to cite instances where this Court has held that co-operative societies stand on a special footing which distinguishes them from other establishments or corporations. Clause (b) has reference to establishments which have been in existence for less than three years or five years, the case may be. That is an understandable classification with a view to save newly started establishments from the additional burden of making contribution to provident fund in respect of its employees. It is clear that the exemption is a short-lived one because with the efflux of three of five years period, they will automatically come under the scheme framed under the Act. The operation of S. 17 has already been discussed, and it has already been indicated that an establishment coming under the exemptions granted or to be granted under S. 17 does not mean that the establishment bears less burden of its share of contribution to the fund. It has not been contended before us that the petitioners establishment does not come within the general rule laid down in S.1(3) of the Act or within the scope of the scheme framed under S. 5. It is equally clear that all hotels and restaurants come within the scope of the notification impugned in this case. Hence, there is absolutely no reason for complaint that the petitioners establishment of that class has been chosen for hostile discrimination.