Case: M/S Yeshwant Gramin Shikshan Sanstha Vs. Asst.P.F.Commr.Nagpur

Before dealing with the legal submissions and issues, it would be apposite to set out the factual matrix leading to the filing of the present appeal:a) The appellant is a registered society under the Societies Registration Act, 1860 and Bombay Public Trusts Act, 1950 and runs 29 (twenty nine) schools and junior colleges in the Wardha District, Nagpur. Out of which, 28 (twenty eight) schools and colleges purportedly received 100% grant-in aid from the State Governmentb) Between 1996 and 1997, due to administrative exigency 16 part-time librarians were appointed to some of the appellants colleges, with the permission/approval of the State Government. These librarians worked for lesser hours as opposed to the working hours put in by regular, full-time employees. The appellant contends that the entire process of appointment and approval was monitored and supervised by the State Government. Further, the appellant did not possess any direct control over the payment of or deductions to the salaries of its employees. It is done by the State Authoritiesc) On 5th May, 1998, the appellant forwarded a bill of one of the part-time librarians to the Education Officer, with a request to deduct the provident fund. This request was declined vide a letter dated 19th November, 1998, with a direction not to deduct provident fund contributions of such part-time employees. Subsequently, on 5th March, 2004, the Director of Education issued a letter clarifying that the contributory provident fund scheme was not applicable to such part-time employees. In view of the aforesaid communications, the appellant had reason to believe that it was not supposed to deduct and/or deposit provident fund contributions of its 16 part-time employeesd) On 6th October, 2005, the officers of Respondent No.1 visited one of the schools of the appellant and sought details of the employees and payments made on their behalf vis-a-vis provident fund contributionse) The appellant submitted its response to the aforesaid query vide its letter dated 18th October, 2005, wherein the appellant mentioned that as per the law, it was not required to deduct provident fund contributions of the concerned part-time employeesf) The appellant, however, received a summons from Respondent No.1 dated 23rd May, 2006, to appear in connection with failure to remit provident fund dues of its employees. Further correspondence in that regard ensued between the parties and adjournments were taken in the matterg) Ultimately, Respondent No.1 heard the matter and passed an order dated 1st August, 2007, holding that the appellant was liable to pay a sum of Rs. 16,89,796/- as outstanding provident fund contributionsh) The appellant then filed a review application dated 14th September, 2007 against the aforesaid order, on the ground that Respondent No.1 had failed to appreciate certain material submissions and objections raised at the time of hearing. Respondent No.1 dismissed the said review with a one-page order, without granting a hearingi) During the abovementioned proceedings, 3 (three) out of 16 part-time librarians of the appellant were regularized w.e.f 29th September, 2007. Another librarian was regularized w.e.f. 29th September, 2009. This was done with the approval of the State Authoritiesj) Aggrieved by the aforesaid order passed by Respondent No.1, the appellant filed an appeal before the Appellate Tribunal, which rejected the appeal vide its order dated 8th April, 2011 inter alia on the ground that there was no difference between full-time and part-time employees and thus the appellant was bound to deduct/pay the provident fund contributions in respect of the part-time employeesk) Respondent No.1 thereafter issued a demand notice dated 10th May, 2011 to one of the schools of the appellant for payment of the due amount by 25th May, 2011. That was followed by a show cause notice as to why a warrant of arrest be not issued by Respondent No.1, dated 23rd June, 2011. The appellant replied to the said show cause notice vide its letter dated 8th July, 2007, asking for one week time to pay the amount as demandedl) In the meanwhile, the appellant also filed Writ Petition No.4013 of 2011 before the High Court, challenging the order dated 8th April, 2011 passed by the Appellate Tribunal. The High Court stayed the order and directed the appellant to deposit Rs. 4 lacs in court, which it duly complied withm) Ultimately, on 17th January, 2012, the High Court was pleased to dismiss the said writ petition.

Court's reasoning:
16. On a plain reading of this provision, it is evident that the Central Act applies to the establishments referred to therein. In the present case, the appellants establishment may fall within the purview of other establishment referred to in sub-clause (b) of Section 1(3). It is indisputable that the Central Government in exercise of the powers conferred by clause (b) of sub-Section (3) of Section 1 of the Central Act has published a Notification being No.S.O.-986, dated 19.02.1982 on 06.03.1982, so as to include all the educational institutions in the category of any other establishment, namely; University; College (Whether or not affiliated to a University); School (Whether or not recognized or aided by the Central or a State Government); any scientific institution; any institution in which research in respect of any matter is carried on; and any other institution in which the activity of imparting knowledge or training is systematically carried on17. A conjoint reading of Section 1 of the Central Act with the aforesaid notification, makes it clear that the Central Act would apply to all the colleges and schools, subject to the provisions of Section 16 of that Act18. The question then arises is: whether the appellant school is an establishment covered by any one of the excepted category specified in Section 16 of the Central Act. The appellant has invoked clause (a) as well as clause (b) of Section 16 (1) of the Central Act. As regards the argument hinging on clause (a), it proceeds on the premise that the appellants school (in which 16 part-time employees were working), had employed less than fifty persons and working without the aid of power. This argument, in our opinion, cannot come to the aid of the appellant. Inasmuch as, the appellant is running 29 schools/colleges and has employed around 1151 permanent employees. Section 2A of the Central Act predicates that where an establishment consists of different departments or has branches, whether situate in the same place or in different places, all such departments or branches shall be treated as part of the same establishment. In other words, the fact that the appellant has employed less than 50 permanent employees and who are working without the aid of power in the school in which the 16 part-time employees were also working, will not take the matter any further. We find that the appellant has neither pleaded the material facts nor adduced any proof, so as to rebut the presumption stipulated in Section 2A of the Central Act - that all the schools and colleges run by the appellant were part of the same establishment. The fact that the appellant is a Co-operative Society registered under the State Co-operative Societies Act by itself will not extricate the appellant from the application of the Central Act19. The fact that the appellant is not falling within the ambit of clause (a) of Section 16(1), however, can be no impediment for the appellant to peruse the argument regarding exemption by relying on clause (b) of Section 16(1) thereof. We say so because, the excepted categories specified in Section 16 are mutually exclusive. They are separated by the word or. Sub-clause (b) of Section 16(1) is an independent excepted category. It is attracted to any other establishment belonging to or under the control of the Central Government or a State Government and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits. These twin conditions are required to be satisfied by the concerned establishment, seeking exemption from the provisions of the Central Act. In the present case, the employees working in the concerned schools/colleges of the appellant are covered by the contributory provident fund scheme framed by the State Government, subject to eligibility. The second condition required for seeking exemption under the Central Act is thus fulfilled20. The moot question is: whether the schools in which the 16 part-time employees were working, can be said to be an establishment belonging to or under the control of the Central Government or a State Government. This question is no more res integra21. The question is whetherthere are similar provisions in the subject State Act and Rules framed threunder, so as to infer that the State Government exercises substantive control over the establishments such as that of theappellant. On analyzing the provisions of the State Act and Rules framed thereunder, similar inference can be drawn as in the case of Sanatan Dharam (Supra). In the present case, the State Act which has received assent of the President of India on 16th March, 1978, contains several provisions elucidating the extent to which the State Government has control over the private schools22. Suffice it to observe that the State Act, the Rules made thereunder and the provisions of the Secondary Schools Code are a complete code in themselves with regard to the educational institutions and indicative of the extent of exercise of substantive control by the State Government over such institutions, whether owned by it. The State Government has the power of superintendence and the authority to direct, restrict or regulate working of the educational institutions. It necessarily follows that the establishment of the appellant, which in this case is 100% grant-in aid schools in which 16 part-time employees were working, is under the control of the State Government and thus would fulfill even the first condition of Section 16(1) (b) of the Central Act23. As we have held that the establishment of the appellant fulfills the twin conditions specified in Section 16 (1) (b), it must follow that the same is exempted from the application of the provisions of the Central Act. In the present case, however, it has been found by the authority concerned and the Tribunal, that the 16 part-time employees working in the establishment of the appellant were not covered by the State CPF Scheme applicable to the other permanent employees of the establishment. Inasmuch as, Rule 20 does not cover the part-time employees working in the school, in case they are not doing full time load of work. True it is that the said finding of fact cannot be over turned. Even so, is it possible to uphold the decision of the authority as confirmed by the Tribunal and the High Court - that the appellant is liable to pay towards the Provident Fund under the Central Act in respect of its part-time employees? Intrinsic in that direction, is that the provisions of the Central Act are invoked against the establishment of the appellant. That is impermissible. As aforesaid, Section 16 of the Central Act makes it abundantly clear that the provisions of the Central Act will have no application to the establishment, if covered by one of the excepted category provided therein. Notably, the exemption is for the establishment as a whole and for all purposes, from the application of the Central Act. Once the establishment is covered by the excepted category specified in Section 16, to get exemption, it is incomprehensible that the provisions of the Central Act can be invoked against such establishment on the specious reasoning that few (16 in this case) part-time employees working thereat were not covered by the CPF Scheme of the State Government, as applicable to rest of its employees24. It is not possible to countenance a situation that although the establishment enjoys exemption from application of the provisions of the Central Act, is still liable to be proceeded in respect of its few (16) part-time employees. That would lead to an incongruous approach, not envisaged by the Central Act. Taking any other view would result in rewriting of the provisions of the Central Act to mean that although the establishment is exempted from the application of the provisions of the Central Act, yet it would be open to the central authorities to proceed against such establishment in certain situations. In our opinion, once the establishment qualifies for exemption of application of the provisions of the Central Act, there is no way that the authorities under the Central Act can exercise authority over it or call upon the establishment to comply with the provisions of the Central Act, unless the exemption of the establishment is withdrawn or lifted de jure. Section 16 of the Central Act does not envisage a concept of partial exemption of application of the provisions of the Central Act in respect of employees, but the exemption operates qua the establishment for all purposes25. In the present case, the appellant is running 29 schools/colleges and is receiving 100% grant-in aid from the State Government in respect of 28 schools/colleges. The employees working in the said schools of the appellant have been employed with the permission and approval of the State Government and are governed by the State CPF Scheme. The entire process of appointment has been strictly monitored by the State Government. Additionally, the appellant has been submitting pay bills of its employees to the Education Department which directly deposits the salaries of such employees into their bank accounts. At the relevant time, the appellant had employed around 1151 employees who were covered by the Contributory Provident Fund Scheme framed by the State Government for the employees of the private schools (except the 16 part-time employees who were not doing full time load of work). The appellant had engaged those 16 part-time employees with the permission and approval of the State Government. It can be safely presumed that the State Government was fully conscious of the fact that those part-time employees will not be entitled for the benefits of CPF Scheme of the State. In other words, the substantial number of employees of the appellant if not all of them, around 1151 employees, were covered by the contributory provident fund scheme of the State Government applicable to private schools governed by the provisions of the State Act and the Rules made thereunder. Just because the 16 part-time employees working in the appellants school were not eligible for the benefits of the State CPF Scheme, the exemption status of the establishment of the appellant acquired under Section 16 of the Central Act, will not cease or stand withdrawn automatically26. Once an establishment is covered under any one of the excepted category under Section 16 of the Central Act, the officials empowered by the Central Act will have no authority to proceed against such establishment; and more so on the ground that a miniscule number of employees (16 part-time employees) working in the establishment were not eligible for the benefits under the State Contributory Provident Fund Scheme governing the rest of the regular employees of the establishment27. Having said this, we must hold that initiation of action of recovery by the official(s) of Respondent No.1 against the establishment of the appellant, which was otherwise exempted from application of the provisions of the Central Act is wholly without authority of law. The appellant had placed reliance on the case of Sanatan Dharam (supra), before the Tribunal. But neither has the Tribunal nor the High Court considered the same. The Tribunal, however, chose to rely on the decision in the case of The Shamrao Vithal Co-operative Bank Ltd. v. Kasargod Pandhuranga Mallya, (1972) 4 SCC 600.   This decision has been duly considered and distinguished in the case of Sanatan Dharam (supra), as can be discerned from paragraph 33 of the reported decision