3 S.C.R.

SUPREME COURT REPORTS

M/S. ORISSA CEMEN'f LTD.

UNION OF INDIA

(B. P. SINHA, C.J., K. SUBBA RAO, N. RAJAGOPALA

AYYANGAR, J. R. MuDHOLKAR and T. L.

VENKA.TARAMA AIYAR, JJ.)

Provident Fund-Contract labour-Contribution to provident fund-If and when principal employer liahle-Providenl Fund Act, 1952 (XIX of .1952), ss. 5, 6, 7-Employees' Provident Fund Scheme, paras. 30, 31, 32, 73A-Notification No.

S.R.O. 331 dated January 15, 1958-Notification No. G.S.R. 1461 dated December 2, J.?60. '

The Central Government under s.5 of the Provident Funds Act, 1952, published a Scheme under the Act for the establishments of the Provident Fund. Paragraph 2(f)(iii) of the Scheme defined "Excluded Employees" meaning employees employed by or through a contractor.

Section 6 of the Act and paras. 30 to 32 of the scheme provided for the employer making contribntion to the fund and the combined effect of s.6.and paras. 30 to 32 of the Scheme is that the contribution to the Provident Fund is to be 12-1/2% of the basic wages and dearness allowance, that is to be borne equally by the employer and the employee and that the employer is to pay the whole of it, half on his account, and the other half on account of the employee and he is to recoupe himself bv deducting it from the wages of the employee.

Paragraph 26 of the Scheme provided that every employee in a factory or establishment other than excluded employee shall be regarded

to become a member of the fund if he has completed one years cOntinuous servict".

The Government by Notification No. S.R.O. 351 dated January 15, 1958, amended Para. 2(f)(iii) of the Sd1eme,

whereby all employees employed by coµtractor who were directly connected with any manllfacturing process carried out in a factory or establishment became entitled to the benefit by' the Act.

Another Notification No. G. R. E. 1457 dated December 2, 1960 repealed the said para. 2(f)(iii) added

a new para. 73A.

This amendment had the effect of abolishing the distinction between the workmen employed by the contractors who "vere directly connected with the manufacturing process in the factory or establishment, and those who were not so connected, all of whom becaine entitled to !h~

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•• Ut1ion of India

benefit of the Schcrnc. 'I'he authorities issued notice on the petitioner to comply with the changes introduced hy the amcn<ln1en ts .

The (>(titioncr filed petition under Art.32 of the Constitution challenging the valirlity of the two notifications as unreasonable restrictions and not falling within Art. 19(6) and that they .slwld be struck down as infringing Art. 19( 1) (g) of the Constttutton.

Held, that the './otification dated Januai:y l'i, 1958 and December 21, 1960 ore unconstitutional and void.

Section 6( 1) of the Act is to make the employer liahlc only for a moiety of the provident fund and while the scheme of 1952 is \vell designed to carrv out this intentions in ito;; application to \\'Orkrnen directly eployc<l, by' reasons of the combined operation of paras. 30 and 32, it broaks down in its extension to contract labour by reason of the inapplicability of para. 32.

It opc.r; ltr.s unfairly and harash.Jy on persons who employ contract labour and it further results in discrimination bct\\ecn those \vho employ contract labour anti. those who employ direct labour. The scheme. therefore cannot be said to he reasonable and inust he stn1ck down as not fallin~ v.:ithin the protection afforded hy :\rt.· 19(6).

OnIGIXAL Ju111snrcnoN : Petition No. 17 of l!l6l.

Petition under Art. :l2 of the ConRtitution of Indin. for enforcement of Fund11.ment:1l Rights.

A. V. Vistcanatha Saslri, K. C .. Jain nnd 13. P.

Jfahe.hwari, for tho petitioners.

Bishan N11rain, Snkumar Ghosc and P. D. Menon, for the rospondcnt..

1962.

March 14.

The Judgment of the Court was delivered by

VE:-; KATAllAMA AIL\H, J.-The first petitioner is a company cn.rrying on business. in the manfc ture of cement in the Stale of Ortssa and pet1t10ners os. 2 and 3 11.re t.wo of its Direotors. They have filed the prcsont petition under Art. :l2, challenging the validity of two 11otiflc11tins. date<l Janua.ry Hi, 1958, and D0cembor 2, 19o0, issue 4

by the Central Government under s. 7(1) of the em ployees' Provident Funds Act. 1952 hereinafter referred to as "the Act". It will be convenient to first set out the relevant statutory provisions bearing on the question. The Act was passed for the purpose of providing for the institution of Provident Funds for the employees in factories and other establishments. Section 5 of the Act, which deals with this matter is a.s follows :-

"5. Employees' Provident Fund Schemes.-(!) The Central Government may, by notification in the Official Gazette, frame a Scheme to be called the employees' Provi dent Fund Scheme for the establishnent of provident funds under this act for employees or for any class of employees and specify the establishments or class of establishments to which the said Scheme shall apply and there shall be established, as soon as may be a, fter the framing of the Scheme, a Fund in accordance with the provisions of this Act and the Scheme.

(2) A Scheme framed under sub-section (I) may provide that any of its provisions shall take effect either prospectively or retros., pectively on such date as may be specified in this behalf in the Scheme.

Section 6( 1) which provides for the employer making contribution to the Furd runs as follows :-

"6(1) The contribution which shall be p_aid by the employer to the Fund shall be six and a quarter per cent. of the basic wages dearness allowance and retaining allowance (if any) for the time being payable to each oft.he employees, and the employees contribution shall be equal to the contribution payable by the emplof'er in respect of him

Orissa Cement Ltd

Union of India

Aryar J,

Oria1a Ctmtnl Lt~. ..

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and may, if any employee so desires and if the i:lchemo makes provision therefor, be an amount not exceeding eight and onet.hird per cent. of his basic wages, dearness allowance and retaining allowance (if any):

Provided that where the amount of any contribution payable under this Act. involves a fraction of a rupee, the Scheme may provide for the rounding off of 8ueh fraction to the nearest rupee, half of a rupee or quarter of a rupee.

Under s.7 the ('_, entral Government may, by notiffoation iP the Official Gazette, add to, amend or vary any Scheme framed under this Act. Section

14 prescribe~ penalties for any contravention of the provisions of the Act or default in eompliance with them.

In exercise of the powers conforrod bys. 5 of the Act, the Central Government publiRhed on September 2, 195~, what is called the Employees' Provident Funds Scheme, lflfi~. Para 2(f)(iii) of the Schomo defines "Excluded Employees'' as men.ning the employees employed by or through a contractor. l.Jnder Pam :l the provident fund standing to the credit of an employee vests in the authorities constituted therennder.

Para 26 provides that every omployee cmployod in a factory or establishment other than an exc:luded employee shall he required to become a member of the fund if he has completed one ycr's continuous service, in the factory or establishment, and there is a proviso that if the employee has actually worked in the factory or establishment for not less than 240 days, he shall dceme<l to ha, e cumplnted one years continuous service.

Paras 30 to :l2 deal with contributions to he made hy the <'m ployul' and they 11rc a.~ follows:-

"30. Thn employfir shall, in the first instanco ipay both thn oontribution pay:tblP, by

himself (in this Scheme referred to as the employer's contribution) and also, on behalf of the member . employed by him, the contribution payable by the member (in this Scheme referred to as the member's contribution)."

"31. Notwithstanding any contract to the contrary the employer shall not be entitled to deduct the employer's contribution from the wage of a member or otherwise to recover it from him.'1

"32. (I) The amount of a member's contribution paid by the employer shall notwithstanding the provisions in this Scheme or any law for the time being in force or any contract to the contrary be recoverable by means of deduction from the wages of the member and not otherwise :

Provided that no such deduction may be made from any wage other than that which is paid in respect of the period or part of the period in respect of which tho contribution is

p:tyahle :

Provided further that the employer shall be entitled to recover the employee's share from a wage other than that which is paid in respect of the period for which the contribution has been paid or is p:tyable where the employee has in writing given a false declaration at the time of joining service with the said employer that be was not already a member of the Fund :

Provided further that where no such deduction has been made on account of an accidental mistake or a clerical error, such deductinri may, with the consent in writing of the Inspector, he made froll) the subsequent wages, ·

Orissa Cement Ltd. v.

Union of India

AiYar J,

J96t

Otissa Cement Ltd. v.

Union of India --

(:!) Deduction ma.de from tho wages of a member paid on daily, weekly or fortnightly basis should he totalled up to indicate the monthly deductions.

(3) Any sum deducted by an employer from the wage of an employee under this Sc!icme shall he deemed to have been entrusted to him for the purpose of payinir tho contribution in respect of which it was deducted."

The combined effect of s. (i and Paras 30 to 32 of tho Schnme is that the contribution to the Provident J<'und is to be 12-1/:! per cent. of the basic wages, and dearness allowanc<>, that it. is to be borne equally by the employer and the employee, and that the employer is to pay the whole of it, half on hiR account, and the other half on account of the employee, a.ncl he is to recoup himself by deducting it from the wages of the employee. Such deduction would he poosible only when the employer is the person who h1is to pay wages to t.he employee and that is why employees cmplo.\'ed hy or through a contractor were inclmlcd in thB definition of "excluded persons" to whom under Para ~(i the 8cheme had no application. These cmploy"c8 would bo paid hy the contmctor and the <JUestion of deduction of wages by tho pri1wipal employer, i.e, the person who is in charge of the factory m cst.ahlishment, will not arise.

It is said that with a view to avoicl their contribution under the Act, t.ho employers rrsorted increasingly to the , device of employing workm<'n through contractors, and the GovPrnment accordingly deemed it expedient t.o amend the pre'" isions o(thll Schomc so as t.o secnro the benefits thereof to

employees who were employed through contrnct.ors. 'fo carry out this purpose, a notification w:~~

issued on January 15, 1958 No. S.R.O. 331 subRtituting for Para 2(f)(iii) of the Scheme as it stood in 1952 the following :- '

"(iii) an employee employed by a contractor in any operation not directly connected with any manufacturing process carried on in the factory or other establishment, or

Exp/, a, nation-ln respect of an employee employed by a contractor who is not an excluded employee under this paragraph, the principal employer shall be responsible for complying with the provisions of the Act and the Scheme;"

The result of this amendment was that all employees employed by contractors who were directly connected with any manufacturing process carried on in the factory or the establishment became entitled to the benefits under the Act. On May ll, 1959, Para26 was suitably amended so as to conform to the notification dated January 15, 1958. Even this notification was felt to be inadequate for achieving the objects of the legislation and the, refore in exercise of the powers conferred by s. 7( 1) of the Act Government issued a: fresh notification No.

G.S.R. 1467 on December 2, 1960, whereby it repealed Para 2 (f) (iii) as it then stood and added a new Para 73A as follows :-

. "73A. Where an employee is employed by, or through, a contractor in, or in connection with, the work of an establishment, the principal employer shall be responsible for complying with the provisions of the Act and this Scheme in relation to such employee."

This amendment had the effect of abolishing the distinction made b! the arrHmd..,,, nt of l958 bet\j'eeq

01issa Cement Ltd. v.

Union of India

AiYaf J,

I96t

Orissa Ctmttd LJd.

•• Union of India

A1yar .T.

844 SUPREME COUH.T ltEPORTS (1062J SOPP.

workmen employod by contractors who wero direc tly connected with the manufacturing process in tho factory or establishment, and those who were not so connected, all of whom became entitled to the benefits of the Scheme. • The authorities constituted under the Act issued notices to the first Petitioner drawing its attention. to the changes introduced by th<i notifi. cations and asking it. to comply with their provi sions, to which the management replied pointing out the practic:d difficulties in the way of implementing them as reg:irds workmen brought in by contractors.

A long correspondence followed <mlminating in a thre:it by the respondents to take penal proceedings under s. 14 of the Act.

Thereupon. the petitioners have filed the present potition, raising the queHtion

of the constitutionality of tho two not.ificntions dated .January );), l!l58 anrl December 2, l!IGO. They contend that they throw a heavy burden on their btrnine8s :i.nd cannot, in consequence, b<0 upheld as reasonable restriction within Art. I 0{6) and m1rnt be •truck dnwn as infringing Art. 19( I )(g) of the Con8titntion. Tho respondent.< on t.he other hand maintain that t.hey arn heneficient l<'gislation ena.ctcd in the interests of tho public ancl :ire within the protection of Art. J!) ( (i ).

Now there can he no question that the impn)!n ed notifications are conceived in the interests of the

public. The Scheme framed under the Act in I U!i2 conferred benefits of provident fund on workmen directly employed in factories or establishmtnlR hut large sections of them working there under similiir conditions but. crnploycrl hy contractors w0 rc

<'X eluded from its pur\'iew. This was obviously a disc:rimin:ition for which there w:is no ju:; tific;1tion and it was this that was Rought to he rem ovcd hy the notifications in qnest ion. It is not contcndcd

by the petitioners th:i.t the object. behind these notifications is not such as would fall witbiu

Art. 19(6). What is urged is that the means and modus adopted for :10hieving it are unreasonable and that therefore tho Scheme must be held to violate Art. 19(l)(g). It is argued that when the Government decided to confer the benefits of provident fund on workmen who were employed through contractors, instead of framing provisions appropriate to their character as employees of contractors, it simply extended to them the provisions which had been framed in 1952 with reference to workmen directly employed without regard to the difference in the situations in which the two classes of workmen were placed. This, it is contended, has led to results as unjust as unforeseen, and the Scheme must therefore be held not to be within" the saving of Art. 19(6).

In order to decide how far this objection is well founded we must examine the distinction between contract labour and direct la.bom to the extent that it bears on the provisions of the Scheme. When the principal employer engages contract labour there is no privity of contract between him and the work men who actually do the work. It is the contractor who engages them, and pays wages to them. The principal employer has as such no direct relationship with them. Now the argument of the petitioners is that the ob!iga, tion of the employer to contribute every month to the provident fund an amount equal to six and a quarter per cent. of the wages and dearness allowance of the employee is incapable of performance as the principal employer is not in a position to know what wages had been agreed between the contractor and his employees and that further as the factory or establishment maintains no muster rolls as regards workmen employed through contractors, it is not possible for the principal employer to know whether a workmen is .a casual labourer, or whether he is entitled to the benfits of the Scheme under Para 26, by reason of his

Oriss• Cement Ltd.

Union oJ India

AiyarJ.

Orusa Ctm<M Lid.

v. l/nion of India

AfyarJ.

846 SuPREME COURT REPORTS (1962] SUPP.

having put in continuous work for the requisite period.

Tho difficulties suggested by the petitioners are not without substance but they are not, in our view, of sufficient weight to overthrow the Scheme. It is true that they could have been eliminated if the

Scheme had enacted a provision imposing on the contractors an obligation to give a statement in writing to the prinoipal employer containing the neoeBBary particulars about the workmen and their wages.

But even apart from such a provision there should ho no difficulty in the principal employer requiring the contractor at the time of the agreement to give those particulars, so as to protect himself. Nor is ther'e any point in the contention that the workmen may be casual labourers and the prinoipal employer would not be in a position to asoertain whether a particular workmen is entitled to the benefits of the Scheme under Para 26 because under that para the workman can claim the benefits of the Scheme only if ho works continuously for a period of not less then 240 days in that very factory or establishment, and that is a matt-0r which is capable of being asoertained by the principal employer.

A more serious objection to the extension of the Scheme of 1952 to workmen umployed through contractors is that the right given to the prinoi pal employer under Para 32 is incapable of exercise as against thom. Under Para 30 the whole of the provident fund, being 12-1 /2 per cent. of the wages and dearness allowance ha~ to be paid in tho first instance by the employer and under Para 32 he is to deduot half of it, being the omployee's share of the oontribution from his wages.

As already pointed out, this contemplates that the hand whioh has to pay the provident fund under Para 30 ia also the hand that has to pay wages to the workmen under Para 32. But that is not the position in the oas!\ of oontraot labour.

It is tho oontraotor wh~ p&yd

3S.C.R.

' 847

SUPREME COURT HEPORTS

the wages of workmen employed through him, but the obligation to pay the provident fund is cast on the principal employer. Now the complaint of the petitioners is that tbe Scheme works ''with a.n evil oye and an unequal hand" with reference to an employer who engages contract labour, in that while an obligation to pay the entire provident fund, including the share of his employee, is laid on him, he is not given the correlative right of recouping himself to the extent of that share, by deducting it out of his wages. -· The answer of the respondents to this is that the principal employer might by an arrangement with the contractor deduct from out of the amounts payable to him the sums contributed by him to the provident fund on account of the employees and that further he might . sue to recover those sums from the contractor in a suit based on s. 69 of the Contract Act. But then, it is to be observed, that Para 32 provides that the employer has to deduct the amount paid towards thii provident fund on account of the employee from his wages "and not otherwise". Moreover the Scheme does not impose any obligation on the contractor to pay to the principal employer the amounts paid by him on account of the employee. The intention of the Legislature as expressed ins. 6(1) of the Act is to make the employer lii>ble only for a moiety of the provident fund and while the Scheme of 1952 is well designed to carry out this intention, in its application to workmen directly employed, by reason of the combined operation of Paras 30 and 32, it breaks

down, in its extension to contract labour by reason of the inapplicability of Para 32. It operates unfairly and harshly on persons who employ contract labour and it further results in discrimination between those who employ contract labour and those who employ direct labour.- The Scheme therefore cannot

Orissa Cement Ltd.

Union of India

A{Var J.

Orisso CtmmJ Lttl.

Uni0tt of lrutia

AfyarJ.

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t ' r 848 SUl'l\E.ME COlJRT l{EPORTS [Hlli2J SUPP.

be said to be reasonable and must be struck down as not falling within the protection afforded by Art. HJ (6).

In the result we hold that the notifiuat.iuns dated January I 5, 1958, and Dcocmbf)J' 2, 1960, are unconstitutional and void.

The petitioners are entitled to their costs.

PetitWri allowed .

MOHAN SINGH v.

STATE OF PUNJAB

( B. P. Sr XHA, C. J., P. B. GAJE!WRAGADKAR, K. N.

WANCHoo, N. RAJAGOl'ALA AYYANOAR and

1'. L. V}; l\KATARAMA An:AR, JJ.)

Cri1nit1al Liability-Members of u11/auful assembly- M aintainahility of conviclion-Cou11nou obejct and common i?ltention-Di•tinction-A/teration of w1.viction-lndian l!enal Code 1860 (Act 46 of 1860). ss. 302, 149, 34.

The two appellants, who were tried with three others, were convicted under s. 302 read withs. 149 ands. 147 of the h1dian Penal Code. Two of these five persons tried together were acquitted.

In the charge these five accused persons and none others wc:rc mentioned as forn1ing the unlawful assembly and the evidence led in the case was confined to them alone.

The facts proved in the case unmistakably showed that the two appellants and the other convicted person, who inflicted the fatal blow, were actuated by the common intention of fatally assulling the deceased. It was contended in this Court that the conviction of the appellants under s. 302 read with s. 149 of the Indian Penal Code was not sustainable in law in view of the acquittal of two of the five accused persons who were alleged to have formed the unlawful assembly.

Held, that the contention must prevail and the conviction altered to one under ' 302 read with s. 34 of the Indian Penal Code.

Section 149 of Indian Penal Code prescribes vicarious or constructive criminal liability for members ofan unlawful