Court : supreme court of India
Brief : The word 'employment' must therefore. be
construed as employment in the regular course of business of
the establishment, such employment obviously would not
include employment of a few persons for a short period on
account of some passing necessity or some temporary emer-
gency beyond the control of the company.
Citation : PETITIONER:
REGIONAL PROVIDENT FUND COMMISSIONER, ANDHRA PRADESH
Vs.
RESPONDENT:
SHRI T. S. HARIHARAN
DATE OF JUDGMENT01/04/1971
BENCH:
DUA, I.D.
BENCH:
DUA, I.D.
SHELAT, J.M.
BHARGAVA, VISHISHTHA
CITATION:
1971 AIR 1519 1971 SCR 305
1971 SCC (2) 68
CITATOR INFO :
D 1987 SC 447 (12)
JUDGMENT:
CIVIL APPELLATE JURISDICTION: civil Appeal No. 1128 of
1967.
20-1 S.C. India/71
306
Appeal from the judgment and order dated September 1,
1964 of the Andhra Pradesh High Court in Writ Petition
No.907 of 1963.
L. M. Singhvi and S.P. Nayar, for the appellant
The respondent did not appear.
The Judgment of the Court was delivered by
Dua, J.-The appellant in this appeal by certificate granted
by the Andhra Pradesh High' Court oft February 25, 1965
under Art. 133 (1) (b) of the Constitution is the Regional
Provident Fund Commissioner, Andhra Pradesh. A large
number, of writ petitions. by various parties were filed in
the High Court praying for writs in the nature of mandamus
directing the. appellant to-forbear from enforcing or taking
other proceeding under the provisions of the Employees'
Provident Funds Act, 1957 (hereinafter called the Act) and,
provident Fund Scheme,' 1952. With 'the exception of
perhaps one writ petition, all the rest, including W. P. 907
of 1963 presented by T. S. Hariharn, Proprietor, New Cochin
Cafe, Ongole, respondent in; this Court were dismissed.
Certificates under Article. 133 (i) (b) of the Constitution
were secured by the appellant in almost all the cases but.
the present is the only appeal which now survives, all the
rest having been dismissed for non-prosecution.
The writ, petition of the respondent was dismissed which
means that the final order made by the High, Court was in
favour of the appellant. The only grievance raised by the
appellant's learned counsel in this court was that the
High- Court bad in the course of its judgment expressed the
view that Clause (a),and (b)of sub-section (3) of Section I
of the Act do not cover casual labour and since this
expression of opinion which he considers to be legally
erroneous would be binding on the appellant in administering
the Act, it was necessary to have the correct legal position
enunciated by this Court. According to the appellant's
learned counsel the following passages in the judgment of
the High Court clearly bring out the arguments both for and
against the legal position canvassed by him:--
"We have next reconsider whether clauses (a)
and (b) of Section 1(3) are wide enough to
cover casual labour.the work
of an establishment even for a day or a
fraction thereof. This argument is sought to
be reinforced; by the unreported judgment of a
Division Bench of the Madras High It is
maintained by the learned Government Pleader
that` requirement as to the numerical strength
is satisfied is twenty persons are engaged in
connection with
307
308
The other passage occurs a little lower down in that
judgment
"Section 19-A also seems to strengthen our
view. A doubt as to the number of persons
employed in an establishment could arise only
if the employment of twenty persons in the
establishment were a normal feature. A
legitimate doubt cannot, be said to arise if
the condition as to the number is satisfied if
twenty persons work in the establishment even
for a day or two. It is not necessary for us
to labour this point any further as we feel
that the provisions of the Act are
inapplicable to establishments which do not
employ twenty or more persons,to work therein
for a period of one year. It follows that
'casual labour'- falls outside the scope of
section 1(3). The fact that the casual labour
is engaged by. or, through a contractor does
not make any different for the decision of the
question, the only criterion being whether
they were casual laborers or not.
On this discussion, it follows that the
establishments whose employees do not, come
upto twenty,, excluding casual laborers do not
fall within the purview 'of Section 1(3) and
so the, provisions of the Scheme cannot be
applied to them. The respondents will.
therefore, examine this question in the light
of these decide whether the Scheme should be
applied these establishments excluding casual
labour."
The appellant's learned counsel had at one stage of his
arguments stated that his client was anxious merely to steer
clear of the observations made by the High Court that "the
provisions of the Act are inapplicable to establishments
which do not employ 20 or more persons to work therein for a
period of one year." But while citing certain decided cases
he did appear to canvas for the wide proposition that
employment of a person for however short a period would be
employment for the purpose of determining the number of
persons,employed as contemplated by Section 1 (3) (a) and
(b) of the Act. He relied on the Bench decision of the
Madras High Court reported Messrs East.-,India Industries
(Madras) v. Regional P. F: Commissioner(1) (this decision
was also cited in the High Court as an unreported judgment)
and pressed us to uphold the reasoning adopted therein.
The question requiring our determination is a very short
one. As there is no representation on behalf of the
respondent in this Court and, therefore, we do not have the
benefit of the respondent's point of 'view we propose to
confine ourselves strictly to the
(1) [1964] 1 L. L. J. 441
309
limited question of the scope of clauses (a) and (b) of sub-
section (3) of Section I and this judgment is not intended
to be considered as expressing any opinion on other
controversial aspects. Before considering the relevant
provisions of the Act it may be pointed out that according
to the respondent's writ petition presented in the High
Court in August, 1963, the New Cochin Cafe (treated as a
hotel) was started in Ongole town on November 20, 1956 and
the respondent usually employed only 18 or 19 persons. In
1961 there was total failure of rains,in the Ongole region
and that town was particularly hard hit. The respondent
had, to employ two or three persons on contract basis. for
supplying water to the hotel. Those persons were engaged
from June to September, 1961. The appellant has not
questioned the correctness of these assertions for the
purpose of this appeal. Let us now examine the relevant
provisions of the Act.
The Act was brought on 'the statute book for providing for
the institution of provident fund for the employees in
factories and other 'establishments. The basic purpose of
providing for provident funds appears to be to make
provision for the future of the industrial worker after his
retirement or for his dependants in case of his early death.
To achieve this ultimate object the Act is designed to
cultivate among the workers a spirit of saving something
regularly, and also to encourage stabilisation of a steady
labour force in the industrial centres. This Act has since
its initial enactment been amended several times to extend
its scope for the benefit of industrial workers. We are,
however, concerned with the Act as it stood in 1962 when
notice was sent by the appellant to the respondent stating
that the provisions of the Act had been made applicable to
his establishment. Sections 1 (3) (a) and (b), 4 and 5 may
now be reproduced
"Section 1
(3) Subject to the provisions contained in
section 16, it applies.
(a) to every establishment which is a
factory engaged in any industry specified in
Schedule 1 and in which twenty or mom persons
are employed, and
(b) to any other establishment employing
twenty or more persons or class of such
establishments which the Central Government
may, by notification in the Official Gazette,
specify in this behalf
Provided that the Central Government may,
after giving not less than two months' notice
of its intention so to do, by notification in
the Official Gazette, apply the provisions of
this Act to any
310
establishment employing such number of persons
less than fifty as may be specified in the
notification.
Sub-Section 4
"Notwithstanding anything contained in sub-
section (3) of this section or subsection(1)
of section 16, where it appears to the
Central Government , whether on an
application; made to it in this behalf or
otherwise, that the employer and the majority
of employees in relation to any establishment
have agreed that the provisions of this Act
should be made applicable to the establishment
it may by notification in the Official
Gazette, apply the provisions of this Act to
that establishment."
Sub-Section 5
"An establishment to which this Act applies
shall continue to be governed by this Act
notwithstanding that the number of persons
employed therein at any time falls below
twenty
Provided that where, for a continuous period
of not less than one year the number of
persons employed therein has been less than,
fifteen the employer in relation to such
establishment may cease to give effect to the
provisions of- this Act and any scheme framed
thereunder, with effect from the beginning of
the month following the expiry of the said
period of one year, but he shall, within one
month, of the date, of such cessation,
intimate, by. registered post, the. fact
thereof to such authority, as may be specified
by appropriate Government in this behalf."
The original Act was applicable to establishments which were
factories engaged in the six industries specified in
Schedule 1 but as a result of persistent demands for
extension of provident fund benefits to all industrial
workers, the Act was amended' in 1956 by Act 94 of 1950 so
as to enable its extension ,to other establishments as
well. .,Earlier, it may be pointed out, it was amended in
1953. It is unnecessary to give the details of the
various amendments.
We now turn to the relevant definition clauses contained in
Section 2. These definitions are subject to the context
providing otherwise. In Clause (f) "employee is, defined to
mean any person who is employed for wages in any kind of
work manual or otherwise in or in connection with the work.
of an establishment and who gets his wages directly or
indirectly from the employer and includes any person
employed by, or through a contractor in or in connection
with the work of the establishment. Clause
311
(h) defines "Fund" to mean the provident fund established
under a Scheme.' "Member" is defined in Clause (j) to mean a
member of the Fund and "Scheme" is defined in Clause (1) to
mean a scheme framed under the Act. Section 5 provides for
the framing of a scheme called the Employees' Provident Fund
Scheme by the Central Government. Section 6 makes provi
sion for- contribution by the employer and the
employee to the Fund. Section 14 provides penalties for
evasion of payments under the Act or the Scheme. Section 16
Which excludes from the applicability of the Act
establishments belonging to Government or local authority
and also infant factories, reads
"16. Act not to apply to establishments
belonging to Government or local authority and
also to infant industries
This Act shall not apply--
(a) to any establishment registered under
the Cooperative Societies Act,, 1912, or under
any other law for the time being in force in
any State relating to cooperative societies
employing less than fifty persons and Working
without the aid of powers; or
(b) to any other establishment employing
fifty or more persons or twenty or more, but
less than fifty persons until the expiry of
three years in the case of the former and five
years in the case of the latter, from the date
on which the establishment is, or has been,
set up.
Explanation.--For the removal of, doubts, it
is hereby declared that an establishment shall
not be deemed to be newly set up merely by
reason of a change in its location.
(2)If the Central Government is of opinion
that having regard to, the financial position
of any class of establishment or other
circumstances of the case, it is necessary or
expedient so to do, it may, by notification
in the Official Gazette, and subject to such
conditions as may be specified in the
notification, exempt that class of estab-
lishments from the operation of this Act for
such period as may be specified in the
notification."
Section 17 invests in the appropriate Government power to
exempt certain establishments from the operation of all or
any of the provisions of any scheme. Section 19-A vests in
the Central Government power to remove difficulties by
making necessary provision or giving directions not
inconsistent :with the provisions of
312
the Act. The order of the Central Government made under
Section 19-A for removing doubts and difficulties is clothed
with finality.
The narrow question which directly arises for our conside-
ration is whether Clause (b) of sub-section (3) of Section 1
when it speaks of the establishment employing 20 or more
persons means that the person so employed may be employed by
the establishment for any purpose whatsoever and for however
short a duration or that the employment must be for some
minimum period in the establishment. The language used in
the clause does not give any clear indication., We have,
therefore, to construe this word in the light of the
legislative, scheme, the object and purpose of enacting this
clause and the ultimate effect of adopting one or the other
construction. The relevant sections of the statute have
already been reproduced.
Section 16 which has already been get out in extenso seems
to us to throw considerable light on the point raised., it
may be recalled that this section excludes from the
applicability of the Act establishments belonging to the
Government and to local authorities and infant
establishments. It is, therefore, obvious that this Act is
intended to apply only where ;in establishment has attained
sufficient financial stability and is prosperous enough to
be able to afford regular contribution provided by the Act.
Contribution by the employer is an essential part of the
statutory scheme for effectuating the object of inducing the
workmen to save something regularly. The establishment,
therefore, must possess stable financial capacity to bear
the burden of regular contribution to the Fund under the
Act. In this connection it may be recalled that by virtue
of Section 1 (5) an establishment to which the Act is
applied continues to be governed by the Act notwithstanding
that the number of persons employed by it 'at any time falls
below the required number. This liability to be governed by
the Act ceases only if the terms of the Proviso to Section
1(5) are complied with. The financial capacity of the
establishment to bear the burden must, therefore, have, some
semblance of a reasonably long term stability. In other
words, the employment of requisite number of persons must be
dictated by the normal regular requirement of the
establishment reflecting its financial capacity and
stability. It, therefore, follows from this that the number
of persons to be considered to have been employed by an
establishment for the purpose of this Act has to be
determined by taking into account the general requirements
of the establishment for its regular work which should also
have a commercial noxus with its general financial capacity
and stability. This seems to us to be the correct approach
under the statutory scheme.
313
To accede to the appellant's argument would lead to some
Startling consequences. By way of illustration, if for the
purpose of extinguishing accidental fire an establishment is
compelled to employ a few persons for about a couple of
hours, even then, however weak and unstable its general
financial capacity, the establishment would be covered by
the Act and would have to contribute towards the 'provident
fund for the benefit of its regular ,employees, of course,
excluding those whose services were utilised for a short
while for extinguishing the fire. In this illustration we
are assuming that the employees would have no objection to
being governed by the Act. This, in our opinion, could
never have been the intention of the legislature.
Similarly, we find it difficult to impute to the legislature
an intention to exclude from the application of the Act an
establishment which regularly employs for its general
business the required number of persons for a major part of
the year, say, for 360 days every year, merely because the
;employment of the required number does not extend to full
one year. Both the extreme views, the one canvassed on
behalf of the appellant and the other postulated in the
observation of the High Court that the required number of
persons must continuously work in the establishment for one
year, do not conform to the ,scheme and object of the Act
and are, therefore, unacceptable.
Considering the language of Section 1 (3) (b) in the light
of the foregoing discussion it appears to us that
employment of a few persons on account of some emergency or
for a very short period necessitated by some abnormal
contingency which is not a regular feature of the business
of the establishment and which does not reflect its
business prosperity or its financial capacity and stability
from which it can reasonably be concluded that the
establishment can in the normal way bear the burden of
contribution to-wards the provident fund under the Act would
not be covered by this definition. The word "employment"
must, therefore, be construed as employment in the regular
course of business of the ,establishment; such employment
obviously would not include employment of a few persons for
a short period on account of some passing necessity or some
temporary emergency beyond the control of the company. This
must necessarily require determination of the question in
each case on its own peculiar facts. The approach pointed
out by us must be kept in view when determining the
,question of employment in a given case.
The appellant's learned counsel argued that in the present
case ,the respondent has to employ a few persons every year
regularly from June to September for supplying water to the
hotel because ,of failure of rains. This, according to him,
would be a regular ,employment and the High Court was wrong
in holding to the contrary. There is no finding of the
High Court to this effect and
314
indeed no attempt was made before also to substantiate this
bald assertion We are, therefore, unable to accept this
contention on, the present., record. The general approach
of the High Court to the problem raised in this case
seems.to us to be, broadly speaking, correct; so is its
final conclusion. ,The only observation of the-High 'Court
which required consideration is that the sub-section in
question contemplates the required number of per-. sons to
work in the establishment continuously for one year. On
this point we have clarified the legal position. As the
High Court has dismissed the writ petition after clarifying
the points of law raised leaving it to the appropriate
authority to finally decide the controversy on a
consideration of all the facts and circumstances we do not
propose to say anything more in this appeal which has, been heard
ex parte. , With the aforesaid clarification of the
legal. position we. dismiss this appeal. As there is no
representation. on behalf of the respondent there will be no
order as to costs.
G.C. Appeal dismissed.-
315
