Kerala High Court
Employees Provident Fund Organization vs M/S Ambassador Security & Detective ... on 31 July, 2025
2025:KER:56854
W.P.(C).No.25272 of 2014
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
THURSDAY, THE 31ST DAY OF JULY 2025 / 9TH SRAVANA, 1947
WP(C) NO. 25272 OF 2014
PETITIONER:
THE EMPLOYEES PROVIDENT FUND ORGANIZATION
KOTTAYAM - 686 001;
REPRESENTED BY THE ASST. PROVIDENT FUND
COMMISSIONER
BY ADV SHRI.JOY THATTIL ITTOOP
RESPONDENTS:
1 M/S AMBASSADOR SECURITY & DETECTIVE SERVICES
CHIRATHALATTU BUILDING, NEAR MEDICAL CENTRE,
KOTTAYAM - 686 001, REPESENTED BY ITS MANAGING
PARTNER, MR.C.S.CHANDRASEKHAR.
2 THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL
SCOPE MINAR, 4TH FLOOR, CORE-II,
LAXMI NAGAR DISTRICT CENTRE, NEW DELHI -110001.
BY ADVS.SRI.T.M.CHANDRAN
SRI.S.SUJITH
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 31.07.2025, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
2025:KER:56854
W.P.(C).No.25272 of 2014
2
S.MANU, J.
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W.P.(C).No.25272 of 2014
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Dated this the 31st day of July, 2025
JUDGMENT
First respondent is engaged in the business of providing security and detective services to individuals and business houses. It is a covered establishment under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. On the basis of report of the Enforcement Officer proceedings under Section 7A of the Act was initiated against the 1 st respondent. Ext.P1 order was passed by the Regional Provident Fund Commissioner finding that the 1st respondent was liable to remit a total amount of Rs.42,92,510/- towards EPF dues. First respondent approached the EPF Appellate Tribunal in Appeal No.ATA No.803(7)/12. The appeal was allowed. Challenging 2025:KER:56854 W.P.(C).No.25272 of 2014 3 the order passed by the Appellate Tribunal, Employees Provident Fund Organization has filed this writ petition.
2. Two issues were considered by the Regional Provident Fund Commissioner in the proceedings under Section 7A. First issue was as to whether the 1st respondent was required to remit PF contribution on the minimum wages as notified by the appropriate Government. This issue was found in favour of the 1st respondent. The second issue considered was as to whether the 1st respondent was liable to pay PF contribution on HRA, conveyance allowance and washing allowance. The authority noted that till January 2010 the wage structure consisted of basic wages, DA, HRA as well as conveyance and washing allowance. From February 2010 the HRA and conveyance allowance were merged into basic and the 1 st respondent started remitting contributions on the basis of the new basic wages, inclusive of HRA and conveyance allowance. The 2025:KER:56854 W.P.(C).No.25272 of 2014 4 authority concluded that the 1st respondent was liable to pay PF contribution on the allowances also for the period from March 2008 to March 2010. The authority held that the employer was liable to make contributions on those components of emoluments which in reality were not allowances.
3. In the appeal the 1 st respondent contended that the enquiry was not conducted properly and proper opportunity was not provided to the employer to adduce evidence and also to cross-examine the officers who had prepared the report after inspection. First respondent argued that as per the practice in the security service industry, terms of employment are arrived at by verbal contracts and not necessarily by contracts in writing. It was for the employer and the employees to decide how much is to be paid as basic wages. Similarly, it was for them to decide how much shall be paid as allowances and also that allowances under which heads are to be paid. Till January 2025:KER:56854 W.P.(C).No.25272 of 2014 5 2010 the wage structure followed by the 1 st respondent was different. From February 2010, HRA and conveyance allowance were merged into the basic on the basis of demands by the employees. First respondent thereafter started remitting PF contribution on the basis of basic wages which included HRA and conveyance allowances also. Hence, the 1 st respondent contended that there were no short remittances as found by the Regional Provident Fund Commissioner.
4. The Appellate Tribunal found that the employer was free to settle the wage structure of the employees as no law prescribed any norms for fixing the wage structure. The Tribunal made reference to its order in ATA No.223(16)/2006 wherein it was held that no contribution is liable to be paid in respect of minimum wages as well as HRA, TA payable etc. The Tribunal agreed with the contention of the 1 st respondent that the decision to merge HRA and conveyance allowance into basic 2025:KER:56854 W.P.(C).No.25272 of 2014 6 was pursuant to agreement arrived at between the employer and employees and the said decision was having effect from only from the date of agreement. From February 2010, after such merger was effected, the 1st respondent started remitting contributions on the basis of revised basic pay. The Appellate Tribunal held that the presumption of the Regional Provident Fund Commissioner that the 1st respondent was bound to merge all allowances into basic wage even before an agreement to that effect was arrived at was erroneous. Accordingly, the appeal was allowed and the assessment order was set aside.
5. The learned Standing Counsel for EPFO contended that the Tribunal went wrong in allowing the appeal. The 1 st respondent in order to reduce the liability to pay PF contribution treated a part of the wages as HRA, washing allowance and conveyance allowance. Later, in February 2010 the establishment started paying contribution at a higher rate. This 2025:KER:56854 W.P.(C).No.25272 of 2014 7 conduct amounted to an admission that the contribution was not paid properly hitherto. The learned Standing Counsel submitted that in Ext.P1 order, the Regional Provident Fund Commissioner had considered every relevant aspect and concluded that the employer had not produced any agreement or contract between him and the workers regarding the wage structure. No appointment order of any employee showing the details of wages and components were shown to the Enforcement Officers. No satisfactory explanation was offered for not considering the allowances to calculate the PF contributions. There was no reliable material to show that, as per the terms of the contract, the allowances were to be treated as not part of the basic wages. Therefore, the conclusions of the authority under Section 7A were proper and legal and the Tribunal went wrong in setting aside the same. The learned Standing Counsel relied on the judgment of the Hon'ble Supreme Court in 2025:KER:56854 W.P.(C).No.25272 of 2014 8 Regional Provident Fund Commissioner (II), West Bengal and others v. Vivekananda Vidhya Mandir and others [(2020) 17 SCC 643] to contend that the conclusions on facts made by the authority under Section 7A ought not to have been lightly interfered with by the Appellate Tribunal. The learned counsel hence submitted that the order passed by the Appellate Tribunal may be set aside and the order under Section 7A may be upheld.
6. The learned counsel appearing for the 1st respondent defended the order of the appellate authority. He contended that the authority under Section 7A of the Act had proceeded in a highly prejudiced manner against the 1 st respondent. In the very nature of business of running a security service, many employees will come work for a short term and leave the establishment. It was not practical to execute employment agreements under such circumstances. Several persons who 2025:KER:56854 W.P.(C).No.25272 of 2014 9 work as security personnel may leave the job and opt other jobs frequently. The Regional Provident Fund Commissioner proceeded against the 1st respondent without noticing the peculiar features of establishments offering security services. He contended that the Enforcement Officer proceeded against the 1st respondent only after the 1st respondent started making contributions at a higher rate after February 2010. He pointed out that from February 2010 the 1 st respondent establishment merged HRA and conveyance allowance to basic pay. Thereafter, PF contribution was remitted on the basis of basic pay which included the said allowances also. Only then the authorities under the EPF Act proceeded against the 1 st respondent alleging that contributions made earlier were inadequate as the same was not on the basis of pay excluding HRA and conveyance allowance. He hence pointed out that the authorities proceeded against the 1st respondent on totally wrong premises. The 2025:KER:56854 W.P.(C).No.25272 of 2014 10 reasoning adopted by the Regional Provident Fund Commissioner was erroneous. The learned counsel also contended that the said authority did not provide opportunity to the petitioner to adduce evidence by examining witnesses. Hence, the proceedings were vitiated and the conclusions were fallacious. He contended that the Appellate Tribunal rightly interfered and set aside the order passed under Section 7A.
7. The learned counsel relied on judgment of the Hon'ble Supreme Court in Assistant Provident Fund Commissioner v. G4S Security Services (India) Limited and another [(2023) 11 SCC 822]. It was a case in which the allegation against the employer was that the wage structure was split to reduce the basic wage and thereby incorrect amounts were paid towards provident fund. The Appellate Tribunal decided against the EPFO. Order of the Tribunal was upheld by the learned Single Judge and the Division Bench of the High 2025:KER:56854 W.P.(C).No.25272 of 2014 11 Court. The Hon'ble Supreme Court also rejected the appeal filed by the EPFO.
8. The learned counsel for the petitioner relied on the judgment of the Hon'ble Supreme Court in Food Corporation of India v. Provident Fund Commissioner and others [(1990) 1 SCC 68], in support of his contention that when the employer sought for adducing evidence, it was the legal duty of the Commissioner to permit to adduce evidence. The Hon'ble Supreme Court held in the said judgment that the Commissioner should exercise all his powers to collect all evidence and collate all material before coming to proper conclusion. The Apex Court further held that the same is the legal duty of the Commissioner and it would be failure to exercise the jurisdiction if the Commissioner refuses to do so when a party to the proceeding requests for summoning evidence from a particular person. The learned counsel for the petitioner submitted that, by refusing to 2025:KER:56854 W.P.(C).No.25272 of 2014 12 examine witness cited by the 1 st respondent and also by not providing opportunity to cross-examine the officers involved in the inspection, the authority had committed grave illegality while passing the orders under Section 7A. The learned counsel relied on a judgment of a Division Bench of this Court in ESI Corporation v. Taurus Security Services [2018 (1) KLT 131] in support of his contention that special allowances paid to security guards taking into account the peculiar nature of the work were not to be treated as part of basic wages. The learned counsel also referred to a judgment of Patna High Court reported in Raj Kumar Gupta v. Assistant Provident Fund Commissioner [Laws (PAT) 2013 774]. The learned counsel pointed out that Patna High Court criticized the Provident Fund Authorities for compelling employers to make contributions with regard to faceless, nameless or non-identifiable workman on mere head-count or herd-count. The learned counsel concluded 2025:KER:56854 W.P.(C).No.25272 of 2014 13 by submitting that the order passed by the Appellate Tribunal is not liable to be interfered with.
9. It is evident from the facts of the case that proceedings were initiated under Section 7A of the Act against the 1st respondent only after the establishment merged HRA and conveyance allowance with basic wages in February 2010. The explanation offered by the establishment for effecting such merger was that the same was as per the demand by the employees. I find considerable merit in the contention of the learned counsel appearing for the 1st respondent that in the peculiar nature of the business of providing security services, the employer establishment may not be in a position to execute employment agreements with all security guards deployed by it. Many persons may join the establishment for short period and number of persons remaining continuously engaged through the employer may be less. It is up to the employer and the 2025:KER:56854 W.P.(C).No.25272 of 2014 14 employee to settle the terms of employment as long as there is no law governing the same. The authority under Section 7A also found that minimum wages were not applicable. Hence, the said authority ought to have found that there was no legal requirement to pay any particular amount as basic wages as far as the 1st respondent is concerned. For the reason that the 1 st respondent started remitting contribution at a higher rate after the HRA and conveyance allowance were also merged with basic wages from February 2010 the authorities could not have presumed that the 1st respondent had split up those allowances which were part of actual wages prior to February 2010. The conclusion of the Appellate Tribunal in this regard is sound and correct.
10. It is also evident from the facts that proper opportunity was not provided to the 1st respondent to adduce evidence during the inquiry under S.7A. In the light of the 2025:KER:56854 W.P.(C).No.25272 of 2014 15 judgment of the Hon'ble Supreme Court in Food Corporation of India v. Provident Fund Commissioner and others [(1990) 1 SCC 68], the authority under Section 7A ought to have provided opportunity to the 1 st respondent to adduce evidence. Failure to do so has caused prejudice to the 1 st respondent. However, as the imposition of penalty has been found improper and illegal it is not required to remit the matter for fresh inquiry.
In view of the above discussion, I do not find any reason to interfere with the impugned order passed by the Employees' Provident Fund Appellate Tribunal. The writ petition is therefore dismissed.
Sd/-
S.MANU JUDGE skj 2025:KER:56854 W.P.(C).No.25272 of 2014 16 APPENDIX OF WP(C) 25272/2014 PETITIONER'S EXHIBITS EXT.P1 TRUE COPY OF THE ORDER DATED 21/9/2012 BEARING NO.KR/KTM/RPFC/HMT/19140/ ENF.I(1)/13/12/7606. EXT.P2 A TRUE COPY OF THE APPEAL FILED BY THE 1ST RESPONDENT BEFORE THE 2ND RESPONDENT.
EXT.P3 A TRUE COPY OF THE COUNTER AFFIDAVIT FILED BEFORE THE 2ND RESPONDENT.
EXT.P4 A TRUE COPY OF THE ORDER DATED 11/03/2013 ISSUED BY THE 2ND RESPONDENT.