The Andhra Pradesh High Court in its recent ruling held that provident fund dues cannot be determined merely on the basis of balance sheet entries without identifying the specific employees and further held that employees engaged by security agencies for the purposes of loading and unloading, office or factory maintenance and Pay Loader work are covered by the definition of 'employee' under Section 2(f) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) and are entitled to the Provident Fund.
Brief Facts:
The appellant, Sri Chakra Cements Ltd., challenged the orders of a learned Single Judge dismissing their writ petition against the EPF Appellate Tribunal's order, which upheld the demand of Rs. 8,09,558.15 made by the Regional Provident Fund Commissioner, Guntur. The factory was covered under the EPF Act and was declared a sick industry. Initially, an order under Section 7A of the EPF Act was passed determining contributions, which the appellant challenged. The matter was remitted for fresh consideration. Upon re-enquiry, the EPF authority again determined dues of Rs. 8,09,558.15 for April 1999 to March 2003. The appellant contended that contributions were demanded from non-employees and that workers were not identified. Despite challenges, the Tribunal upheld the assessment, leading to the present appeal.
Contentions of the Petitioner:
The learned counsel for the petitioner argued that the Single Judge erred in upholding the demand, particularly the inclusion of contract and unidentified workers without proof of their engagement. It was contended that reliance on ledger entries without employee identification violated established principles and relied on the case of The Provident Fund Inspector, Guntur vs. T.S. Hariharan (AIR 1971 SC 1519), where the Supreme Court held that the word 'employment' connotes regular course of business and would not include employment of a few persons for a short period for a passing necessity or some temporary emergency.
Contentions of the Respondent:
The respondents argued that the definition of 'employee' under Section 2(f) of the Act includes workers engaged through contractors and that the demand was based on proper inquiry. It was contended that the Tribunal and Single Judge rightly upheld the order.
Observations of the Court:
The Court observed that while Section 2(f) of the EPF Act broadly defines 'employee' to include those engaged through contractors, the inquiry must still establish who those employees are. It was noted that during the 7A inquiry, the General Secretary of the union alleged non-enrollment of 75 workers. However, no conclusive proof was found supporting this claim. Physical verification yielded no confirmation that the alleged 75 workers were engaged by the appellant.
The Court found that in Annexures A and B, amounts were calculated for security and loading/unloading services based solely on ledger entries, with no employee names or identities established. Only Annexures C and D contained specific employee names. Relying on a previous ruling of the Employees Provident Fund Appellate Tribunal in M/s. Janchaitanya Housing Limited vs. Asst. Provident Fund Commissioner, Guntur, where it was held that without identifying workers, determining Provident Fund dues based on balance sheet entries was improper, the Court set aside the order dated 11.06.2004 insofar as it related to the determination of the dues in respect of unidentified workers.
The Court observed that the learned Single Judge overlooked this critical aspect and mechanically upheld the assessment. It was clarified that while identified employees must be covered, amounts relating to unidentified persons could not be sustained.
The decision of the Court:
The Court allowed the writ appeal in part, setting aside the Tribunal and EPF orders relating to unidentified workers. The rest of the assessment concerning identified employees was confirmed.
Case Title: M/s. Sri Chakra Cements Ltd. vs The Employees Provident Funds & Others
Coram: Hon’ble Mr. Justice Dhiraj Singh Thakur, Chief Justice; Hon’ble Mr. Justice Ravi Cheemalapati
Case No.:Writ Appeal No. 11 of 2025
Advocate for the Applicant: K. Venugopal Reddy
Advocate for the Respondent: T. Balaji
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