R.K. Mohta And Ors. vs Union Of India And Ors.
1992 Latest Caselaw 55 Del

JUDGMENT

B.N. Kirpal, J.

(1) The challenge in this writ petition is to the Provident Fund which is being contributed in case of the employees of Sardar patel Vidyalaya (hereinafter referred to as the said School).

(2) This petition has been filed by some of the teachers of the school. There is also an application filed by the Karamcharis of the school for intervention. We have allowed the application (C.M. 5810/91) for intervention and have heard Counsel for the petitioner and the other parties including the interveners.

(3) The dispute relates to three distinct periods. The first period is 1st April, 1959 to September. 1977. The second period is September, 1977 to August, 1982 and the third period is August, 1982 to August, 1988.

(4) In order to appreciate the dispute which is raised it is necessary to examine as to how the respondent school acted in the present case. The memorandum and Rules of the school employees Provident Fund were promulgated and enforced w.e.f. 1st April, 1958. According to Rule 5, the employees were entitled to be paid not less than 6% Provident Fund up to 31st March, 1959 and 8 1/3% w.e.f. 1st April, 1959 of the employees pay. The expression "Pay" was defined in Rule 4(a) to mean "a monthly Basic Pay plus Dearness Pay". The expression "Dearness Pay" has not been defined in the said Rules. However, Rule 15 of the Rules, inter alia, provides that wherever the Fund Rules are silent the provisions of the Income-tax Act and the relevant Rules made there under shall prevail.

(5) It seems that an Office Memorandum was issued by the Central Government on 25th May, 1979, according to which a certain portion of Dearness Allowance was to be treated as Dearness Pay. This Office Memorandum purported not to apply to members of the All India Services or persons appointed on contract or persons who were granted consolidated rates of pay and were not in receipt of Dearness Allowance. The school, however, applied the said Memorandum and w.e.f. September, 1977 to August, 1982 it contributed, and deducted from the employees salary, Provident Fund @ 8.33% of the Basic Pay plus Dearness Pay as understood by the aforesaid Office Memorandum dated 25th May, 1979. From August, 1982 the provisions of the Employees Provident Fund and Misc. Provisions Act, 1952 were made applicable to the schools in Delhi. According to Section 12 of the Act the wages or emoluments of the employees were not to be reduced and the total quantum of benefits to all employees could not be less than what was being paid prior to the applicability of the said Act.

(6) The contention of the petitioner and other employees is that with respect to the period 1st April, 1959 to September, 1977 a portion of the Dearness Pay was not included while calculating the amount of contribution to Provident Fund. With regard to the second period the grievance is that the entire Dearness Allowance would be treated as Dearness Pay and the contribution should be @ 8 1/3%. With regard to the third period the grievance is that the school is deducting and contributing Provident Fund @ 6.25% whereas it should be 8 1/3% and the reduction of the rate amounts to violation of Section 12 of the Employees Provident Fund Act.

(7) Dealing with the first two periods together, in our opinion there is no merit in the contention raised in this writ petition. Firstly the petitioner and the other employees are guilty of laches with regard to the contribution of the Provident Fund for the period 1st April, 1959 to September, 1977. The present writ petition had been filed in 1990. It is a stale claim which is sought to be raised in this writ petition. That apart, it is not possible for us to agree that the expressions "Dearness Pay" and "Dearness Allowance" are synonymous or mean one and the same thing. It has been contended by Mr. Jaitley that we should invoke the provisions of the Fourth Schedule of the Income-tax Act, 1961 and by doing so the full amount of Dearness Allowance has to be included in the expression "Dearness Pay". In support of this, reliance is placed by him on Rule 15 of the Schools Provident Fund Rules which, inter alia, provides that in respect of those matters for which no provision has been made in the School Rules, the Income-tax Act would apply.

(8) In our opinion the aforesaid Rule 15 can be of no assistance. Firstly the Fund Rules are not silent with regard to the expression "Pay". The said expression is defined in Rule 4(a) to mean Basic Pay plus Dearness Pay. It is true that the expression "Dearness Pay" is not defined in the School Rules but the said expression Dearness Pay is also not defined in the Fourth Schedule of the Income-tax Act. According to the said Schedule contribution to Provident Fund has to be made with reference to the salary which is paid to an employee. Clause 2(h) of the Fourth Schedule provides that salary includes Dearness Allowance but in the case of the schools the expression which is used is not salary but pay. At the time when the scheme of the school was framed the Income-tax Act and the Rules of 1922 were in existence. The expression which was used in the 1922 Act was "salary" for the purpose of determination of the Provident Fund contribution. There was obviously a deliberate departure when the School Rules were framed and it chose to use the expression "pay" instead of "salary". Even under the Income-tax Act, 1961 the expression used is "salary" and not "pay". It is only because of the inclusive definition that Dearness Allowance is included in the expression "Salary". In our opinion the definition contained in Clause 2(h) of the word "Salary" cannot be incorporated into the School Rules.

(9) According to Section 6 of the Act Dearness Allowance is regarded as something in addition to the Basic Wage. In the Office Memorandum of 25th May, 1979 a part of Dearness Allowance was to be treated as Dearness Pay for the purpose of retirement benefits. Retirement benefits were both pension and gratuity. Till that time no part of Dearness Pay was taken into consideration while calculating the quantum of pension or gratuity which was payable. Furthermore clause 6 of this memorandum specifically provided that for calculating the amount of subscription towards contributing Provident Fund the Dearness Pay shall be treated as part of such Pay and the Dearness Pay was to be that portion of the Dearness Allowance which was designated as Dearness Pay by the said Office Memorandum of 25th May, 1979. We are also told that on 18th January, 1969 there was also an Office Memorandum whereby a part of Dearness Allowance was regarded as Dearness Pay and that further strengthens the stand of the school namely that the entire amount of Dearness Allowance was not to be regarded as Dearness Pay. Mr. Jaitley is right in submitting that the said Office Memorandum did not specifically apply to the school. In our opinion even though the said Office Memorandum did not apply, the school, very fairly, invoked the said Office Memorandum and gave larger benefits to the employees than what they were getting earlier. As we have already explained the provisions of the Income-tax Act were not applicable or in any case where of no assistance in determining the concept of Dearness Pay. There was no other statutory definition of Dearness Pay. What was being paid by the school to its employees was Dearness Allowance and not Dearness Pay. It is a special benefit which was granted by the Government to its employees when by the said Office Memorandum it regarded, obviously by fiction, a part of Dearness Allowance as Dearness Pay. This extra benefit was extended by the school on its own to its employees w.e.f. September, 1977, according to the petitioners. Mr. Dhawan, however, submitted on behalf of the school that the school did give effect to the earlier Office Memorandum of 18th January, 1969 and a part of the Dearness Allowance was treated as Dearness Pay as per the said Office Memorandum.

(10) We, therefore, are of the firm opinion that there is no merit in the contention of the petitioners for claiming any extra benefits for the first two periods viz,., 1st April. 1959 to September, 1977 and September, 1977 to August, 1982. The School has complied with the provisions of the law and the amount which was required to be contributed has been contributed by the school.

(11) Coming to the third period of August, 1982 to August. 1988 the submission of the learned Counsel for the petitioners is that prior to the applicability of the said Act contribution towards Provident Fund was being made @ 8.33%. He submitted that it is no doubt true that according to the Act what is required to be contributed is only 6.25% but because the employees were contributing (a) 8.33%, therefore, by virtue of the provisions of Section 12 of the Act this rate could not be reduced. It is submitted, in this connection, by Mr. Jaitley that the reduction of the rate would amount to reduction in the quantum of total benefits which were being paid to the petitioners. We are unable to agree with this submission. Section 12 reads as follows : "12.No employer in relation to an establishment to which any Scheme or the Insurance Scheme applies shall, by reason only of his liability for payment of any contribution to the fund or the Insurance Fund or any charges under this Act or the Scheme or the Insurance Scheme, reduce, whether directly or indirectly, the wages of any employee to whom the Scheme applies or the total quantum of benefits in the nature of old age pension, gratuity provident fund or life insurance to which the employee is entitled under the terms of his employment, express or implied."

(12) The expression used in this provision is "total quantum of benefits ......". What the Section implies is that the total amount of money or money's worth which the employer was paying or contributing should not be reduced as a result of the applicability of the Act. It is not in dispute that with the applicability of the Act and the school contributing only @ 6.25% the total pay package or the total quantum of benefits has not been reduced. The employees are now getting not less than what they were getting prior to the applicability of the said Act. What has happened is that the whole amount of the Dearness Allowance is taken into consideration for the purpose of calculating the Provident Fund. Even by reducing the rate from 8.33% to 6.25% there has been no reduction in the total quantum of benefits which is paid to the employees. We cannot equate the expression "total quantum" to the "rate of contribution". Learned Counsel for the petitioners placed reliance on a decision of the Bombay High Court in the case of M/s Consolidated Crop Protection (P) Ltd., v. V. Hema Chandrarao and Another, 1977 Labour & Industrial Cases, 251. In that case there was reduction in the contribution from 12"% to below 10% and the High Court came to the conclusion that the reduction was contrary to the provisions of Section 12 of the Act. With respect what has to be seen, as required by Section 12, is the total quantum of benefits which the employee was getting prior to the applicability of the Act. If this total quantum of benefits is not reduced, then, not withstanding the alteration in the rate of contribution alone, there is no violation of Section 12. It is n.)t disputed as, we have already observed that the employees are not getting less thin what they were getting prior to August, 1982. This being so the reduction in the rate from 8.33% to 6.25% is not illegal because the total quantum of benefits has not been adversely affected. (13) We find no merit in this writ petition. It is accordingly dismissed. Petition dismissed.