Saraswati Construction Company vs Central Board Of Trustees
2010 Latest Caselaw 1991 Del

*                IN THE HIGH COURT OF DELHI AT NEW DELHI


+                       W.P.(C) No. 5625/2007

                                     Judgment reserved on: 27.01.2010
%                                    Judgment delivered on: 19.04.2010

Saraswati Construction Company                            ...... Petitioner
                                     Through: Mr. S.P. Arora, Advocate
                        versus

Central Board of Trustees                           ..... Respondent
                                     Through: Mr. R.C. Chawla, Advocate

CORAM:
HON'BLE MR. JUSTICE KAILASH GAMBHIR

1.       Whether the Reporters of local papers may
         be allowed to see the judgment?                   Yes

2.       To be referred to Reporter or not?                Yes

3.       Whether the judgment should be reported
         in the Digest?                                    Yes

KAILASH GAMBHIR, J.

*

1. By this petition filed under Article 226/227 of the Constitution of

India, the petitioner seeks quashing of the order dated 13.11.2006

passed by the EPF Appellate Tribunal and orders dated 12.11.99 and

14.5.2001 passed by the Regional Provident Fund Commissioner,

Delhi under Section 7A and 7B of the Employees Provident Fund and

Misc. Provisions Act, 1952. The petitioner also seeks directions to

direct Regional PF Commissioner, Delhi not to proceed further in the

matter of determination of PF dues under Section 7A of the Act till

final decision of the present petition.

2. Brief facts of the case relevant for deciding the present petition

are that on 9.3.89, a two member squad of Enforcement Officers

visited the petitioner firm and submitted their enquiry report and on

23.9.92, the respondent department initiated enquiry u/s 7A of the

Employees Provident Fund and Misc. Provisions Act, 1952. On

12.11.99, the Regional PF Commissioner, Delhi upheld the coverage

as recommended by the squad of the Enforcement officers.

Thereafter, the petitioner filed review petition and the Regional PF

Commissioner on 14.5.2001 passed an order against the petitioner.

Consequently, the petitioner filed an appeal before the EPF Tribunal

which vide order dated 13.11.06 dismissed the same. Feeling

aggrieved by the aforesaid orders, the petitioner has filed the present

petition.

3. Mr. S.P. Arora, counsel for the petitioner argued that the

enquiry report dated 9.3.1999 submitted by the Officers of P.F.

Enforcement is bogus and incorrect as the said officers never visited

the establishment of the petitioner. Counsel further submitted that in

the inspection report submitted by the Provident Fund Inspectors,

the address of the petitioner has been wrongly disclosed as 908,

Hemkunt House, 6 Rajendra Place, Delhi where as the correct address

of the petitioner is 906, Hemkunt House, 6, Rajendra Place, Delhi.

Similarly the petitioner firm has been shown to be a partnership firm

comprising of two partners while in fact the petitioner firm is a

proprietorship firm under the sole proprietorship of Mr. Lalit Mohan

Madhan. Finding further faults with the inspection report, counsel

submitted that the enforcement inspectors did not obtain signatures

of any employee of the petitioner and had given incorrect strength of

the employees then working in the establishment of the petitioner

firm besides quoting wrong and inappropriate amount of wages being

drawn by such employees. The contention of the counsel for the

petitioner was that at no point of time the petitioner establishment

had employed 20 employees and therefore, the petitioner could not

have been brought under the purview of the said Act w.e.f. 1.8.88.

Counsel further submitted that the onus to prove the existence of 20

employees or more was on the respondent, but since the respondent

failed to discharge the said onus, therefore, the Tribunal ought to

have drawn an adverse inference against the department instead of

proceeding against the petitioner. Counsel for the petitioner further

submitted that the petitioner was not given any opportunity to cross-

examine the said two enforcement inspectors who had submitted their

inspection report based on their alleged visit to the petitioner

establishment despite specific requests made by the petitioner, and

therefore, the impugned orders passed by the Regional Provident

Fund Commissioner suffers from patent illegality and perversity

besides being arbitrary and in violation of principles of natural justice.

Counsel for the petitioner further submitted that it is for the

respondent Provident Fund Commissioner to establish the fact of any

establishment employing 20 or more persons with their exact

identification, period of service etc. and since the respondent failed to

prove the same, therefore, the provisions of the said Act could not

have been made applicable to the establishment of the petitioner. In

support of his arguments, counsel for the petitioner placed reliance on

the following judgments:-

1. Himachal Pradesh State Forest Corporation Vs. Regional Provident Fund Commissioner, 2008 LLR 980.

2. Food Corporation of India Vs. Provident Fund Commissioner & Ors. (1990) 1 SCC 68.

4. Per contra Mr. R.C. Chawla, counsel for the respondent

supported all the three orders under challenge before this Court.

Counsel pointed out that the fact of employment of more than 20

employees was admitted by the petitioner itself as it was stated by the

petitioner that it had employed 10 regular employees and 30 on daily

wages through petty contractors and thus in the face of the said

admission, the petitioner cannot take any contrary stand before this

court in the present petition. Counsel further submitted that an order

under Section 7A can be passed even in a case where workers are

employed through a contractor and that all the relevant service

records were in the possession of the petitioner and hence the onus

was on the petitioner to prove that it had not deployed 20 or more

persons at the relevant time and on the failure to discharge such an

onus, the petitioner cannot find fault with the inspection report

submitted by the inspectors. Counsel for the respondent further

submitted that the proceedings under Section 7A of the said Act were

initiated against the petitioner on 23.9.92 and not less than 84

hearings were held before the Regional Provident Fund

Commissioner, but the petitioner failed to produce the relevant

records comprising of his balance sheet, wage register, account books

etc and, therefore, the Regional Provident Fund Commissioner rightly

upheld bringing the petitioner establishment under the umbrella of

Section 7A of the Act. Counsel for the respondent further submitted

that the petitioner failed to produce any document on record even in

the review proceedings filed by the petitioner under Section 7B of the

Act. Counsel thus submitted that the review application of the

petitioner was also dismissed as it failed to substantiate its case by

means of any supporting documentary evidence and also the appeal

filed by the petitioner was dismissed as no merit was found in it by the

Tribunal. Counsel further submitted that this Court while exercising

its jurisdiction under Article 226 of the Constitution of India will not

reappreciate the findings of fact arrived at by the Appellate Authority

and the Regional Provident Fund Commissioner unless the petitioner

points out any manifest illegality or perversity in such findings which

as per the counsel for the respondent, the petitioner has failed to

show before this Court. In support of his arguments counsel for the

respondent placed reliance on the following judgments:-

1. 1975 Lab IC 1162 Calcutta

2. 1975 Lab 1C 1186 Delhi

3. 1999 Lab 1C 3407 Andhra Pradesh

5. I have heard learned counsel for the parties at considerable

length and perused the records.

6. The order dated 12.11.1999 passed by the Regional Provident

Fund Commissioner under Section 7A of the said Act clearly shows

that the petitioner had admitted that it had employed 10 permanent

employees and about 30 employees on daily wages through petty

contractors. Under Section 2(f) of the said Act "employee" has been

defined to mean any person who gets 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.

Section 2(f) of the said Act is reproduced as under:-

"2. Definitions

(f) "employee" means 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

(i) employed by or through a contractor in or in connection with the work of the establishment;"

(ii) engaged as an apprentice not being an apprentice engaged under the Apprentices Act 1961 or under the standing orders of the establishment; "

7. Going by the said definition, it would be manifest that if an

employer has employed certain employees through a contractor in or

in connection with the work of establishment, then the strength of

such employees shall also be taken into consideration to see whether

by counting such a strength the establishment employs 20 or more

persons for the applicability of the provisions of the said Act. In the

inspection report dated 9th March, 1989 the strength of the petitioner

establishment in the year 1988-89 from August to March, so far the

permanent employees are concerned, have been shown to be

between 9-10 and so far daily wagers or other casual employees are

concerned, they have been shown to be 25 to 40 persons. The

petitioner is engaged in the field of construction and, therefore,

deployment of employees through contractor to work for the

establishment of the petitioner cannot be ruled out. The report of the

inspectors should have been more clear, specific and categorical to

show the exact strength of employees, possibly with the names and

their salaries etc. But in any event of the matter, the petitioner was

given enough opportunities to rebut the said inspection report, but

the petitioner failed to adduce any evidence despite number of

opportunities, preceding the stage of Section 7A of the Act, in the

proceedings under Section 7A of the Act, and even at the stage of the

review were given. Therefore, once the petitioner itself failed to

substantiate its case by means of any supporting documentary

evidence, then, no fault can be found with the finding of fact arrived

at by the Regional Provident Fund Commissioner while passing orders

under Section 7A and 7B of the Act. The Appellate Tribunal also

upheld the orders passed by the Regional Provident Fund

Commissioner and dismissed the appeal filed by the petitioner. I do

not find merit in the submission of the counsel for the petitioner that

the onus was on the respondent to prove that the petitioner had

deployed 20 or more workers at the relevant time of the inspection as

the entire documentary evidence always remained in the control,

power and possession of the establishment. Therefore, it was for the

petitioner establishment to have placed sufficient cogent documentary

evidence so as to rebut the said inspection report and despite

numerous opportunities granted to the petitioner at every stage of the

proceedings, the petitioner failed to produce any such evidence.

Hence no infirmity or perversity can be found in the findings arrived

at by the Regional Provident Fund Commissioner and also in the order

passed by the Appellate Authority.

8. It is a settled legal position that unless there is any perversity

or illegality in such findings, the writ Court would be hesitant to

reappreciate the findings of the fact and in the present case the

petitioner has failed to advance any reason as to why the

documentary evidence was not placed before the Regional Provident

Fund Commissioner to rebut the said inspection report dated 9th

March, 1989.

9. Before carrying on further discussion it would be relevant

to reproduce Section 7A of the Employees Provident Fund and

Miscellaneous Provisions Act, 1952 as under:-

"7A. Determination of moneys due from employers

(1) The Central Provident Fund Commissioner any Additional Central Provident Fund Commissioner any Deputy Provident Fund Commissioner any Regional Provident Fund Commissioner or any Assistant Provident Fund Commissioner may by order

(a) in a case where a dispute arises regarding the applicability of this Act to an establishment decide such dispute; and

(b) determine the amount due from any employer under any provision of this Act the Scheme or the Pension Scheme or the Insurance Scheme as the case may be and for any of the aforesaid purposes may conduct such inquiry as he may deem necessary.

(2) The officer conducting the inquiry under sub-section (1) shall for the purposes of such inquiry have the same powers as are vested in a court under the Code of Civil Procedure 1908 for trying a suit in respect of the following matters namely :

(a) enforcing the attendance of any person or examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavit;

(d) issuing commissions for the examination of witnesses; and any such inquiry shall be deemed to be judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code.

(3) No order shall be made under sub-section (1) unless the employer concerned is given a reasonable opportunity of representing his case.

(3A) Where the employer employee or any other person required to attend the inquiry under sub-section (1) fails to attend such inquiry without assigning any valid reason or fails to produce any document or to file any report or return when called upon to do so the officer conducting the inquiry may decide the applicability of the Act or determine the amount due from any employer as the case may be on the basis of the evidence adduced during such enquiry and other documents available on record.

(4) Where an order under sub-section (1) is passed against an employer ex parte he may within three months from the date of communication of such order apply to the office for setting aside such order and if he satisfies the officer that the show cause notice was not duly served or that he was prevented by any sufficient cause from appearing when the inquiry was held the officer shall make an order setting aside his earlier order and shall appoint a date for proceeding with the inquiry :

Provided that no such order shall be set aside merely on the ground that there has been an irregularity in the service of the show cause notice if the officer is satisfied that the employer had notice of the date of hearing and had sufficient time to appear before the officer.

Explanation : Where an appeal has been preferred under this Act against an order passed ex parte and such appeal has been disposed of otherwise than on the ground that the appellant has withdrawn the appeal no application shall lie under this sub-section for setting aside the ex-parte order.

(5) No order passed under this section shall be set aside on any application under sub-section (4) unless notice thereof has been served on the opposite party."

As would be manifest from the above provision that whenever an

employer raises a dispute regarding the applicability of the said Act,

a detailed enquiry has been envisaged and the officer conducting the

enquiry has been given all the powers to enforce the attendance of the

witnesses, receive evidence on affidavit and even to issue

commissions for examination of the witnesses. Under Sub Section 3 of

the said section, the officer cannot make any order under Sub-Section

1 unless a reasonable opportunity of hearing has been afforded to the

employer. It is not in dispute that in the present case the petitioner

was given innumerable opportunities from 8.1.1993 till 20.8.1999, but

still he failed to place on record any cogent documentary evidence

based on which the Regional Provident Fund Commissioner could

have come to the conclusion that the petitioner management was not

employing 20 or more employees in their establishment. In fact the

petitioner management on its own admitted that they were employing

10 employees as permanent employees and about 30 on daily wages

or through petty contractors and once having taken such a stand the

establishment of the petitioner would clearly fall under Section 2F of

the said Act. There cannot be any doubt that it is the employer who is

the legal custodian of the records, registers, etc. pertaining to the

payment of wages, their attendance etc. and in the enquiry under

Section 7A of the said Act, necessary documents could have been

placed by the petitioner to dispute and dislodge the fact finding report

of the enquiry officer. It is not the case of the petitioner that the

petitioner was deprived to place on record any documentary evidence

or the documentary evidence placed on record by the petitioner was

not considered by the Regional Provident Fund Commissioner and,

therefore, no infirmity can be found with the order of the competent

authority passed under Section 7A of the said Act upholding the

coverage of the establishment under the Act w.e.f. 1.8.1988. The

petitioner also equally failed to place any further documentary

material when review was sought by it under Section 7B of the Act

and in the appeal as well the case of the petitioner was not on a better

footing.

10 . The Employees Provident Fund and Miscellaneous

Provisions Act, 1952 is a beneficial piece of legislation for the benefit

and betterment of the employees and their families and it is a

statutory obligation of every employer to ensure that their employees

and workers are not deprived of the benefits of the said statutory

scheme. It would be worthwhile to refer to the judgment of the Apex

Court in the case of Maharashtra State Coop. Bank Ltd. Vs.

Provident Fund Commissioner (2009) 10 SCC 123 where the

philosophy of the said Act has been very eloquently put as:

"Since the Act is a social welfare legislation intended to protect the interest of a weaker section of the society i.e. the workers employed in factories and other establishments, it is imperative for the courts to give a purposive interpretation to the provisions contained therein keeping in view the Directive Principles of State Policy embodied in Articles 38 and 43 of the Constitution. In this context, we may usefully notice the following observations made by Krishna Iyer, J. in Organo Chemical Industries v. Union of India7: (SCC pp. 587 & 591- 92, paras 28 & 40-41) "28. The pragmatics of the situation is that if the stream of contributions were frozen by employers‟ defaults after due deduction from the wages and diversion for their own purposes, the scheme would be damnified by traumatic starvation of the Fund, public frustration from the failure of the project and psychic demoralisation of the miserable beneficiaries when they find their wages deducted and the employer get away with it even after default in his own contribution and malversation of the workers‟ share. „Damages‟ have a wider socially semantic connotation than pecuniary loss of interest on non-payment when a social welfare scheme suffers mayhem on account of the injury. Law expands concepts to embrace social needs so as to become functionally effectual.

* * *

40. The measure was enacted for the support of a weaker sector viz. the working class during the superannuated winter of their life. The financial reservoir for the distribution of benefits is filled by the employer collecting, by deducting from the workers‟ wages, completing it with his own equal share and duly making over the gross sums to the Fund. If the employer neglects to remit or diverts the moneys for alien purposes the Fund gets dry and the retirees are denied the meagre support when they most need it. This prospect of destitution demoralises the working class and frustrates the hopes of the community itself. The whole project gets stultified if employers thwart contributory responsibility and this wider fall-out must colour the concept of „damages‟ when the court seeks to define its content in the special setting of the Act. For, judicial interpretation must further the purpose of a statute. In a different context and considering a fundamental treaty, the European Court of Human Rights, in the Sunday Times Case, observed:

The Court must interpret them in a way that reconciles them as far as possible and is most appropriate in order to realise the aim and achieve the object of the treaty.

41. A policy-oriented interpretation, when a welfare legislation falls for determination, especially in the context of a developing

country, is sanctioned by principle and precedent and is implicit in Article 37 of the Constitution since the judicial branch is, in a sense, part of the State. So it is reasonable to assign to „damages‟ a larger, fulfilling meaning."

11 . It is a settled legal position that if any establishment or

employer is not covered under the said Act, then it is for the employer

to place sufficient cogent and convincing material before the

designated authority in an enquiry under Section 7A so as to satisfy

the authority with regard to the non-applicability of the Act and on

failure to place any such material, the onus cannot be shifted on the

EPF authorities to prove the applicability of the Act, who under no

circumstances, can be in possession of necessary records evidencing

the extent of strength of employees in any particular establishment. In

the case of Himachal Pradesh State Forest Corporation Vs.

Regional PF Commissioner (Supra) cited by the counsel for the

petitioner, being distinguishable on facts would not be applicable to

the present case. As in the facts of the said case employer itself had

admitted its liability under the Act and since due to delay of 16 years

period, the employer was not in possession of the records, the Court

directed the benefits only with respect to those employees who are

identifiable and whose entitlement was proved on evidence. So far

as the facts of the present case are concerned, the

petitioner itself never came forward to place on record the documents

or took any such plea of non-availability of the documents, therefore,

the said judgment of the Apex Court will not cut any ice to help the

petitioner in the facts of the present case.

12. In the light of the above discussion, this Court upholds the

orders dated 13.11.2006 passed by the EPF Appellate Tribunal and

orders dated 12.11.99 and 14.5.2001 passed by the Regional

Provident Fund Commissioner, Delhi.

13 . Hence the present petition being devoid of any merits

stands dismissed.

April 19, 2010                                KAILASH GAMBHIR,J