Regional Provident Fund ... vs The Presiding Officer ...
2010 Latest Caselaw 1043 Del

             *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                              WP(C)2022/1998 & CM.APPL 16051/2008


%                                      Date of decision: 23rd February, 2010


REGIONAL PROVIDENT FUND
COMMISSIONER, NEW DELHI                          ..... Petitioner
            Through: Mr Rajesh Manchanda, Advocate.

                                       Versus


THE PRESIDING OFFICER EMPLOYEES'
PROVIDENT FUND APPELLATE TRIBUNAL,
NEW DELHI & ORS                                           ..... Respondents
                       Through: Mr Pinaki Addy, Advocate for R-2.

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.     Whether reporters of Local papers may               Yes
       be allowed to see the judgment?

2.     To be referred to the reporter or not?              Yes

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

RAJIV SAHAI ENDLAW, J.

1. The writ petition has been filed for quashing the order dated 16th

September, 1997 of the EPF Appellate Tribunal (impleaded as respondent No.1

in these proceedings) on a petition preferred by the respondent No.2 M/s

Everett (India) Private Limited under Section 19A of the Employees Provident

Funds and Miscellaneous Provisions Act and which upon the setting up of the

Tribunal, under Section 7P of the Act stood transferred to the Tribunal.

2. The respondent No.2 was covered by the provisions of the Act. In or

about the year 1989 during an inspection it came to the notice of the petitioner

that the respondent No.2 had since November, 1981 been not depositing the

contribution towards provident fund as per the salary/basic wage being paid by

the respondent No.2. Proceedings under Section 7A of the Act were

accordingly initiated by the petitioner against the respondent No.2 employer for

determining the amount due. It appears that the respondent No.2 sought to

justify the contributions deposited by it by contending that certain amounts

were being paid to the employees by way of housing and medical subsidy and

were thus not included in the definition of basic wage in Section 2(b) of the Act

on which the provident fund contributions were to be deposited. The petitioner

vide order dated 1st November, 1990 held that the respondent No.2 inspite of

opportunity had failed to satisfy that the amount admittedly being paid as salary

by the respondent No.2 to its employee was being paid on account of medical

and/or housing subsidy. It was held that the amounts claimed to be paid as

housing and medical subsidy were shown as salary in the balance sheet of the

respondent No.2 and thus were entitled to be treated as salary for the purposes

of PF contribution. The respondent No.2 during the said inquiry only relied

upon a resolution of its Board of its Directors resolving payment of housing and

medical subsidy to the employees. The order however records that the

respondent No.2 inspite of opportunity failed to produce the said resolution of

the Board of Directors. The contention of the respondent No.2 that the housing

subsidy was akin to house rent allowance which under Section 2(b) (supra) is

exempt from the definition of basic wage and the terminology of housing

subsidy instead of HRA was used only for the reason that the same was being

paid irrespective of whether the employees were paying rent to any landlord or

not, was not accepted by the petitioner. The petitioner held that since in the

books of accounts/balance sheet of the respondent No.2 the amounts were not

treated as housing subsidy and/or medical subsidy but were considered as part

of salary, there was no reason to treat them differently for the purposes of

contribution to PF. The said order also notes that the respondent No.2 had

inspite of opportunity failed to file any document to show that the amounts by

way of subsidy were in fact allowances for housing or medical treatment. The

order dated 1st November, 1990 thus rejected the version of the respondent

No.2 and held that the amounts under the heads of housing subsidy and medical

subsidy formed part of the basic wage and were liable for PF contribution.

However, since the respondent No.2 had failed to produce the records

summoned from it for computation of the additional amount due from it

towards PF contribution, further inquiries in this regard were ordered. The

respondent No.2 still failed to participate in the inquiry inspite of opportunity

and the petitioner thus on 15th July, 1997 assessed the amounts due on the basis

of the report of the inquiry officer.

3. A certificate of recovery of the amounts so found due was accordingly

issued under Section 8-B of the Act. Aggrieved therefrom the respondent No.2

made a petition under Section 19A (as it then existed) to the Central

Government. Upon the setting up of the Tribunal, the said petition of the

respondent No.2 under Section 19A was transferred to the Tribunal and the

Tribunal has vide order impugned in this petition allowed the said petition and

held that the amounts paid by way of housing and medical subsidy cannot be

included in the basic wages as defined in Section 2(b) of the Act and cannot be

included for the purposes of computation of the PF contribution. The Tribunal

negated the contention of the petitioner that the respondent No.2 having not

challenged the order dated 1st November, 1990 (supra) and having allowed the

same to have attained finality is not entitled to challenge the recovery in

pursuance thereto. The Tribunal has held that it is inconceivable that the

Central Government under Section 19A would lack jurisdiction for looking into

any order passed by its employees. It was further held that upon transfer of the

petition under Section 19A to the Tribunal, the Tribunal is empowered to hear

and decide the same as an appeal. The Tribunal further held that since house

rent allowance does not form part of the basic wage, the amounts paid by the

respondent No.2 by way of housing subsidy and medical subsidy cannot also be

included in the basic wage for the purposes of computating the contribution to

PF.

4. The contention of the counsel for the petitioner before this court is

twofold. Firstly, it is contended that the Tribunal had no jurisdiction to

entertain the petition as the order dated 1st November, 1990 had attained finality

and secondly, it is contended that there is nothing to show that the amounts

admittedly paid were paid by way of housing subsidy or medical subsidy.

5. As far as the first of the aforesaid contentions is concerned, the counsel

for the petitioner admits that prior to the amendment of the Act w.e.f. 1997 the

only remedy of the respondent No.2 under the Act against the orders such as

the order dated 1st November, 1990 was of review. It is however contended that

the respondent No.2, if aggrieved by the order dated 1st November, 1990, ought

to have preferred a writ petition against the same in this court, but did not do so

and allowed the same to attain finality. It is urged that the petition under

Section 19A also was not maintainable against the proceedings under Section 8

of the Act for recovery of the amounts so found due after determining the

liability vide order dated 1st November, 1990.

6. Section 19A as it stood prior to its deletion entitled the Central

Government to make such provision or give such direction as appeared to be

necessary or expedient for removal of doubt or difficulty in giving effect to the

provisions of the Act including as to whether the total quantum of benefit to

which an employee is entitled to has been reduced by the employer or not. I

find the ambit of Section 19A to be very wide. Undoubtedly, the order dated 1 st

November, 1990 though holding the respondent No.2 liable for PF contribution

for the amounts claimed to be paid by way of housing and medical subsidy,

nevertheless did not crystallize the liability of the respondent No.2. The said

liability was crystallized subsequently on inquiry and at which stage the

respondent No.2 preferred the petition under Section 19A. The said petition

was admittedly entertained. There is nothing to show that the petitioner

opposed the maintainability of the said petition. It is also admitted that upon

the setting up of the Tribunal in 1997 the petition preferred by the respondent

No.2 under Section 19A stood transferred to the Tribunal. In the

circumstances, it cannot be held that the Tribunal did not have jurisdiction to

adjudicate on the matter.

7. However, I find merit in the second contention of the counsel for the

petitioner. The petitioner had vide a detailed order dated 1st November, 1990

held that there was absolutely nothing to show that any amounts admittedly

paid by the respondent No.2 to its employees were by way of housing and

medical subsidy. The Tribunal has in a very cryptic manner held that since

HRA does not form of basic wages, then housing subsidy and medical subsidy

cannot also be included. The said reasoning/logic applied by the Tribunal is so

erroneous as to invite interference by this court in its writ jurisdiction. In fact,

the Tribunal does not appear to have adjudicated the matter in issue at all.

Merely because an employer found to be not depositing the PF contribution in

accordance with the payments by way of salary paid to the employees claims

the excess payments on which PF has not been contributed to be by way of

allowance to be excluded from the definition of basic wages, is not

determinative. The employer has to establish that such payments were in fact

by way of allowance and were for all other purposes treated as an allowance.

The order dated 1st November, 1990 records that no evidence/material

whatsoever in this regard was produced by the employer in this case. Reliance

was sought to be placed on the resolution of the Board of Directors sanctioning

payments of medical and housing subsidy but the said resolution was also not

produced. In the face of such finding of fact, and without there being anything

to disturb the same, the Tribunal has derelicted its duty in, merely on the basis

of the contention of such payments being made as subsidy, having allowed the

appeal. The counsel for the petitioner has fairly stated that if the respondent

No.2 established the payments to be by way of allowance, the same are to be

not included in the basic wages under the Act and the petitioner is willing to

exclude the same.

8. I may however notice that a Single Judge of the Gujarat High Court in

Gujarat Cypromet Ltd. VS Assistant P.F. Commissioner

MANU/GJ/0509/2004 has gone to the extent of holding that the emoluments

paid by way of lunch allowance, medical allowance, conveyance allowance

become part of the basic wage under Section 2(b); it was held that unless the

allowance falls under any of the exceptions in Section 2(b), they are to form

part of the basic wage. However, this aspect need not detain me any further

inasmuch as in the present case there is nothing to show that the nature of the

payment was by way of allowance and not by way of salary. During the

hearing it was repeatedly put to the counsel for the respondent No.2 that if the

payments were by way of allowance or subsidy, they would be treated

differently for the purposes of taxation and in the books of accounts and the

material in that regard would be available. However, neither was any such

material placed before the petitioner nor before the Tribunal nor before this

court. So much so that the salary slips of the employees which would have

shown the heads under which payments were made have also not been

produced. The order dated 1st November, 1990 unequivocally holds that the

entire payment made to the employees was treated in the balance sheet as salary

and no part of the payment is treated as any subsidy. The said finding in the

order dated 1st November, 1990 has also not been rebutted.

9. The Supreme Court in Bridge & Roof Co. (India) Ltd.Vs Union of India

AIR 1963 SC 1474 evolved a test of "whether the allowance is payable to all

the permanent employees or not". It was held that whatever allowances are

payable to all the permanent employees would be included in the definition of

basic wage and those which are not paid/payable to all the employees are

excluded therefrom. It was held that house rent allowance is not paid in many

concerns and sometimes in the same concern it is paid to some employees but

not to others. In the present case, the counsel for the respondent No. 2 has

argued that the housing subsidy is given to those who are producing the house

rent receipt as well as to the others. Thus, it appears that the housing and

medical subsidy is being given to all the employees of the respondent and for

this reason also the same would be included in the definition of basic wage in

terms of the judgment in Bridge & Roof Co. (India) Ltd. (supra).

10. Thus, viewed from any angle, the order of the Tribunal which does not

meet even the reasons contained in the order appealed from and/or is without

any basis, cannot stand and is liable to be quashed.

11. CM.No.16051/2008 has been filed by the respondent for claiming

refund, in the event of the petition being dismissed, of the sum of Rs. 55,000/-

already recovered by the petitioner. However, the petition having succeeded,

the said application has become infructuous.

12. The petition is allowed. The order dated 16th September, 1997 of the

Tribunal is quashed and set aside and the order and recovery proceedings

initiated by the petitioner are restored. The respondent No.2 is also burdened

with costs of Rs 11,000/- of these proceedings.

RAJIV SAHAI ENDLAW (JUDGE) February 23, 2010 M