Pee Aar Electrodes vs The Regional Provident Fund ...
2010 Latest Caselaw 1385 Del

                 *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                              WP(C) 823/1995

 %                                        Date of decision: 12th March, 2010

PEE AAR ELECTRODES                                        ..... PETITIONER
                               Through: Mr. Pradeep Kumar Arya with Mr.
                                        Narinder Chaudhary & Mr. Vijay
                                        Chopra, Advocates

                                       Versus

THE REGIONAL PROVIDENT FUND
COMMISSIONER & ANR.                                    ..... RESPONDENTS
                               Through: Mr. A.P. Sinha, Advocate

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

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. This writ petition is preferred for quashing of the order dated 1 st

February, 1995 of the respondent no.1 Regional Provident Fund

Commissioner (RPFC) of determination under Section 7A of the

Employees Provident Fund & Miscellaneous Provisions Act, 1952 holding

the provisions of the Act applicable to the establishment of the petitioner.

Though under Section 7D as inserted in the Act w.e.f. 1st July, 1997, the

order as impugned in this petition is appealable before the Provident Funds

Appellate Tribunal but this petition having been preferred prior to the

incorporation of the said Section 7D is maintainable. This Court vide ex

parte order dated 9th March, 1995 while issuing notice of the petition stayed

the operation of the order dated 1st February, 1995 and the said order was

made absolute on 22nd February, 1996 till the decision of the writ petition.

2. The Act, as per Section 1(3)(a) is applicable to an establishment in

which 20 or more persons are employed. The only controversy raised in

the present petition is as to whether the establishment of the petitioner can

be said to be employing 20 persons.

3. On the basis of an enquiry report submitted by the enforcement

squad of the respondents, coverage notice was sent to the petitioner. The

petitioner disputed the applicability of the Act on the ground of not

employing 20 employees and also on the ground of being not an industry

specified in Schedule I of the Act. The RPFC vide order impugned in this

petition held against the petitioner on both counts. The petitioner has in the

writ petition not challenged the finding of its factory being specified in

Schedule I of the Act and has confined the challenge only to the number of

employees employed by it. While according to the petitioner, it employs

19 persons, according to the RPFC, at the time of visit by the enforcement

squad of the respondents, besides the 19 employees, an accountant of M/s

Jindal Singla & Associates Chartered Accountants was also found working

in the establishment of the petitioner. The controversy is whether the same

would make the number of persons employed in the establishment of the

petitioner as 20, so as to make the provisions of the Act applicable to the

petitioner.

4. The RPFC in the impugned order has held that:-

(i) Section 2(f) defines "employee" as any person employed for wages in any kind of work in or in connection with the work of an establishment and 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.

(ii) That though there is no written contract between the petitioner and M/s Jindal Singla & Associates Chartered Accountants, yet payments are being made on monthly basis which generally are not made to any chartered or cost accountant for preparing of annual balance sheet or accounts.

(iii) "The normal day-to-day work(s) pertaining to accounts books, ESI, Sales Tax, etc. are being undertaken by some personnels who are deputed by so called accountant firm "Jindal Singla & Associates" to attend the work of M/s Pee Aar Electrodes. Thus there is a necessity in the establishment to obtain services of a person to attend such type of work as cited hereinabove and to meet that necessity the employer instead of engaging any person directly prefers to obtain the services of any personnel through a firm of chartered accountant for which payments are being made in cash on monthly basis and received by someone."

The RPFC thus held the establishment of the petitioner to be

employing 20 or more persons.

5. The main plank of the contention of the petitioner is that a chartered

accountant firm cannot be treated as an employee; that the chartered

accountant firm is rendering professional service to the petitioner and can

by no means be held to be an employee of the petitioner. The petitioner has

filed a photocopy of an affidavit of the partner of M/s Jindal Singla &

Associates (Chartered Accountant) to the effect that they are looking after

accounting including auditing and taxation matters of the petitioner on a

professional fee of Rs.400/- per month; that to meet out the professional

obligations they either call the representatives of the petitioner to their

office with the records and sometimes send a person from their side to the

establishment of the petitioner; that such person sent by them to the

establishment of the petitioner works under the instructions of the chartered

accountant firm and reports to them and the petitioner has nothing to do

with any such person sent by them as regards the work to be done by such

person on behalf of the chartered accountant firm. They have further

deposed that their representative is their employee and draws salary from

them and does not work as a part time accountant with the petitioner.

6. The counsel for the respondents has contended that the nature of the

duty and the monthly payment make the representative of the chartered

accountant firm, the employee of the petitioner.

7. Though no fault can be found with the reasoning of the RPFC that if

the petitioner is availing services of an accountant, such accountant even if

engaged indirectly through the chartered accountant firm, can be treated as

an employee of the petitioner for the purpose of the Act but peculiarly the

impugned order does not name the said accountant. All that has been

found is that the work pertaining to keeping of accounts is being

undertaken "by some personnels who are deputed" by the chartered

accountant firm and that the need of the petitioner for having an accountant

is being fulfilled, instead of by engaging / employing any person directly,

"by obtaining the services of any personnel through a firm of chartered

accountant." I am afraid on such findings, the establishment of the

petitioner cannot be said to be employing 20 or more persons. A firm of

chartered accountant cannot be the employee of the petitioner within the

meaning of Section 2(f) of the Act. Though the definition of employee

under Section 2(f) is wide enough to include a contract labourer but does

not include a contractor, even if the chartered accountant firm were to be

equated to a contractor. An employee, within the meaning of Section 2(f)

of the Act, has to be a natural personal and cannot be a firm as the

chartered accountant firm is. Had there been a finding in the order of the

RPFC that a particular individual of the said chartered accountant firm is

regularly looking after the accounts of the petitioner even if not exclusively

looking after the affairs of the petitioner, it could have been argued by the

respondents that he / she should be considered as the employee of the

petitioner. However, the finding is of "some personnels" or "any

personnel" indicating plurality, of the chartered accountant firm doing the

said job for the petitioner. It indicates that the chartered accountant firm

deputes any of its Chartered Accountants, Accountant, Assistant, Trainee,

Article, Clerk etc. for the works of the petitioner and the said person need

not to be the same all the time. In such a situation, it cannot be said that

any particular person is the 20th employee of the petitioner to make the

provisions of the Act applicable to the petitioner. No relationship of

employer, employee between the petitioner and any such person can in the

circumstances be said to exist. Such an arrangement would constitute

hiring by the petitioner of the services of the chartered accountant firm and

would not constitute a contract for employment. This Court in Springdales

Schools Vs. RPFC 2006 II LLJ 321 held that when an education society

enters into an agreement with transporter for providing contract carriage

bus and staff for running the bus such as driver, conductor, cleaner and

there is no stipulation in the agreement about payment of charges by the

transporter to his staff and the said transporter and his staff were also doing

the duties of others, the employees of the transporter cannot be said to be

the employees of the education society within the meaning of Section 2(f)

of the act.

8. The impugned order does not find any particular person, even if from

the chartered accountant firm, regularly working for the petitioner to make

him an employee of the petitioner. The Division Bench of this Court in K.

Gopalan Vs. Union of India 1973 Lab Industrial Cases 287 has included a

person employed through a contractor under Section 2(f). However, in the

present case there is no finding of any particular person, even if of the

chartered accountant firm, working for the petitioner or under the

supervision of the petitioner. Rather the finding is of several persons from

the chartered accountant firm as per convenience doing the said work for

the petitioner and which as aforesaid cannot be said to be a contract for

employment. This Court in Laxmi Restaurant Vs. RPFC 1975 LIC 1186

has held that the Act is applicable to the regular employees and not persons

engaged for casual work. Without a definite name it cannot even be said

that such person is the retainer of the petitioner. The only inference is of a

professional relationship between the petitioner and the chartered

accountant firm.

9. The counsel for the respondent relied on M/s Autocrat Tours Vs.

Regional Provident Fund Commissioner 111(2004) DLT 589; in the said

case though some of the persons counting whom the establishment was

said to be covered were argued to be casual/temporary employees but the

Court found that they had remained in the employment during the

pendency of the writ petition before the Court. On this basis, it was held

that regularly employing such casual workers month after month and year

after year cannot be due to some abnormal contingencies or emergency and

the said persons were held to be employees and the establishment held to

be covered. However, in this case also, there were definite identifiable

persons. In the present case there is none. The respondent also relies upon

Bengal Ingot Company Ltd. Vs. The Regional Provident Fund

Commissioner, West Bengal (1996) 3 LLJ (Supp.) 176. This was also a

case of identified part time worker and counting whom the establishment

was held to be covered by the Act. However, as aforesaid in the present

case there is no identified person who can be said to be the employee of the

petitioner even if through the chartered accountant firm.

10. The petition therefore succeeds. The order dated 1st February, 1995

of the RPFC under Section 7(A) of the Act holding the Act applicable to

the establishment of the petitioner is quashed. The petition is disposed of.

No order as to costs.

RAJIV SAHAI ENDLAW (JUDGE) March 12th 2010 gsr