Delhi High Court

M/S. Whirlpool Of India Ltd. vs Employees Provident Fund ... on 20 September, 2011

Author: M. L. Mehta

*              THE HIGH COURT OF DELHI AT NEW DELHI

                                Decided on 20.09.2011


+W.P.(C) No. 4408/2000


GROUP 4 SECURITAS GUARDING LTD.                        ...... Petitioner

                                Through:   Mr. Harvinder Singh & Mr.
                                           Prattek Kohli, Advocate

                                      Versus

EMPLOYEES PROVIDENT FUND APPELLATE
TRIBUNAL & ORS.                    ... Respondents

                                Through:   Mr. Ankit Kohli, Adv. for R-2,
                                           Ms. Ruchir Mishra nd Mr. Jatan
                                           Singh, Advs. for R-3

                                AND

+W.P.(C) No. 4433/2000


M/S. WHIRLPOOL OF INDIA LTD.                     ...... Petitioner

                                Through:   MS. Meera Mathur, Advocate.

                                      Versus

EMPLOYEES PROVIDENT FUND APPELLATE
TRIBUNAL & ORS.                    ... Respondents

                                Through:   Mr. Ankit Kohli, Adv. for R-2,
                                           Mr. Harvinder Singh and Mr.
                                           Prattek Kohli, Advocates for R-
                                           3
CORAM:
HON'BLE MR. JUSTICE M.L. MEHTA

W.P.(C) 4408/2000 & 4433/2000                                  Page 1 of 11
 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
       in the Digest ?                                        Yes.

M.L. MEHTA, J. (ORAL)

1. Both these writ petitions are being disposed of together as

they have arisen out of a common order dated 01.05.2000 passed

by Employees Provident Fund Appellate Tribunal (for short „the

Tribunal‟).

2. Both the petitioners herein, namely M/s. Group 4 Securitas

Guarding Ltd. („M/s. GSGL‟ for short) and M/s. Whirlpool of India

Ltd. („M/s. Whirlpool‟ for short) had challenged order dated

31.05.1999/02.07.1999 & 31.05.1999/22.06.1999 respectively

passed against them by the Respondent No. 2 herein, namely,

Regional Provident Fund Commissioner, Faridabad (Haryana)

under Section 7A of the Employees Provident Fund & M.P. Act,

1952 (for short „the Act). In both the cases, the Commissioner

directed the petitioners to pay additional provident fund

contributions on the amount shown as HRA, conveyance

allowance and washing allowance. The Tribunal vide the

impugned order dismissed the appeals of the petitioners holding

that M/s. GSGL was supplying security personnel to one M/s.

Havels (I) Ltd. as a contractor and that all these personnel were

the employees of the establishment where they were deputed. It

was held that since the employees were employed by M/s. GSGL

for the principal employer, hence, the principal

employer/establishment where the personnel were deputed was

liable to pay PF contributions of those employees. Based on this

premise, the Tribunal dismissed the appeals of the petitioners.

The petitioners have assailed the impugned order of the Tribunal.

2. There is no dispute to the fact that M/s GSGL is an

independent legal entity and operates all over the world having

workforce of large number of employees and engaged in the

business of providing „security guard services‟ to various

establishments all over India. M/s. Whirlpool Ltd. and M/s. Havels

(I) Ltd. are some of its clients. It is also not in dispute that M/s.

GSGL is independently covered under the provisions of EPF Act by

virtue of notification under section 1(3) (b) of the Act which

extends provisions of the said Act to establishments engaged in

the business of providing "security guard services" and that it has

been granted a code number by the authority under the Act. It is

also not in dispute that PF department has been accepting

contributions from M/s. GSGL treating it as the "employer" in

respect of the said employees.

3. The commissioner initiated proceedings under Section 7A of

the Act against the petitioners on the ground that M/s GSGL had

allegedly violated compliance under the said Act by not

depositing PF contributions on the additional component of HRA,

conveyance allowance and washing allowance as paid by it to its

employees who were employed by its clients namely M/s

Whirlpool and M/s Havels (I) Ltd. The first question that arises for

consideration in the present writ petitions is as to whether the

security guards/personnel provided by M/s GSGL to its clients M/s.

Whirlpool and others would be its employees or that these

personnel would be the employees of the establishment to whom

they are provided. In other words the question would be as to

whether it is M/s GSGL who is the employer of those personnel or

it would be the clients of M/s GSGL to whom such personnel are

provided. The other question would be as to whether there was

any additional liability payable in respect of those personnel by

their employer.

4. The contention of the petitioners is that it is M/s GSGL alone

who is the employer in relation to those personnel who were

employed by it in various establishments. I am in full agreement

with the submission of learned counsel for the petitioners in this

regard. There is no dispute that M/s GSGL is engaged in the

activities of providing "security guard services" which is

recognized under the Act as primary activity and not as an

agency. It is not disputed that M/s GSGL is an establishment with

large number of employees and is directly covered by the

provisions of the Act. It has been allotted a PF code number for

direct compliance of the provisions of the Act. There is no dispute

that such code number is allotted to the employers and not to the

contractors. M/s GSGL clearly falls within the meaning of Section

2(e) of the said Act in respect of its personnel deputed at various

establishments and factories. It is stated that M/s GSGL was

submitting statutory returns and contributions in respect of such

employees to the competent authority directly as employer.

Section 2(e) (ii) of the Act defines employer in relation of any

other establishments, the person who, or the authority which, has

the ultimate control over the affairs of the establishment. It could

not be said that the clients like M/s. Whirlpool and others have

any control over the affairs of M/s GSGL. On the other hand M/s

GSGL has control over its employees and the establishment. The

said security personnel/guards not only received their

appointment letters, but also wages and allowances from M/s

GSGL after signing the registers maintained by M/s GSGL and

were governed by the terms and conditions of their services with

M/s GSGL. The clients of M/s GSGL have no control in the fixation

of terms and conditions of the service of security guards. The

security personnel are deputed by M/s GSGL in the establishment

of their clients not permanently, but, on rotation and transfer

basis depending upon the requirement and exigency of the

services related to its clients. The clients have no disciplinary

control over those personnel. The submissions of the learned

counsel for the petitioners that in some cases M/s GSGL maintains

control rooms in the client‟s establishment to supervise and

regulate the working of the security guards/personnel deputed

there and that besides security guards M/s GSGL also deputes

other staff at their clients establishment who take care and

regulate the working of the security personnel, was not

extroverted. From all these it could be seen that the personnel

provided by GSGL to its clients including M/s Whirlpool and others

were not provided as a contractor, but on principal to principal

basis. Thus the clients cannot be termed as the principal

employer of those security guards provided by M/s GSGL.

5. Section 6 of the Act makes it mandatory for the employer to

contribute to the Provident Fund on the basis of wages, dearness

allowance, retaining allowance as payable to its employees. It is

the obligation of the employer alone to contribute to the fund and

that too on the basic wages, dearness allowance and retaining

allowance as mentioned in this section. Likewise, section 7A also

provides that the competent authority named therein ought to

determine the amount due from the „employers‟ under the

provision of this Act. In this scheme of the provisions of the Act

there does not remain any doubt that it is the employer alone

who is under an obligation and is liable to contribute to P.F. In the

case of Tata Engineering and Locomotive Company, Ltd. vs.

Union of India and others 1996 II LLN 1194, there was similar

issue before the Bombay High Court. In the said case the

question arose under the Act with regard to the workers

employed with Respondent No. 3 who were attending

conservancy work of Tata factory at Pune. The Court held that

the relationship between the petitioner and respondent No. 3 has

to be gathered from the circumstances as a whole and not by

picking a word here and there. The court held that Respondent

No. 3, which was a registered Cooperative Society and provided

conservancy workers had an existence of its own independent of

TELCO and the fact that the said respondent No. 3 was covered

by separate code number, indicated that TELCO could not be

called upon to account for any payments on their behalf. The

court upheld the contention of TELCO that it was merely one of

the many clients of Respondent No. 3 who was doing conservancy

work through its own set of employees at various establishments

and factories and therefore, cannot be regarded as a "principal

employer" in relation to respondent No. 3, employees. The Court

further held that Section 8A has no application to the case

because a contractor contemplated under that section of the Act

is one who is a mere front or headman of the principal employer

and this could not be said of the Respondent No. 3.

6. In the case of Basanta Kumar Mohanty Vs. State of

Orissa 1992 (1) LLS 190 it was held by the Orissa High Court that

the Security and Detective Service (India) Ltd. which was

providing security services to Talcher Thermal Power Station was

not a contractor in relation to the employees deputed by it to

Talcher Thermal Power Station nor was it required to obtain a

license as contractor under the Contract Labour Act thereby

holding that the contract between the two parties was a principal

to principal contract for services and not for supply of Labour.

7. Section 6 of the Act casts an obligation upon the employer

to contribute to the Fund only on the basic wages, dearness

allowance and retaining allowance payable to the employees.

According to the respondent provident fund was liable to be paid

not only on the basic wages, but, on the minimum wages, dress

allowance and conveyance allowance. It was on this premise that

the Commissioner issued the aforesaid orders under Section 7A

against the petitioners.

8. Under Section 2(b) of the EPF and MP Act, 1952, „basic

wages‟ is defined as under:

"Section 2(b) "basic wages" means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include

i. the cash value of any food concession;

ii. any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), houserent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;