Delhi High Court
Regional Provident Fund ... vs M/S United India Periodicals P. ... on 14 March, 2014
Author: V. Kameswar Rao
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on January 08, 2014
Judgment Delivered on March 14, 2014
+ W.P.(C) 463/1999
REGIONAL PROVIDENT FUND COMMISSIONER
..... Petitioner
Represented by: Mr.Rajesh Manchanda, Advocate
with Mr.Rajat Manchanda, Advocate
versus
M/S UNITED INDIA PERIODICALS P. LTD. & ORS.
..... Respondents
Represented by: Mr.Rajinder Dhawan, Advocate with
Mr.B.S.Rana, Adv. for R-1
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.
1. The present petition has been filed by the Regional Provident Fund
Commissioner („Commissioner‟ in short) challenging the order of the
Employees Provident Fund Appellate Tribunal („Tribunal‟ in short) dated
July 20, 1998 whereby the Tribunal has allowed the appeal filed by the
respondent No.1 herein against the order of the Commissioner dated
February 24, 1998 under Section 7-A of the Employees Provident Fund &
Miscellaneous Provisions Act, 1952 („Act‟ in short) whereby the PF dues
to be paid by the respondent No.1 for the period between June, 1996 to
August, 1997 have been worked out to `34,24,076/- and `5,43,564/- in
account No.1 and in account No.10 respectively.
2. Before I deal with the issue, which falls for consideration, suffice to
say that the respondent No.1 company is in liquidation and vide order dated
February 03, 1999 the Company Court has while admitting the winding up
petition has appointed Official Liquidator and the official liquidator has
been impleaded in this writ petition and has also filed counter-affidavit on
behalf of the company, I find a separate counter-affidavit has also been
filed by the respondent No.1 through Mr.Rajinder Dhawan, Advocate.
3. The brief facts are that the respondent No.1 namely United India
Periodicals Pvt. Ltd. is a company registered under the Companies Act,
engaged in the business of publishing and printing „Patriot‟ and English
Daily and „Link‟ English Magazine. The company is covered under the
provisions of the Employees Provident Fund & Miscellaneous Provisions
Act, 1952 („Act‟ in short). On June 14, 1996 the respondent No.1 declared
a lock-out. Subsequently the appropriate govt. vide notification dated
August 05, 1996 made a reference under Section 10 of the Industrial
Disputes Act („I.D Act‟ in short) to the Industrial Tribunal with the
following terms of reference:
"Whether the workmen whose names are given in Annexure-A are
entitled to wages for the lock-out period with effect from 14.6.96 and
if so, what directions are necessary in this regard."
4. That along with the reference order as referred above, another
notification dated August 05, 1996 was issued by the appropriate govt.
prohibiting the continuation of the lock-out.
5. That aggrieved by the said notifications, the respondent No.1 filed a
writ petition CWP No.3472/1996 in this Court. This Court while issuing
had stayed the operation of the impugned notifications.
6. During the pendency of the writ petition, the respondent No.1 vide
its order dated April 30, 1997 lifted the lock-out.
7. That the petitioner herein issued a show cause notice dated August
20, 1997 whereby the respondent No.1 was called upon to explain on
failure to produce records, such as salary, attendance, cash books, ledgers
etc., the exemption granted under Section 17(1A) be not withdrawn apart
from initiating legal action against the organisation. That further notices
were issued on September 22, 1997 and October 12, 1997 by the petitioner
under Section 7-A of the Act alleging that the respondent No.1 had failed
to remit the provident fund contributions, as required to be paid in
accordance with the law for the period March, 1995 onwards.
8. The respondent No.1 in response to the earlier notice dated August
20, 1997 replied vide its letter dated August 21, 1997, that there was a lock-
out in the establishment and no wages were payable and/or have been paid
for the period of lock-out.
9. Section 7-A proceedings culminated in an order dated February 24,
1998, whereby the authority has held that the respondent No.1 is liable to
pay an amount of `34,24,076/- in Account No.1 and `5,43,564/- in
Account No.10 for the period June, 1996 to August, 1997 (period of lock-
out), failing which action to recover the amount under Section 8 was to be
initiated. Against the order dated February 24, 1998, the respondent No.1
filed an appeal before the Tribunal. It was the case of the respondent No.1
before the Tribunal that no salary was paid during lock out period.
According to the respondent No.1, the employees had not earned any
wages, for payment. It would further state that as no wages were payable
and paid during the period of said lock out, the question of deduction of
any contribution and/or deposit of the contributions did not arise. The
Appellate Tribunal after interpreting Section 6, Section 2(b) of the Act and
Rule 29(3) and referring to the judgments relied upon by the respondent
No.1 was of the view that for the period of lock out as the employees did
not earn any wages, the order of the Commissioner working out the dues is
not justified.
10. Mr.Rajesh Manchanda, learned counsel appearing for the petitioner
would submit that since the wages were due during the lock-out period, the
contribution was liable to be made by the respondent No.1. He would
justify the order of the Commissioner under Section 7-A of the Act. He rely
upon the judgment reported as (2007) 11 SCC 660 Hindustan Fasteners
Pvt. Ltd. vs. Nasik Workers‟ Union in support of his contentions.
11. On the other hand, Mr.Rajinder Dhawan, learned counsel appearing
for the respondent No.1 would rely upon the definition of „basic wages‟
under Section 2(b) of the Act to submit that it is only when emoluments
which are earned by an employee while on duty or on leave or on holidays
with wages in accordance with the terms of contract of employment and
paid or payable in cash to the employee, then only the dues can be said to
be payable. In other words, since the wages were not paid to the employees
during the lock-out, nor the issue even though referred to the Tribunal was
decided, it cannot be said that the employees have earned their wages
during the period of lock out. Hence, there is no question of making
contributions. He would rely upon the following judgments in support of
his contentions:
(a) AIR 1960 SC 893 Management of Kairbetta Estate
Kotagiri vs. Rajaanickam & Ors.
(b) (1992) 2 MHLJ 1129 Siemens Limited Thane vs.
Gajanan Vithal Konde & Ors.
12. I note that in the proceedings before the RPFC under Section 7-A,
the Union was represented through Mr.Cecil Victor and it was the union‟s
case that even if salaries are not disbursed to the employees, the PF dues
become payable by the establishment.
13. Having considered the submissions made on behalf of the parties,
insofar as the order of the Authority under Section 7-A of the Act is
concerned, the Authority has primarily agreed with the submissions made
on behalf of the union that even if salaries are not disbursed to the
employees, the PF dues become payable by the respondent No.1
establishment for the period in question. On the other hand, in the
impugned order the Appellate Tribunal, on a reading of Section 2(b), which
defines „basic wages‟, read with Rule 29(3) was of the view that the PF
contributions become due only when the actual wages are paid and not
when they become payable.
14. The questions which fall for consideration in this writ petition are as
under:
(i) Whether PF contributions become due only when the actual
wages are paid and not when they become payable.
(ii) Whether, even otherwise, in the absence of any determination
that the lock-out was illegal and unjustifiable, the dues can
still be said to be payable.
15. Before I deal with the aforesaid questions, the position of law in
regard to lock-out and wages to be paid during the period is as under.
In Management of Kairbetta Estate case (supra), the Supreme Court
has held as under:
"8. Stated broadly lay-off generally occurs in a continuing
business, whereas a lock-out is the closure of the business. In
the case of a lay-off, owing to the reasons specified in
s. 2(kkk) the employer is unable to give employment to one or
more workmen. In the case of a lock-out the employer closes
the business and locks out the whole body of workmen for
reasons which have no relevance to causes specified in
s. 2(kkk). Thus the nature of the two concepts is entirely
different and so are their consequences. In the case of a lay-
off the employer may be liable to pay compensation as
provided by s. 25(C), (D) and (E) of the Act; but this liability
cannot be invoked in the case of a lock-out. The liability of
the employer in cases of lock-out would depend upon whether
the lock-out was justified and legal or not; but whatever the
liability, the provisions applicable to the payment of lay-off
compensation cannot be applied to the cases of lock-out.
Therefore, we hold that the lock-out in the present case was
not a lay-off, and as such the respondents are not entitled to
claim any law-off compensation from the appellant.
Incidentally we would like to add that the circumstances of
this case clearly show that the lock-out was fully justified.
The appellant's Manager had been violently attacked and the
other members of the staff working in the lower division were
threatened by the respondents. In such a case if the appellant
locked out his workmen no grievance can be made against its
conduct by the respondents.
In Indian Marine Service Private Ltd. case (supra), the Supreme
Court has held as under:
"14. It seems to us that the attitude of the company was a
reasonable one and that it even proposed to the union and
through it to its workmen that work should go on, that the
dispute should be taken before the Conciliation Officer for
conciliation and that in the meanwhile they were prepared to
grant some interim relief to the workmen. But instead of
accepting this reasonable offer the union spurned it
contemptuously and for coercing the company encouraged its
members to strike work on November 13, 1958. It is true that
the strike was intended to be a token one. But the object of
that strike being to circumvent settlement in an amicable
manner, even though the company was ready for such
settlement, we have no doubt that strike was unjustified. It is
in the light of this finding that the lock-out has to be judged.
In our opinion, while the strike was unjustifiable the lock-out
when it was ordered on November 13, 1958, was justified. It
seems to us, however, that though the lock-out was justified
at its commencement its continuance for 53 days was wholly
unreasonable and, therefore, unjustified. In a case where a
strike is unjustified and is followed by a lock-out which has,
because of its long duration, become unjustified it would not
be a proper course for an industrial tribunal to direct the
payment of the whole of the wages for the period of the lock-
out. We would like to make it clear that in a case where the
strike is unjustified and the lock-out is justified the workmen
would not be entitled to any wages at all. Similarly where the
strike is justified and the lock-out is unjustified the workmen
would be entitled to the entire wages for the period of strike
and lock-out. Where, however, a strike is unjustified and is
followed by a lock-out which becomes unjustified a case for
apportionment of blame arises. In our opinion in the case
before us the blame for the situation which resulted after the
strike and the lock-out can be apportioned roughly half and
half between the company and its workers. In the
circumstances we, therefore, direct that the workmen should
get half their wages from November 14, 1958, to January 3,
1959, (both days inclusive)."
In 1969(3) SCC 124 Management of Messers Pradip Lamp Works
vs. Pradip Lamp Workers Karamcharya Sangh & Anr. the Supreme Court
has held as under:
"12. In our opinion, it was incumbent on the Tribunal to
apply its mind to the question of apportionment of blame on
the two parties and to its effect on the amount of wages to be
awarded to the workmen for the period of the lock out after
February 28, 1964. The order of the Tribunal ignoring this
important aspect is infirm and is difficult to sustain. In so far
as the first question in concerned, prima facie, the order of
the Tribunal does appear to be somewhat arbitrary and
injudicious and it would have been more appropriate
exercise of judicial discretion to adjourn the case to the
following day for the production of the appellant's evidence,
if necessary, on payment of costs. Had we decided to remit
the case back to the Tribunal for considering the question of
the effect of both parties being blame worthy for the lock out
on the amount of wages to awarded, we would have perhaps
thought it proper also to direct the Tribunal to permit the
appellant to adduce evidence. This evidence, we were
informed, was only sought to be adduced on the question of
apportionment of blame. On a consideration of all the facts
and circumstances of the case we, however, feel that it would
be more just and proper not to prolong this litigation and to
put to an end to the controversy by directing that half wages
should be paid to the workmen for the period of lock out from
February 28, 1964.
16. The Supreme Court in the case reported as 2001 (2) SCC 519 Shree
Changdeo Sugar Mills & Anr. vs. Union of India & Anr. has held as under:
"We are unable to accept the submissions. Undoubtedly
contribution towards Provident Fund can only be on a basic
wage. However, it is not at all necessary that the workman
must actually be on duty or that the workman should
actually have worked in order to attract the provisions of the
Employees Provident Funds Act. For example, there may be
a lockout in a Company. During the period of lockout the
workmen may not have worked yet for the purpose of the
Employees Provident Funds Act they will be deemed to have
been on duty and Provident Fund would be deductible on
their wages. In this case by order dated 12th December,
1988, the High Court (pursuant to directions of this Court)
fixed 31st October, 1988 as a date when the services of the
employees stood terminated/retrenched. Thus upto 31st
October, 1988 the employees were in service of the
Appellant Company. They were, therefore, deemed to be on
duty upto 31st October, 1988. As set out above many of
these employees had raised claims before the Labour Court
and there were Awards of the Labour Court for payment of
arrears of wages and retrenchment compensation. All that
the Settlement did was that, by Agreement, the total claim of
the workmen was reduced to a certain extent. Amongst the
claim of the workmen was a claim for wages upto 31st
October, 1988. This was a claim for wages for a period
during which they were on "deemed duty". Clause 5 of the
Settlement, which has been set out herein above, snows that
a sum of Rs. 35 lakhs has been paid towards Wages and
another sum of Rs. 10 lakhs has been paid towards
Retaining (seasonal) wages. These are amounts which are
paid for wages during a period when the workmen are
deemed to be on duty. Therefore it is Basic Wage within the
meaning of Section 2(b) of the Employees' Provident Funds
Act. All the cases relied upon by Mr. Sharma are of no
assistance to him as in those cases the amounts were clearly
not Basic Wages. In this case the above mentioned two sums
of Rs. 35 lakhs and Rs. 10 lakhs are wages."
17. The Supreme Court in the case reported as 2007 (11) SCC 660
Hindustan Fasteners (P) Ltd. vs. Nashik Workers Union has held as under:
"Clause 21 refers to the previous settlement also. The rights
of the workmen under the existing settlement were not
adversely affected. If they have worked, they would be
entitled to wages. If they have reported for duties during the
period of lock-out which was illegal, they were entitled to
the wages for the said period."
18. In 1992 LIC 2587 Siemens Ltd. vs. Gajanan Vithal Khonde & Ors.,
the learned Single Judge of the Bombay High Court has held as under:
"A conspectus of the authorities, noticed hereinabove,
makes it abundantly clear that there can be no right to claim
wages for the period of lock-out or strike, unless the inter se
rights and liabilities have been declared by an adjudicatory
process by the competent Industrial Tribunal. Despite the
expression "Strike Wages" and "Lock out Wages", used
frequently in industrial adjudications, I am of the view that
the amount payable to the workmen during the illegal and/or
unjustified strike/lock-out does not amount to „wages‟ within
the meaning of the expression as defined in Section 2(rr) of
the Act."
19. From the reading of the above judgments, the following position
emerges:
(a) The liability of employer to pay wages in case of lock-out would
depend upon whether the lock-out was legal and justified.
(b) If the lock-out is illegal, the employer would be liable to pay full
wages to the workman.
(c) If the lock-out is legal but is unjustified, the workman is entitled
to receive full wages and other benefits.
(d) The dispute regarding payment of wages during the lock-out need
to be decided by the Tribunal by applying mind to the question of
apportionment of the blame on the two parties and to its effect on the
amount of wages to be awarded to the workman.
(e) If the wages are paid during lock-out, even though not worked
they would be deemed to be on duty and provident fund to be
deductible on their wages.
20. The provident fund contributions are payable on basic wages. The
word „basic wages‟ has been defined in Section 2(b) of the Act. The same
is reproduced as under:
"2(b) "basic wages" means all emoluments which
are earned by an employee while on duty or 6[ 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), house- rent 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;
(iii) any presents made by the employer".
21. Under Chapter 5 of the Employees Provident Funds Scheme, 1952
(„Scheme‟ in short) lays down the contributions (vide para No.29) and
payment of contributions (vide para No.30).
22. A perusal of the definition of „basic wages‟ as given in Section 2(b)
of the Act contemplates all emoluments paid or payable in cash to the
employee concerned.
23. It is an admitted position that wages for the lock-out period have not
been paid. Since the wages are not paid, there was no occasion for the
respondent No.1 to deduct the provident fund contributions.
24. Whether in the case in hand the wages are „payable‟. The answer is
„No‟. The word „payable‟ has been defined in the Shorter Oxford English
Dictionary to mean „of a sum of money a bill etc. that is to be paid falling
due, able to be paid‟.
25. The wages become payable during the period of lock-out, if the lock-
out is held to be illegal and unjustified. The same has to be adjudicated by
the Industrial Tribunal. In the present case even though reference was made
to determine whether the workmen are entitled to wages for the lock-out
period with effect from June 14, 1996, such an adjudication could not take
place. There is nothing on record that workers had pursued the claim for
wages during the lock-out period in any forum thereafter. The lock-out was
between the period 1996-97. Much time had elapsed thereafter. Now the
claim would not be maintainable. So it is not a case where the wages have
become payable to the workman.
26. I do not find any merit in the writ petition for the reasons given
above and the writ petition is accordingly dismissed.
27. No costs.
(V.KAMESWAR RAO)
JUDGE
MARCH 14, 2014
km
