Kerala High Court
Avg Motors Ltd vs The Regional Provident Commissioner on 25 June, 2025
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE MOHAMMED NIAS C.P.
WEDNESDAY, THE 25TH DAY OF JUNE 2025 / 4TH ASHADHA, 1947
WP(C) NO. 19209 OF 2021
PETITIONER/S:
M/s AVG MOTORS LTD,
BAKERS JUNCTION, KOTTAYAM-686 001, REPRESENTED BY ITS
DIRECTOR MR.A.V.GEORGE
BY ADVS.
SHRI.BENNY P. THOMAS (SR.)
SRI.D.PREM KAMATH
SRI.TOM THOMAS (KAKKUZHIYIL)
SHRI.ABEL TOM BENNY
RESPONDENT/S:
1 THE REGIONAL PROVIDENT COMMISSIONER,
EMPLOYEES PROVIDENT FUND ORGANIZATION, SUB REGIONAL
OFFICE, KOTTAYAM-686 001
2 CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT,
38/377 A-2, KARITHALA LANE, KARSHAKA ROAD, COCHIN-682016
BY ADV SHRI.JOY THATTIL ITTOOP, SC FOR R1
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
18.06.2025 THE COURT ON 25.06.2025 DELIVERED THE FOLLOWING:
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MOHAMMED NIAS C.P., J.
.............................................................
W.P(C) No. 19209 of 2021
.............................................................
Dated this the 25th day of June, 2025
JUDGMENT
The petitioner is a company engaged in the sales and service of
vehicles and is an authorised dealer for Maruti Suzuki Ltd. It is submitted that
the company is duly covered under the provisions of the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "EPF
Act") with EPF Code No. KR/15951, and has been regularly remitting
contributions for all eligible employees without default. The present dispute
arises concerning the liability to pay contributions in respect of certain
individuals described by the petitioner as "trainees" who were engaged from
January 2009 to January 2010.
2. Proceedings under Section 7A of the EPF Act were initiated by the
1st respondent, culminating in Ext.P2 order dated 04.07.2011, whereby the
petitioner was directed to remit contributions in respect of 161 such trainees
for the said period. The petitioner submits that this order was passed without
proper application of mind and in complete disregard of the legal submissions,
statutory provisions, and the documents produced, and pending certification
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of the standing orders. Aggrieved by the said order, the petitioner filed a
statutory appeal before the 2nd respondent Tribunal. However, the Tribunal,
too, by Ext. P3 order dated 15.03.2021, dismissed the appeal.
3. The petitioner argues that the trainees do not qualify as employees
under Section 2(f) of the EPF Act, as they were engaged purely for training and
not for wages. Any stipend paid was merely ex gratia to assist with basic
expenses, rather than a wage as defined under the EPF Act, thus negating any
employer-employee relationship. Despite the certification of the petitioner's
standing orders in 2013, the petitioner claims that the Model Standing Orders
applied until that time, reiterating that the stipend does not constitute wages
and no contributions are due. Under Section 7A of the EPF Act, the 1st
respondent issued an order, Ext. P2 on 04.07.2011 requiring contributions for
161 trainees, which the petitioner contends is illegal. An appeal to the 2nd
respondent Tribunal was dismissed through Ext.P3 on 15.03.2021, without
regard to the exclusion of apprentices under Section 2(f)(ii) of the EPF Act. The
petitioner also relies on the Industrial Employment (Standing Orders) Act,
1946, to contend that until standing orders are certified, Model Standing
Orders apply, and asserts that the trainees were not performing regular
employee duties, had no binding obligations, and lacked contracts of
employment or disciplinary control. Consequently, the petitioner maintains
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there is no assumption of an employer-employee relationship.
4. They also relied on the judgment of the Hon'ble Supreme Court in
Regional Provident Fund Commissioner v. Central Arecanut and Cocoa
Marketing and Processing Co-operative Ltd. [(2006) 3 SCC 381], that held
that the apprentices engaged under the standing orders of an establishment
are excluded from the definition of "employee" under Section 2(f) of the EPF
Act. On these grounds, Exts.P2 and P3 orders are challenged.
5. In the counter affidavit submitted by the 1 st respondent opposing
the writ petition, it is stated that an inspection by the Enforcement Officers of
the Employees' Provident Fund Organisation (EPFO) found that the petitioner
had engaged 160 individuals as "trainees" from January 2009 to January 2010
but did not enroll them under the EPF Act. However, these individuals were
enrolled under the Employees' State Insurance (ESI) Act, 1948, indicating an
employer-employee relationship, leading to proceedings initiated under
Section 7A of the EPF Act.
6. The inquiry revealed that the trainees were paid monthly stipends
and conveyance allowances, inconsistent with true apprenticeship status. The
respondents noted the absence of a structured training scheme from the
petitioner, suggesting that these individuals were performing roles similar to
regular employees. The stipend amounts varied significantly with no
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justification, further indicating a lack of genuine training as contended.
7. The respondents argue that the attempt by the petitioner to de-
cover these individuals from the ESI Act was opportunistic, aimed at evading
provident fund liabilities. They assert that simply labelling workers as
"trainees" or "apprentices" does not exempt them from the EPF Act unless it
can be shown that they were engaged under the Apprentices Act, 1961, or
certified Standing Orders, which the petitioner failed to prove. Based on the
inquiry and evidence, the 1st respondent concluded that these individuals were,
in fact, employees under Section 2(f) of the EPF Act, with the determination of
dues in Ext.P2 order deemed proper and legal. The 2 nd respondent Tribunal
upheld this finding, which calls for no interference, is the contention.
8. The learned Senior counsel for the petitioner submits that the
impugned orders proceed on the similarity in the definitions of the employees
in the ESI Act and the EPF Act, which cannot ipso facto lead to a coverage under
both Acts. This is more so because of the amendment made to the ESI Act in
the year 2010, to the definition of employee, which includes an apprentice
during the training period.
9. It is also argued that since there was no certified standing order at
the relevant time, Section 12A of the Industrial Employment (Standing Orders)
Act applies, as per which the apprentices are excluded from the definition of
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Employment under the EPF Act. It is further argued that only an opportunity
for training was given to those who came straight from the educational
institutions, and they were granted conveyance allowance as their expenses
and not salary. It is argued that the reasoning behind the impugned orders
cannot be sustained for the above reasons.
10. The learned counsel for the respondents opposes the writ
petition, contending that what was paid to the alleged trainees was salary and
not stipend. It is also argued that even the Part-Time Sweeper and Driver were
shown as trainees. It is argued that the description given to the trainees was
only a camouflage. Both the orders, i.e. the order of the Commissioner and the
appellate order, considered the relevant aspects and correctly arrived at the
conclusion, and do not warrant any interference in this writ petition.
11. Heard the learned counsel appearing on both sides and perused
the records.
12. It is clear from the definition of 'employee' under the EPF Act
that apprentices are specifically excluded. Section 2(f) is extracted below:-
"Section 2(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 though a contractor in or in connection
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with the work of the establishment.
(ii) engaged as an apprentice, not being an apprentice engaged
under the Apprentices Act, 1961 (52 of 1961) or under the
Standing Orders of the establishment."
13. Since there was no certified standing order at the relevant time,
Section 12A of the Industrial Employment (Standing Orders) Act applies, which
also excludes apprentices from the ambit of the EPF Act. The authorities, while
passing the impugned orders, relied on the fact that there were around 161
trainees and therefore such a large number would not be employed as
trainees/apprentices. The further finding in the orders is that there was no
training manual for the trainees, and therefore, it has to be presumed that 161
trainees are employees and are liable to be employed under the Provident Fund
Act.
14. Taking note of the fact that the impugned orders did not properly consider
the impact of either Section 12A of the Industrial Employment (Standing
Orders) Act, or the definitions of Employee in the ESI Act and EPF Act, which
actually was relevant more so after the amendment in 2010 and also reckoning
the contention of the respondents that the petitioner produced no materials
before the authorities to prove that the trainees are engaged as apprentices, I
think, in the interest of justice, the issue requires reconsideration. It will be
open to the petitioner to produce such materials to substantiate their
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contentions that the 161 people engaged by them are only trainees. The
Commissioner will also consider the impact of the arguments of the petitioner
under Section 12A of the Industrial Employment (Standing Orders) Act and
other factual aspects, to decide whether the persons engaged are employees.
The impugned orders are set aside. Fresh orders as directed above shall be
passed by the PF Commissioner within three months from the date of receipt of
a copy of the judgment.
The writ petition is disposed of as above.
Sd/-
MOHAMMED NIAS C.P.
JUDGE
okb/
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APPENDIX OF WP(C) 19209/2021
PETITIONER EXHIBITS
Exhibit P1 TRUE COPY OF THE STANDING ORDERS
Exhibit P2 TRUE COPY OF THE ORDER DATED 04.07.2011
ISSUED BY THE 1ST RESPONDENT
Exhibit P3 TRUE COPY OF THE ORDER DATED 15.03.2021 IN
APPEAL NO.413/2018 ISSUED BY THE 2ND
RESPONDENT
