Madras High Court
M/S.Gudiyatham Jeeva Handloom vs The Employees' Provident Fund on 18 August, 2023
W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 18.08.2023
CORAM:
THE HONOURABLE MR. JUSTICE G.K.ILANTHIRAIYAN
W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
and M.P.No. 1 of 2012 (32 Nos.)
W.P.No.27966 of 2011 :-
M/s.Gudiyatham Jeeva Handloom
Weavers Co-operative Production
and Sales Society Ltd.,
Gudiyatham,
Rep. by its Special Officer,
Gudiyatham. ...Petitioner
-Vs-
1. The Employees' Provident Fund
Appellate Tribunal,
Scope Minar,
Core-II, 4th Floor,
Laxmi Nagar District Centre,
Laxmi Nagar,
New Delhi – 110 092.
2. The Assistant Provident Fund Commissionerm
(The APFC)
EPFO, Sub Regional Officer,
31, Filter Bed Road,
Vellore – 632 001.
3. The Employees' Provident Fund Organization,
No.31, Filter Bed Road,
Vellore – 632 001. ... Respondents
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W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
Prayer: Writ Petition filed under Article 226 of the Constitution of India
praying to issue a Writ of Certiorari, to call for the records pertaining to
the impugned order dated 23.07.2010 of the first respondent Employees'
Providence Fund Appellate Tribunal passed in A.T.A.No.174(13) 2003
and quash the said order by issue of a Writ of Certiorari.
In all W.Ps.
For Petitioner : Mr.A.R.Gokulnath
For Respondents
R1 : Tribunal
For R2 & R3 : Mr.P.K.Panneer Selvam
COMMON ORDER
These Writ Petitions have been filed challenging the order
passed by the first respondent dated 23.07.2010, thereby dismissing the
appeal filed by the petitioners as against the order passed by the third
respondent under Section 7(A) of the Employees Provident Fund and
Miscellaneous Provisions Act, thereby directing the petitioners societies
to comply with the provisions of the Employees Provident Fund and
Miscellaneous Provisions Act (herein after referred to as “the EPF & MP
Act”).
2. The petitioner in all the writ petitions (herein after called as
“the petitioner/society”) is a society registered under the Tamil Nadu Co-
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operative Societies Act. The members of the petitioner/society are the
handloom weavers residing at the place where the society is situated.
They are the shareholders of the petitioner/society. The petitioner/society
has less than 50 employees on its roll and is working without any aid of
power. The principal object of the petitioner/society is to improve the
handloom industry and the economic conditions of the weavers residing
in the area of operation. It is an establishment under the control of the
State Government. Formerly, it was being managed by a board of
management whose members used to be elected from among the
members of the society. By the government order in G.O.Ms.No.204, Co-
operation, Food & Consumer Protection dated 25.05.2001, the
Government of Tamil Nadu superseded the board of management of all
the societies, including the petitioner/society.
3. Section 23 of the Tamil Nadu Co-operative Societies Act
specifically prohibits a paid officer or servant (employee) of the
registered society being admitted as its member and it also disqualifies a
member from being a member, if he becomes a paid officer of servant
(employee) of the registered society. Thus, it is clear that if the weaver
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W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
members of the petitioner/society become its employees for any reason
whatsoever, they will cease to be its members and the society in turn will
cease to exist both as a matter of fact and in law.
4. The main object of the petitioner/society is to encourage
thrift, self help and mutual aid among the persons with common socio-
economic needs. The weaver members of the petitioner/society have
received yarn from it, without making any payment for its, convert them
into cloths with the help of their family members and supply the same to
the petitioner/society at their convenience. In fact, the members have
liberty to sell the finished materials and remit the actual cost of the raw
materials to the petitioner/society and keep the profit to themselves. The
society cannot take any disciplinary action because, it has no jurisdiction
to do so unlike as in the case of its employees. In the case of default in
remittance, the society can initiate arbitration proceedings to recover the
money from its members.
5. The members have installed handlooms of their own at
home. The operation of handloom only by hands and they are not using
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electricity to weave the cloths. Further, the petitioner/society is not
maintaining any attendance register of its members and they have no
fixed working hours for its members. The weavers did not get monthly
wages or daily wages from the petitioner/society as it is in the case of the
employees. Therefore, there is no employer and employee relationship
between the petitioner/society and its weavers members. That apart, the
petitioner/society cannot take any disciplinary action as against its
weaver members.
6. The handloom weavers are receiving substantial amount
yearly by way of dividend from the petitioner/society under various
beneficial scheme as follows:-
(i) The Co-operative Hanloom Weavers Savings
and Security Scheme (8% of the weaving charges is
recovered and remitted to the government treasure and
the State and Central Government contribute 4% each)
(ii) Thrift Fund Scheme and Group Insurance
Scheme
(iii) The Tamil Nadu Co-operative Handloom
Weavers Family Pension Scheme
(iv) Central assistance under Thrift Fund Scheme
(v) The Tamil Nadu Co-operative Handloom
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Weavers Old Age Pension Scheme
(vi) Health Package Scheme for Handloom
Weavers under Central Plan Scheme.
(vii) House construction with handloom scheme.
(viii) Dr.M.G.R. Hanloom Weavers Welfare Trust
Scholarship.
(ix) Welfare Fund for legal heirs of weavers.
(x) Insurance amount to legal heirs of weaver
members.
Therefore, the petitioner/society cannot be sought to be covered by the
provisions under the EPF & MP Act, 1952.
7. Further, the second respondent passed common order dated
24.12.2002, holding that the weaver members of the society are the
employees and that the provisions of EPF & MP Act are applicable to the
petitioner/society. The second respondent conducted enquiry and the
petitioner filed several documents pertaining to its members by way of
documentary and oral evidence. It revealed that the weaver members
have liberty to sell the finished goods and even the raw materials and
remit the actual cost to the petitioner/society and keep the profit
themselves. Therefore, it was challenged by way of appeal by the
petitioner/society before the first respondent. However, the first
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respondent dismissed the appeal and confirmed the order passed by the
second respondent. Therefore, the petitioner/society filed the present writ
petitions with the above said prayer.
8. Heard the learned counsel appearing on either side and
perused the materials placed before this Court.
9. Similar issues were already settled by the Hon'ble Division
Bench of this Court in the judgment reported in 2003 (3) LLJ 795-Q-793
in the case of Madathupatti Weavers Co-operative Production and
Sales Society Ltd., Vs. Regional Provident Fund Commissioner,
Madurai & ors., holding that the members of the co-operative society
cannot be construed as workmen. Further held that the society employed
persons as their staff to maintain the records and other connected work.
All the members of the society are the shareholders and they formed the
Board of Management. They elected the President and Vice-President
among themselves. They share the profits, if any among themselves. It is
stated that all the shareholders who are members do not get yarn
regularly and weave the cloth, nor is there any time frame work. The
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society does not exercise any supervising control over them. Therefore,
those members cannot be construed as employees of the society. In fact,
the said order was challenged before the Hon'ble Supreme Court of India
and the same was also dismissed by the judgment reported in 2008 (3)
LLN 507 (SC) in the case of Regional Provident Fund Commissioner,
Madurai & ors., Vs.Madathupatti Weavers Co-operative Production
and Sales Society Ltd.
10. The above judgment was followed by the Hon'ble Division
Bench of this Court in the judgment reported in 2010 (2) CWC 878 in the
case of the Management, Dindigul ladies Polythene Workers'
Industrial Co-operative Society Ltd., Vs. The Controlling Authority
under the Minimum Wages Act and ors., and held that the petitioner, in
that case, has 32 persons as members who elected the Directors, Vice-
President and President and they manage and administer the affairs of the
society. They enjoy the dividends and share the profits and also take
policy decision with regard to the affairs of the society. Therefore, they
are not workmen.
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11. These judgments were followed by the learned Single Judge
of this Court in W.P.Nos.1069 to 1077 of 2012, by an order dated
06.02.2012, in the case of M/s. The Ponnur Handloom weavers Co-
operative Production and Sales Society Ltd., Vs. Employees' Provident
Fund Appellate Tribunal and ors., thereby setting aside the order
passed by the Tribunal and remitted back to the Tribunal to decide the
matter afresh after given notice to the parties, in accordance with law.
Aggrieved by the same, the society filed writ appeal in W.A.Nos.845 to
862 of 2012 and the Hon'ble Division Bench of this Court by an order
dated 09.08.2021, set aside the order passed by the learned Single Judge
insofar as the remitting back the matter for fresh consideration by the
Appellate Tribunal holding that the relationship of employer and
employee doesn't arise. Further held that to bring the society under the
EPF & MP Act is far from acceptance and untenable in law.
12. In fact, in the judgment cited by the learned counsel
appearing for the respondents reported in AIR 2019 SC 3528 in the case
of the Officer in-charge, Sub Regional Provident Fund Officer and ors
Vs. Godavari Garments Limited., the Hon'ble Supreme Court of India
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held that the company has engaged the workmen who were provided cut
fabric, thread, buttons, etc., to be made into garments at their own homes.
The sewing machines used by the workmen were owned by them and not
provided by the respondent company. Therefore it has been held that
they are employees under Section 2(f) of the EPF & MP Act. As per
Section 2(f) of the EPF & MP Act, the 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. Therefore, it is held in Godavari
Garments case, that the workers were employed by the respondent
company and they were provided all the raw materials such as the fabric,
thread, button etc., from the respondent company.
13. Whereas in the case on hand, as stated supra, the members
of the petitioner/society used to get raw materials from the
petitioner/society and take them to their home for making them as final
cloths. Further, they have liberty to sell the finished goods and even the
raw materials and remit the actual cost to the petitioner/society and keep
the profit themselves. Therefore, the judgment citied by the learned
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W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
counsel appearing for the respondents is not applicable to the case on
hand.
14. Further, the issue has already been settled by the Division
Bench of this Court in the judgment reported in 2003 (3) LLJ 795-Q-793
in the case of Madathupatti Weavers Co-operative Production and
Sales Society Ltd., Vs. Regional Provident Fund Commissioner,
Madurai & ors., and the relevant portion is extracted hereunder :-
“13. All these things are pre-conditions before
issuing notices or proceedings under Section 7-A of the
Act. Inasmuch as the determination takes form of a suit,
the consequence of coverability of the Act as well as
determination and payment of amount follows on the
basis of the determination, the Act has provided for
sufficient requirements being satisfied before the
initiation of an enquiry under Section 7-A of the Act.
Even after initiation under Section 7-A of the Act, the
employer should be given sufficient opportunity, as set
out under Sub-section (3) of Section 7-A of the Act.
14. In the light of these proceedings, we are
unable to find any material as to the notice or sufficient
materials so as to enable the authority to come to a
decision for applicability of the Act and for the
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determination. Sub-section (3) of Section 7-A of the Act
provides for the authority to call for the examination of
any document or report or return so that the question
can be decided. In the absence of any substantial
material, the orders proceeded on the basis of a charge
statement for the year 1993-94 submitted by the
Assistant Secretary one Sri Sivaprakasam, hardly
satisfies even the minimum requirement. The respondent
could have called for the particulars of nature of
business, bye- laws, books of account, wage register,
particulars of employees and members to enable them to
come to a fair and correct conclusion on the question of
determination as well as applicability of the Act, which
are absolutely lacking in this case. They are empowered
to collect and the employer is obliged to provide, if
called for. On the contrary, the order proceeds as if
there was an agreement of coverage under Sub-section
(4) of Section 1 of the Act, which provides for the
majority of the workers agreeing for coverage of
provident fund. The first order, dated June 14, 1994,
states that the proposal of coverage is regularised under
Section 1(3)(a) of the Act. The final order, dated August
13, 1996, proceeds that the issue involved has also been
examined by the then Regional Provident Fund
Commissioner and orders were issued on June 14, 1994
and there was no consideration in this impugned order
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of the Regional Provident Fund Commissioner and even
according to the officer, he has stated that the employer
has not produced any document. In the counter-affidavit
also, it is stated that no records were produced on the
date of enquiry. Therefore, as a judicial authority
deciding the question under Section 7-A of the Act, if no
records are produced for the purpose of determination,
they have got the power to direct the employer to
produce the documents required to enable them to pass
a just order. It may not be correct on the part of the
authority to assess on the basis of available records,
viz., "the Enforcement Officer's report and the
information gathered during the inquiry."
................................
17. From the order and pleadings, we find that
the proceedings, dated June 14, 1004, is passed in a
perfunctory manner concluding that the proposal for the
coverage under sub-section (4) is regularised under
Section 1(3)(a) of the Act. In this order, the Regional
Provident Fund Commissioner says that he has seen
certain heads of accounts and another head dye factory
workers coolie and therefore, he has directed the
authorised representatives to ensure that all the post
accumulations to be transferred to the statutory fund
with immediate effect and has treated 260 weavers
workers under Section 2(f) of the Act. As per the
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W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
subsequent proceedings, dated August 13, 1996, which
is impugned herein, it is seen that an order is passed
under Section 7-A of the Act on the basis of a show-
cause notice issued for appearance on June 14, 1994
and on the basis of receipt and charge statement of
1993-94 wherein he is said to have found wages head of
account and that issue already examined by the then
Regional Provident Fund Commissioner and therefore
"the liability for payment of provident fund for weaver
workers lies on the society." The order further says that
the dues are assessed on the basis of the Enforcement
Officer's report and directs the employer to remit the
said amount. This proceeding hardly satisfied the barest
minimum requirement, as set out above. The following
information are noticed.
(a) There is no independent determination under Section
7-A of the Act. It is based on a prior proceedings.
(b) No enquiry contemplated preceded by inspection and
notice conducted.
(c) The society was not called upon to furnish the
required materials to determine the coverability.
(d) The determination of dues has not been explained.
Therefore, we have no hesitation in our mind to come to
the conclusion holding that the illegality of the order is
apparent on the face of the records.
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18. On merits, it is submitted that the appellant
weavers co-operative society Yormed on the basis of one
for all and all for one as a co-operative movement for
the purpose of producing and selling the finished cloth.
The members of the co-operative society cannot be
construed as "employees" and the society also in turn
cannot be construed as an "employer" and there is no
such relationship between them. In the affidavit, it is
stated that the society do not have looms of their own.
The members, who are weaving through their own looms
in their respective houses, are provided with yarn and
they take yarn to their houses and they weave in their
looms and bring it to the society as finished cloth.
According to them, amount is paid for the cloth.
According to them, amount is paid for the cloth
produced by them and there is no employer and
employee or master and servant relationship between
the members and the society. The society employed eight
persons as their staff to maintain their records and other
connected work. All the members of the society are
shareholders and they formed the Board of
Management. They elect the President and Vice
President among themselves. They share the profits, if
any, among themselves. Besides, it is stated that all
shareholders, who are members do not get yarn
regularly and weave the cloth, nor is there any time
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frame work. The society also does not exercise any
supervising control over them.”
The above judgment is squarely applicable to the case on hand.
15. As stated supra there is no employer and employee
relationship between the petitioner/society and its members. The
members of the petitioner/society is not running the handloom with the
aid of any power. Further there being less than 50 employees in the
petitioner/society and the Act itself states that the provisions thereof are
not applicable and Section 16(1)(a) of the EPF & MP Act is very clear in
that regard. Therefore, The members of the Weavers' Co-operative
Production and Sales Society Ltd., are not employees of the society.
There are absolutely no materials such as attendance register, wages
register and wage bills in order to prove that the members of the society
are the employees of the petitioner/society. Therefore, the orders passed
by the first and second respondents are illegal and this Court has no
hesitation to interfere with the impugned orders.
16. In view of the above discussions, the orders passed by the
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W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
first respondent dated 23.07.2010 and the common order dated
24.12.2002 passed by the second respondent, are hereby quashed and all
the Writ Petitions are allowed. Consequently, connected miscellaneous
petitions are closed. There shall be no order as to cost.
18.08.2023
Internet: Yes
Index : Yes/No
Speaking/Non Speaking order
rts
To
1. The Employees' Provident Fund
Appellate Tribunal,
Scope Minar,
Core-II, 4th Floor,
Laxmi Nagar District Centre,
Laxmi Nagar,
New Delhi – 110 092.
2. The Assistant Provident Fund Commissioner,
(The APFC)
EPFO, Sub Regional Officer,
31, Filter Bed Road,
Vellore – 632 001.
3. The Employees' Provident Fund Organization,
No.31, Filter Bed Road,
Vellore – 632 001.
https://www.mhc.tn.gov.in/judis
W.P.Nos.27966 to 27972 of 2011 & 14875 to 14899 of 2012
G.K.ILANTHIRAIYAN. J,
rts
W.P.Nos.27966 to 27972 of 2011
& 14875 to 14899 of 2012
and M.P.No. 1 of 2012 (32 Nos.)
18.08.2023
https://www.mhc.tn.gov.in/judis
