PETITIONER: MOHMEDALLI AND OTHERS Vs. RESPONDENT: UNION OF INDIA AND ANOTHER DATE OF JUDGMENT: 09/11/1962 BENCH: SHAH, J.C. BENCH: SHAH, J.C. SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS CITATION: 1964 AIR 980 1963 SCR Supl. (1) 993 CITATOR INFO : R 1979 SC 607 (8) R 1979 SC1803 (41) RF 1991 SC1289 (10) ACT: Provident Fund-Constitutional validity of enactment and scheme framed thereunder-Employees' Provident Funds Act, 1952 (19 of 1952) as amended by Act 46 of 1960, ss. 1(3) (b), 16,17-Constitution of India, Art. 14. HEADNOTE: By a notification issued by the Central Government under s. 1 (3) (b) of the Employees' Provident Funds Act, 1952 the petitioners' restaurant was brought under the Act. By a further notification under s. 5 read with s. 7 (1) of the Act, the Employees' Provident Fund (Second Amendment) Scheme, 1961, was introduced. The petitioners challenged the constitutional validity of the said scheme and the sections under which it was made and applied to their restaurant. It was urged that s. 1 (3) (b) of the Act conferred uncontrolled and uncanalised, power on the Government, that the Act had application only to wage- earners and not to salaried employees as those, employed in the petitioners' restaurant and that the scheme was discriminatory and therefore hit by Art. 14 of the Constitution. Held, that whether or not a particular piece of legislation suffers from excessive delegation has to be judged on a consideration of the facts and circumstances that led to the enactment of the impugned statute. If the Act and its preamble do not clearly indicate the underlying principles or the criteria for its application, the inevitable conclusion must be that the delegate is entrusted not merely with the function of applying the law, but substantially with the legislative power itself. So judged, it could not be said that the power entrusted to Central Government to bring by notification such establishments as it thought fit within the purview of the impugned Act was uncontrolled or uncanalised. The Edward Mills Co. Ltd. Beawar v. The State of Ajmer, [1955] 1 S. C. R. 735, Vasantlal Maganbhai Sanjanwala, [1951) 1 S. C. R. 341 and Hamdard Dawakhana Wakf) Lal Kuan, Delhi v. Union of India, [1960] 2 S. C. R(W. 671, referred to. 994 The Act makes no distinction between wages and salary. In principle there is no difference between the two and it was not correct to say that the Act was not intended to apply to salaried employees, if by salary was meant fortnightly or monthly wages running into hundreds per month. The Act was not discriminatory and did not infringe Art. 14. It applied to all establishments since s. 16 was amended by Act 46 of 1960 except .those registered under the Co- operative Societies Act, 1912, and those newly set up till the expiry of three or five years. As was held by this Court co-operative societies stood on a different footing from other establishments. Exemption under s. 17 also could not be said to be discriminatory. The petitioners' establishment, which came within the notification, was not therefore, discriminated against. JUDGMENT:
ORIGINAL JURISDICTION : Petition No. 56 of 1962.
(Under Article 32 of the Constitution of India for the
enforcement of Fundamental Rights).
N. C. Chatterji, S. K. Kapur and K. K. Jain, for the
Petitioners.
H. N. Sanyal, Additional Solicitor General of India, M. S.
K. Sastri and R. H. Dhebar, for the Respondents.
1962. November 9. The judgment of the Court was delivered
by
SINHA, C. J This petition, under Art. 32 of the
Constitution, challenges the vires of certain provisions of
the Employees’ Provident Funds Act (19 of 1952) which
hereinafter will be referred to as the Act, and the scheme
framed thereunder. The respondents to this petition I are
the Union of India and the Regional Provident Fund
Commissioner.
The petition is founded on the following allegations. The
petitioners, 5 in number, are citizens of India and are
carrying on business of running a restaurant and general
stores under the name and style of “Messrs George Restaurant
and Stores” at
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20, Appollo Street, Fort, Bombay-1, since September, 1958.
They are. running this business as a partnership firm,
registered under the Indian Partnership Act. The firm
employs 43 persons, including cooks, waiters, tea-makers,
bill clerks and two store-clerks. Besides paying salary to
their employees, the petitioners give them free food and
other personal allowances, which it is not necessary to set
out in detail. In exercise of the powers conferred by s.
1(3)(b) of the Act, the General Government issued the
notification No. G.S.R. 704, dated May 16, 1961, in the
following terms:
“G.S.R. 704–In exercise of the ,powers con-
ferred by Clause (b) of sub-section 3 of
Section 1 of the Employees’ Provident Fund
Act, 1952 (19 of 1952), the Central Government
hereby directs that. with effect from June 30,
1961, the said Act shall apply. to the
following classes of establishments, in each
of which twenty or more persons are employed,
namely
i. Hotels.
ii. Restaurants.
As a result of the notification aforesaid, the operation of
the Act has been extended to hotels and restaurants,
including the one run by the petitioners. Subsequently, the
Central Government issued a notification ‘under s. 5, read
with s. 7(1), of the Act, the relevant portions of which are
in these terms :
” G.S.R. 783.-In exercise 1 of the powers con-
ferred by section 5 read with subsection (1)
of section 7, of the Employees’ Provident
Funds Act, 1952 (19 of 1952), the Central
Government hereby makes the following Scheme
further to amend the Employees’ Provident Fund
Scheme, 1952, namely
1. This Scheme may be called the Employees’
996
Provident Funds (Third Amendment) Scheme,
1961.
2. In the Employees’ Provident Fund Scheme,
1952, in clause (b) of sub-paragraph. (3) of
paragraph 1, sub-clause (xvii)shall be re-
numbered as sub-clause (xix) thereof and the
following shall be inserted as sub-clauses
(xvii) and (xviii), namely:-
“(xvii) as respects hotels and, restaurants
Covered by the notification of the,Government
of India ‘in the Ministry of Labour and
Employment No. G.S.R. 704 dated May 16, 1961
come into force on the 30th day of June
1961;….
The said notification introduced the scheme, as the
Employees’ Provident Funds (Third Amendment) Scheme, 1961.
The petitioners challenge the constitutionality of the
scheme aforesaid, and the section of the Act in pursuance of
which it was brought into existence. The petitioners pray
for a writ or order or direction quashing the said notifica-
tions and for issue of a mandamus to the respondents not to
apply the said scheme to the petitioners establishment.
Before dealing with the specific grounds of attack raised in
support of the petition, it is necessary to set out
briefly the relevant provisions of the Act. The Act applies
to every establishment which is a factory engaged in any
industry specified in schedule 1 and in which 20 or more
‘persons are employed, and to any other establishment
employing 20 or more persons or class of such establishments
which is Central Government may by notification in the
Official Gazette, specify in this behalf. `Employee’ has
been defined ‘in S. 2(f) as follows:
” employee’ means any person who is employed
for wages in any kind of’ work, manual or
997
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 employed by or
through a contractor in or in connection with the work of
the establishment.”
Section 5 authorises the Central Government to frame a
scheme to be called the Employees’ Provident Fund Scheme,
for the establishment of provident funds under the Act for
employees or any class of employees and establishments or
class of establishments to which the scheme may be applied,
by notification in the Official Gazette. The contribution
of the employer to the fund shall be 61% of the basic wages
and dearness allowance and retaining allowance, if any, and
the employees contribution shall be equal to the employer’s
contribution, subject to his contribution being raised to
the maximum of 6 1/3 %, if the employee so desires and the
scheme so provides. Dearness allowance for the purposes of
contribution shall be deemed to include also the cash value
of any food concession allowed to the employee. Section 7
authorises the Central Government to add to, amend or vary
any scheme framed under the Act. By s. 16 it is provided
that the Act shall not apply to any establishment registered
under the Co-operative Societies Act of 1912, or to any
other establishment employing 50 or more persons or 20 or
more but less than 50 persons until the expiry of 3 years in
the case of the former and 5 years in the case of the
latter, from the date on which the establishment is set up.
Section 17 empowers the appropriate Government, by
notification in the Official Gazette, to exempt .from the
operation of all or any of the provisions of any scheme any
establishment to which the Act applies, if in the opinion of
the Government the rules of its provident fund with respect
to the rates of contribution are not less favourable than
those specified in s. 6 and the employees are also in
enjoyment
998
of other provident fund benefits which on the whole are not
less favorable to the employees than the benefits provided
under this Act, as also any establishment if the employees
of such establishment are in enjoyment of benefits in the
nature or provident fund, pension or gratuity, which on the
whole are not less favorable to such employees. Section 19
provides for delegation of powers.
It has been contended (1) that s. 1(3)(b) under which the
notification including restaurants and hotels were brought
under the operation of the Act, is invalid because-it
confers uncontrolled and uncanalised power on the
Government; (2) that the Act was intended to apply to
mere wage earners and not to salaried people and that,
therefore, the two,notifications as a result of which the
petitioners employees have been brought within the purview
of the Act are bad inasmuch as they are salaried employees
and not mere wage-earners; and (3) that the scheme is bad
under Art. 14 of the Constitution because it is dis-
criminatory.
In our opinion there is no substance in any one of these
contentions. It’ cannot be asserted that the powers
entrusted to the Central Government to bring within the
purview of the Act such establishments or class of
establishments as the Government may by notification in the
Official Gazette specify is uncontrolled and uncanalised.
The whole Act is directed to institute provident funds for
the benefit, of employees in factories and other
establishments, as the preamble indicates. The institution
of provident fund for employees is too, well-established to
admit of any doubt about its utility as a measure of social
justice. The underlying idea behind the of the Act is to
bring all kinds of employees within its fold as and when the
Central Government might think fit, after reviewing the
circumstances of each class of establishments. Schedule 1
to the Act contains a list of a large variety of industries
engaged in
999
the manufacture of diverse commodities, mentioned therein.
To all establishments which are factories engaged in. the
industries enumerated in Schedule 1, the Act has been made)
applicable of its own force, subject to the provisions of s.
16, which has indicated the establishments to which the Act
shall not apply. The Schedule is liable to be added to or
modified so as to include other categories of industries not
already included in schedule 1. So far as establishments
which do not come with in the description of factories
engaged in industries the Central Government has been vested
with the power of specifying such establishment and class of
establishments, as it might determine to be brought within
the purview. of the Act. The Act has given sufficient
indication of the policy underlying its provisions namely,
that it shall apply to all factories engaged in any kind, of
industry and to all other establishments employing 20 or
more persons.This court has repeatedly laid it down that
where the discretion to apply the provisions of a particular
statute is left with Government, it will be presumed that
the discretion so vested in such a high authority will not
be abused. The Government is in a position to have all the
relevant and necessary information in relation to each kind
of establishment enabling it to determine which of such
establishments can bear the additional burden of making
contribution by way of provident fund, for the benefit of
its employees. The power to exempt given, to the
appropriate Government under s. 17 is, not uncanalised
because both cls. (a) and (b) of that section postulate that
the exemption would be granted on the ground that the
employees of ‘those establishments are already in the
enjoyment of benefits in the nature of provident fund,
pension or gratuity not less favorable to them than under
the Act. Sub-section (3) of s.1 lays down the general rule
in these terms as regards the applicability of the Act:
(3) Subject to the-provisions contained in
1000
section 16, it applies-
(a) to every establishment which is a
factory engaged in any industry specified in
Schedule 1 and in which twenty or more persons
are employed, and
(b) to any other establishment employing
twenty or more persons or class of such
establishments which the; Central Government
may, by notification in the Official Gazette,
specify in this behalf : Provided that the
Central Government may, after giving not less
than two months notice of its intention so to
do, ‘by notification in the Official Gazette,
apply the Provision of this Act to any
establishment employing such number of persons
less than twenty as may be specified in the
notification.”
The term ,industry’ used in the sub-section,quoted
above, is defined ‘in s. 2(i), as follows
“‘industry’ means any industry specified in Schedule
‘1, and includes any other industry added
to the Schedule by notification under section
4.”
By s. 4, the Central Government has been authorised to add
to the Schedule any other industry in respect of the
employees whereof it is of opinion that a provident fund
scheme should be framed under the Act, and when such a
notification 1st issued, the industry so added shall be
deemed to been industry specified in the Schedule. The
general rule as to the application of the Act has been laid
down in that sub-section. By way of exception to that
general rule, the Appropriate Government has been-
authorised by s. 17 to exempt from the operation of all or
any of the provisions of any scheme framed under the Act.
The scheme is to be framed by the Central Government, under
s. 5, for the establishment of provident fund
1001
under the Act for employees or any class of employees, in
pursuance of the provisions of the Act. And the scheme in
question in this case, as already indicated, has actually-
been framed and is under challenge in this case. The
relevant provisions of s. 17 are in these words :
“17. Power to exempt.-(1) The appropriate
Government may, by notification in the
Official Gazette, and subject to such
conditions as may be specified in the
notification, exempt from the operation of all
or any of the provisions of any Scheme-
(a) any establishment to which this Act
applies if, in the opinion of the appropriate
Government, the rules of its provident fund
with respect to the rates of contribution are
not less favorable than those specified in
section 6 and the employees are also in
enjoyment of other provident fund benefits
which on the whole are not less favorable to
the employees than the benefits-provided under
this Act or any Scheme in relation to the
employees in any other establishment of a
similar characters; or
(c) any establishment if the employees of
such establishment are in enjoyment of
benefits in the nature of provident fund,
pension or gratuity and the appropriate
Government is of opinion that such benefits,
separately or jointly are on the whole not
less favorable to such employees than the
benefits provided under this Act or any scheme
in relation to employees An any other esta-
blishment of a similar character.”
It would appear from the terms of the relevant portion of s.
17 Chat the exemption to be granted by
1002
the appropriate Government is not in the nature of
completely absolving the establishments from all liability
to provide the facilities contemplated by the Act. The
exemptions are to be granted by the appropriate Government
only if in its opinion the exempted establishment has
provisions made for provident fund, in terms at least equal,
if not more favorable, to its employees. In other words,
the exemption is with a view to avoiding duplication and
permitting the employees concerned. the benefit of the pre-
existing scheme, which presumably has been working
satisfactorily, so that the exemption is not meant to
deprive the employees concerned of the benefit of a
provident fund but to ensure to them the continuance of the
benefit which at least is not in terms less favorable to
them. As the whole scheme of provident fund is intended for
the benefit of employees, s. 17 only saves pre-existing
schemes of provident fund pertaining to particular
establishments. Hence, the provisions of sub-s. (3), of s.
1, read alongwith those of s. 17, quoted above, cannot be
said to have conferred uncontrolled and uncanalised power on
the appropriate Government. In this connection. the
decision of this Court in The Eduard Mills Co. Ltd., Beawar
v. The State of Ajnwr(1) may be referred to. In that case,
the provisions of s. 27 of the Minimum Wages Act (11 of
1948) were questioned as having given uncanalised power.
The provisions of that Act run more or less on parallel
lines to those of the Act impugned in this case. The
Schedule attached to the Minimum Wages Act gave a list of
the employments in respect of which minimum wages were to be
fixed. Under S. 27 of that Act, power had been given to the
“appropriate Government” to add to the Schedule any
employment in respect of which it was of the opinion that
minimum wages should be fixed. Those provisions were
attacked as lacking in legislative
(1) [1955] 1 S.C.R. 735.
1003
policy according to which a particular employment shall be
chosen for being included in the schedule. The contention
in that case that no principles had been prescribed and no
standards laid down which could furnish an intelligent guide
to the executive authority in making the selection of
employments was repelled by this Court. A similar question
was raised in this Court in the case of Vasantal Maganbhai
Sanjanuwala v. The State of Bombay (1) challenging the vires
of s. 6 (2) of the Bombay Tenancy and Agricultural Lands Act
(Bom. 67 of 1948), which read as follows :
“The Provincial Government may, by notifica-
tion in the Official Gazette, fix a lower rate
of the maximum rent payable by the tenants of
lands situate in any particular area or may
fix such rate on any other suitable basis as
it thinks fit.”
This Court, on a consideration of the preamble of the
statute and its relevant provisions came to the conclusion
that the power delegated to the Provincial Government by s.
6 (2) was not vitiated by excessive delegation. It will be
noticed that the terms of the section quoted above had given
much wider powers to the executive. But the Court pointed
out that the legislature enunciated its policy and laid down
the principle for the guidance of the delegate in clear
terms, and that, therefore, the impugned provisions of the
Act in that case did not suffer from the vice of excessive
delegation.
But strong reliance was placed on behalf of the petitioners
on the decision of this Court in Hamdard Dawakhana (Wakf)
Lal Kuan, Delhi v. Union of India (2). In that case the
provisions of cl. (d) of s. (3) of the Drugs and Magic
Remedies (Objectionable Advertisements) Act, 1954 (21 of
1954) were
(1) [1961] 1 S.C.R. 341.
(2) [1960] 2 S.C.R. 671,
1004
struck down as having conferred uncanalised and uncontrolled
power on the executive. In that case, the whole Act had
been challenged as having infringed the fundamental rights
of a citizen under Art. 19 (1) (a) & (g). This Court upheld
the constitutionality of the Act as a whole, in view of the
scope and object of the Act, which was not to interfere with
the right of freedom of speech but had reference to trade
and business. This Court held that the provisions attacked
on those grounds were reasonable restrictions on the rights
of a citizen to carry on any trade or business. But this
Court held further that the words “or any other disease or
condition which maybe specified in the rules made under this
Act” in cl. (d) of s. 3, which empowered the Central
Government to add to the list of diseases falling within the
mischief of s. 3 suffered from the vice of excessive
delegation. This Court struck down that portion of the sub-
section as, in its opinion, the words impugned were vague
and Parliament had not established any criteria nor laid
down any standards nor prescribed any principle on which a
particular disease or condition was to be specified in the
Schedule. It is clear that the last mentioned case
illustrates the rule that the question whether or not a
particular piece of legislation suffers from the vice of
excessive delegation must be determined with reference to
the facts and circumstances in the back-ground of which the
provisions of the statute impugned had been enacted. If, on
a review of all the facts and circumstances and of the
relevant provisions of the statute, the Court is in a,
position to say that the legislature had clearly indicated
the underlying principle of the legislation and laid down
criteria and proper standards but had left the application
of those principles and standards to individual cases in
the hands of the executive, it cannot be said that there was
excessive delegation of powers by the legislature. On the
other hand, if a review of all those facts and circumstances
and
1005
the provisions of the statute, including the preamble,
leaves the Court guessing as to the principles and
standards, then the delegate has been entrusted not with the
mere function of applying the law to individual cases, but
with a substantial portion of legislative power itself.
Applying those principles which are now well-established by
quite a number of decisions of this Court, can it be said in
the instant case that the. legislature had not indicated
clearly the principles underlying the legislation and the
standards to be applied ? In our opinion, the answer must be
an emphatic “No”.
It was next contended that the Act was intended by
Parliament to apply to employees who were mere wage-earners
and not to salaried servants, and that in the instant case,
the employees of the petitioners were not mere wage-earners.
It is a little difficult to appreciate the distinction
sought to be made. Both ‘Salary’ and ‘Wages” are emoluments
paid to an employee by way of recompense for his labour.
Neither of the two terms is a ‘term of art’. The Act has
not defined wages; it has only defined “basic wages” as all
emoluments which are earned by an employee while on duty or,
on leave with wages in accordance with the terms of the
contract of employment and which are paid or payable in cash
to him, but does not include……, “(s. 2(b). (Exclusions
are not relevant for our present purposes and, therefore,
need not be read.) ‘Salary’, on the other hand, is
remuneration paid to an employee whose period of engagement
is more or less permanent in character, for other than
manual or relatively unskilled labour. The distinction
between skilled and unskilled labour itself is not very
definite and it cannot be argued, nor has it been argued..
that the remuneration for skilled labour is not ‘wages’.
The Act itself has not made any distinction between ‘wages’
and ‘salary’. Both may be paid weekly, fortnightiy or
monthly though remuneration for the day’s work is not
ordinarily
1006
termed “salary’. Simply because wages for the month run
into hundreds, as they very often do now, would not mean
that the employee is not earning wages, properly so called.
A clerk in an office may earn much less than the monthly
wages of a skilled laborer. Ordinarily he is said to earn
his salary. But in principle there is no difference between
the two. It is, therefore, not established that the Act
was not intended to apply to salaried employees, if by
salary is meant fortnightiy or monthly wages running into
hundreds per month. It is manifest that there is no force
in this contention.
It now remains to consider the third and the last contention
raised on behalf ‘of the petitioners,, namely, that the Act
suffers from the vice of discrimination and, therefore,
‘infringes Art. 14 of the Constitution. It is even more
difficult to understand this contention, because, as already
pointed out, the Act applies to all establishments, except
those recited in s. 16, which before its amendment by Act 46
of 1960, exempted establishments belonging to Government or
to a local authority. But whatever vice there may have been
in that provision has been removed by amending the section,
which stands after the amendment as under:
“16 (1) This Act shall not apply-
(a) to any establishment registered under
the Co-operative Societies Act, 1912, or under
any other law for the time being in force in
any State relating to Co-operative
Societies employing less than fifty persons
and working without the aid of power; or
(b) to any other establishment employing
fifty or more persons or twenty or more but
less than fifty persons until the expiry of
three
1007
years in the case of the former and five years
in the case of the latter, from the date on
which the establishment is or has been set up”
Explanation.-For the removal of doubt it is
hereby declared that an establishment shall
not be deemed to be newly set up merely by
reason of a change in its location.”
Clause (a) of s. 16, as it now stands, has exempted
establishments registered under the Co-operative Societies
Act, because it is well-known that it is the settled policy
of the Government to foster co-operative societies with a
view to their development and growth in the interest of the
community. It is not necessary to cite instances where this
Court has held that cooperative societies stand on a special
footing which distinguishes them from other establishments
or corporations. Clause (b) has reference to establishments
which have been in existence for less than 3 years or 5
years, as the case may be. That is an understandable
classification with a view to save newly started
establishments from the additional burden of making
contribution to provident fund in respect of its employees.
It is clear that the exemption is a short-lived one because
with the efflux of 3 or 5 years’ period, they will
automatically come under the scheme framed under the Act.
The operation of s. 17 has already been discussed, and it
has already been indicated that an establishment coming
under the exemptions granted or to be granted under s. 17
does not mean that the establishment bears less burden of
its share of contribution to the fund. It has not been
contended before us that the petitioners’ establishment does
not come within the general rule laid down in s. 1 (3) of
the Act or within the scope of the scheme framed under s. 5.
It is equally clear that all hotels and restaurants come
within’ the scope of the notification impugned in this case.
Hence, there is absolutely no reason for complaint that the
1008
petitioners’ establishment of that class has been chosen for
hostile discrimination.
As all the contentions raised on behalf of the petitioners
fail, the petition is dismissed with costs.
Petition dismissed.
1