JUDGMENT
R.M. Doshit, J.
1. This is the petition preferred under Articles 226 and 227 of the Constitution of India by M/s. Swastik Textile Engineers Private Limited, an employer within the meaning of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as, “the Act”), against the order dated 21st April, 1999 made by the Regional Provident Fund Commissioner (II)(hereinafter referred to as, “the Commissioner”) under Paragraph 26B of the Employees’ Provident Funds Scheme, 1952 (hereinafter referred to as, “the Scheme”).
2. The dispute is in connection with the liability of the petitioner to make provident fund contribution in respect of the amount of backwages paid to the respondent No. 1 – workman in compliance with the order passed by the Labour Court.
3. The petitioner had terminated the service of the workman on 7th June, 1982. In ensuing litigation, by award published on 27th September, 1991, the petitioner was directed to reinstate the workman in service and to pay him 75% of the backwages. The workman was reinstated in service and was paid the backwages in the sum of Rs. 61,079-10. The petitioner, however, did not deduct the amount of provident fund from the said amount of the backwages, nor did it make statutory contribution.
4. Pursuant to the complaint lodged by the workman in respect of the contribution of the provident fund amount by the employer, an inquiry under Section 7A of the Act was initiated. By order made by the Assistant Provident Fund Commissioner, it was held that the petitioner was liable to make statutory contribution in respect of the said sum of Rs. 61,079-10 paid as backwages. The petitioner was directed to remit the sum of Rs. 6,107-91 by way of its contribution to the provident fund for the period from January, 1982 to February, 1992. Feeling aggrieved, the petitioner made representation under Section 19A of the Act. The said representation came to be allowed by the Employees’ Provident Funds Appellate Tribunal by its order dated 17th March, 1999. The Appellate Tribunal remanded the matter to the Commissioner to reconsider and decide the matter afresh. Pursuant to the said order, a fresh inquiry under Section 7A of the Act was initiated. While the said inquiry was underway, by order dated 18th February, 1999 made by the Commissioner, the said inquiry under Section 7A was ordered to be concluded and a fresh case under Paragraph 26B of the Scheme was initiated. By the impugned order made on 21st April, 1999 in the proceedings under Paragraph 26B of the Scheme, the Commissioner was of the opinion that the backwages awarded by the Labour Court was the wages for the period the workman was out of service. The amount of backwages, therefore, constitute the ‘basic wages’ as defined in the Act. The petitioner, was therefore, liable to make its contribution to the provident fund. Feeling aggrieved, the petitioner has preferred the present petition.
5. Mr. Clerk has assailed the impugned order dated 21st April, 1999. He has submitted that the impugned order was made by the Commissioner without the authority of law. He has submitted that the Appellate Tribunal had directed the Commissioner to hold inquiry under Section 7A of the Act afresh. The Commissioner, was therefore, required to conduct and complete the inquiry under Section 7A of the Act. Instead, in the middle of the inquiry, the same was cancelled and a fresh inquiry under Paragraph 26B of the Scheme was started. The action of the Commissioner was evidently contrary to the directions issued by the Tribunal. He has next submitted that an employer is duty bound to make contribution to the provident fund in respect of the wages earned by an employee. In other words, the wages paid to an employee for the services rendered by him would be the ‘basic wages’ within the meaning of the Act and it is the ‘basic wages’ in respect of which the employer is required to make contribution to the provident fund. The amount of backwages not being the ‘basic wages’ as defined in the Act, neither the petitioner deducted the amount of provident fund from the back wages paid to the workman nor did the petitioner make statutory contribution. The Commissioner has erred in directing the petitioner to remit the amount of contribution to the provident fund in respect of the backwages paid to the workman,
Dated 28-9-2007
6. The petition is contested by Mr. Suthar. He has submitted that while setting aside the order of termination of the service of the workman, the Labour Court directed the petitioner to give continuity in service and also the backwages to an extent. This necessarily means that the workman was required to be treated as “on duty” during the period from the date of termination of his service till the date he was reinstated in service. If that be so, the backwages awarded was necessarily the ‘basic wages’ as envisaged by the Act. The petitioner, was therefore, under obligation to make statutory contribution towards the provident fund. In support thereof, he has relied upon the judgments of the Hon’ble Supreme Court in the matters of Shree Changdeo Sugar Mills and Anr. v. Union of India and Anr. ; of Prantiya Vidhyut Mandal Mazdoor Federation v. Rajasthan State Electricity Board and Ors. and of Union of India and Anr. v. Ogale Glass Works 1971 (II) LLJ 513.
7. In the matter of Shree Changdeo Sugar Mills and Anr. (supra), there was a lock out in the factory and in the proceeding pending before the High Court, the High Court determined the date of termination/retrenchment of workmen from service. Till then, the workmen were deemed to be on duty. The Hon’ble Supreme Court held that since the workmen were deemed to be on duty upto the date of retrenchment fixed by the High Court, the wages paid for the said period was basic wages as envisaged by the Act. The employer, therefore, was liable to make its own contribution towards the provident fund.
8. In the matter of Union of India and Anr. (supra), the concerned employer had, in view of the judgment of the Bombay High Court rendered in case of a similar establishment, discontinued to make contribution towards the provident fund in respect of its employees working in certain sections. The judgment of the Bombay High Court came to be reversed making all such establishments responsible to pay contribution towards the provident fund in respect of the employees working in any sections. The dispute was in connection with the contribution of provident fund on the wages paid during the interregnum period when the earlier order of the Bombay High Court was in operation.
9. In the matter of Prantiya Vidhyut Mandal Mazdoor Federation (supra), pursuant to the upward revision of pay-scale made effective retrospectively, the establishment was required to pay arrears of salary to its employees. The question was that of contribution to the provident fund on the amount of arrears of salary paid to the employees. The Hon’ble Supreme Court upheld the liability of the employer. The Hon’ble Supreme Court held that the amount of arrears of salary did constitute basic wages as defined in the Act.
10. In my opinion, none of the aforesaid judgments shall apply to the facts of the present case.
11. As recorded hereinabove, the service of the workman was terminated, which was held to be illegal and the workman had been reinstated in service with continuity in service. Whether, the ‘continuity in service’ ordered by the Labour Court would amount to the period spent on duty. If it is to be treated as the period spent on duty, then necessarily, the workman would be entitled to receive the entire salary; would be liable to make contribution to the provident fund, and in that case, the employer would be liable to make statutory contribution to the provident fund. But, in my view, the ‘continuity in service’ does not carry the meaning ‘the period spent on duty’. The purpose to allow continuity in service would be that such period would not be treated as break in service for the purpose of service benefits like; pay, increments, leave, allowances, pension, etc. In absence of a specific order that such period should be treated as period on duty, such period cannot be held to be the period spent on duty. Besides, the fact that the Labour Court had awarded only part of the back wages, would also tend to show that the period of absence from duty on account of termination from service was not intended to be treated as the period spent on duty.
12. In my view, when the Court awards backwages for the period the employee was kept away from duty, what the Court does is to award damages assessed in terms of whole or part of the wages the workman would have earned had he been continued in service without interruption. It is not the same as payment of wages for the duties performed or for the period deemed to have been spent on duty. The amount of damages or the compensation awarded by a Court would not constitute the ‘basic wages’ as envisaged by the Act.
13. For the aforesaid reasons, I am of the opinion that the amount of backwages paid to the workman did not constitute the ‘basic wages’ as envisaged by the Act. The petitioner, was therefore, under no obligation to make statutory contribution to the provident fund under the Act.
14. No other contention is raised before me.
15. In above view of the matter, the petition is allowed. The impugned order dated 21st April, 1999 made by the Commissioner is quashed and set aside. The inquiry initiated under Paragraph 26B of the Scheme is set aside. Rule is made absolute. The parties will bear their own cost.