BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 07/09/2011 CORAM THE HONOURABLE MR.JUSTICE VINOD K.SHARMA W.P.(MD)No.3469 of 2009 and M.P.(MD)No.1 of 2009 The Madurai District Central Cooperative Bank Ltd., Rep. by its Special Officer, 187, North Veli Street, Madurai-625 001. ... Petitioner Vs. 1.Employees' Provident Fund Organization, Rep. by its Regional Provident Fund Commissioner, Lady Doak College Road, Chokkikulam, Madurai-625 002. 2.The Recovery Officer, Employees' Provident Fund Organization, Lady Doak College Road, Chokkikulam, Madurai-625 0002. ... Respondents PRAYER Writ Petition is filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorari, to call for the records of the 2nd respondent in his proceedings in the Notice of Demand No.TN/MDU/4169/RECOY 2009103/circle 19/2009, dated 31.03.2009. !For Petitioner ... Mr.R.Sivamanogran ^For Respondents ... Mr.V.S.V.Venkateshwaran :ORDER
The petitioner, being aggrieved by the order, dated 31th March 2009,
directing the petitioner to deposit contribution on behalf of security agencies,
has invoked the writ jurisdiction of this court, to quash the impugned order.
2.The admitted facts are that the petitioner society is registered under
the Tamil Nadu Cooperative Societies Act, 1983, and has its own Provident Fund
Scheme and is an exempted establishment, under section 17 of the Employees
Provident Fund Scheme & Miscellaneous Provisions Act, 1952 [hereinafter referred
to as ‘Act’].
3.The petitioner availed the services of three security agencies, i.e.,
Victory Security service, Loyal Security Service and Jayam/Sward Security
Service.
4.All the security agencies are independent establishment, carrying on
business of providing security service to various establishments.
5.The Victory Security Service and Loyal Security service are registered
under the Act, and allotted code No.TN/42886 and TN/29536 respectively.
6.The case of the petitioner is that the code number is allotted only to
an independent establishment, and that petitioner has no legal obligation to pay
the contribution qua the employees of independent establishment.
7.It is not disputed that the security agencies engaged by the petitioner,
committed default in payment of Provident Fund contribution and that proceedings
were initiated against the said Security Agencies, under section 7-A of the Act.
8.The petitioner was also impleaded as one of the parties, by treating it
to be principal employer. The order, dated 23rd January 2008 was passed by the
authorized officer, under section 7-A of the Act, imposing the liability of each
of the security agencies, for payment of contribution. In the order, it was
stipulated that in the event of failure of the security agencies to pay the
contributions, the amount due will be recovered from the petitioner, being the
principal employer.
9.The case of the petitioner is, that after passing of the order, on 23rd
June 2008, proceedings were initiated against the security agencies, for
recovery of the amount adjudicated, under section 7A of the Act.
10.Thereafter, all of a sudden, the impugned order, dated 31th March 2009
was passed directing the petitioner to pay the contribution, as assessed under
section 7-A of the Act, on the ground that the security agencies had failed to
deposit the amount.
11.The learned counsel appearing on behalf of the petitioner, fairly
conceded that the liability to pay the contribution on behalf of the Jayam/Sward
Security Service is not disputed, as under 30 of the Employees Provident Fund
Scheme, 1952, it is the duty of the principal employer to recover the
contribution, i.e. employer and employees share and deposit it with the
Provident Fund Commissioner. In view of the stand taken by the learned counsel
for the petitioner, recovery of contribution qua the Jayam/Sward Security
Service from the petitioner is upheld, and the petitioner is directed to deposit
the contribution within one month of the receipt of certified copy of this
order.
12.The learned counsel for the petitioner challenged, the notice of demand
with respect to contribution payable by other two security agencies, on the
ground that once these contractors were allotted independent code number, the
liability could not be fixed, on the petitioner, being an exempted
establishment, under section 17 of the Act.
13.In support of this contention, the learned counsel for the petitioner,
placed reliance on the judgment of the Hon’ble Division Bench of Patna High
Court, in the case of Bata India Ltd., & Ors. Vs. Union of India & Others [2001
IV LLN 536 (Pat.DB], wherein, it has been held as under:-
“….By its notification, dated 8 February 1965, published in the Gazette
of India of February 20, 1965 (Annexure 3), Government of India in the
department of social security had, in exercise of the powers conferred by C1.(b)
of Sub-Sec.(1) of s.17 of the Act, exempted the Mokama unit and other units of
the petitioner-company mentioned therein from the operation of the scheme with
effect from the dates mentioned in the notification with respect to the
different units. The petitioner-company has set up a trust exemption for
managing the accounts of provident fund of its employees. It took the stand that
in view of the exemption granted by the respondent authorities, the petitioner
was completely exempted form the provisions of the Act and the scheme which
would mean that the trust shall maintain the accounts of its direct employees
only, and is no longer obliged to maintain the provident fund accounts of
contractor’s labourers…….” (Page 537, Para:2)
“……..On a combined reading of the relevant provisions of the Act and
the scheme it is clear that in case exemption from operation of the scheme is
allowed to the principal employer, he is out of the net of the scheme. He is
then obliged to set up a trust and maintain the accounts of his employees. Such
a literal construction, therefore, naturally leads to the conclusion that the
contractors are within the mischief of the scheme. Not having obtained any
exemption within the meaning of Sec.17 of the Act, they (the Contractors) are
still covered by the scheme and obliged to obtain separate code numbers under
the Act and the scheme and deposit the contributions with the authorities under
the Act.” (Page 540 Para;11)”
14.The learned counsel for the respondents, however, contends, that this
judgment will not be applicable to the case of the petitioner, as an order
passed under section 7A, which has attained finality, the petitioner was held
liable to pay the contribution, on the failure of the security agencies to make
the payment.
15.Therefore, it is not open to the petitioner now to challenge, the
executory order, once the adjudicatory order was allowed to attain finality.
16.It is also the contention of the learned counsel for the respondents,
that under clause 30 of the Employees’ Provident Fund Scheme, 1952, it is the
duty of the principal employer to pay the provident fund contribution,
therefore, the order passed under section 7-A, was in consonance with the
scheme, which deserves to be upheld, consequently, the executory order can also
not be subject to challenge.
17.On consideration, I find force in the contention raised by the learned
counsel for the petitioner.
18.It is not in dispute that the petitioner is an exempted establishment,
under section 17 of the Act, therefore, is not covered under the Act. The
employees of the contractor, by no stretch of imagination can be treated to be
employees of the principal employer, but, as rightly conceded by the
learned counsel for the petitioner, the liability of unregistered contractors,
would fall on the petitioner, in view of clause 30 of the Employees’ Provident
Fund Scheme, 1952, whereas with respect to the contractors, who are registered
with the Provident Fund Department, having independent code number, they are to
be treated as ‘independent employer’.
19.The petitioner, therefore, cannot be treated to be ‘principal employer’
for the purposes of those contractors. The impugned part of the order, under
section 7-A, is also under challenge before this court and not only the
executory order, as contended by the learned counsel for the respondents.
20.In view of the judgment of the Honourable Division Bench of Patna High
Court, the contention of the learned counsel for the petitioner, deserves to be
accepted. The liability with respect to the contractors registered and having
independent code cannot be fastened on the petitioner.
21.The writ petition is partly allowed, and the impugned part of order
passed under section 7-A, as also executory order, fixing liability of security
agencies having independent code i.e. Victory security service and Loyal
security service, on the petitioner is quashed, and the impugned order qua
Jayam/Sward security service is upheld.
22.The respondents shall be at liberty to execute the order under section
7-A, against the Victory security service and Loyal security service
independently.
23.Consequently, connected Miscellaneous Petition is closed. No costs.
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