Gobins (India) Engineering (P) Ltd. v. The Presiding Officer, Central Government Industrial Tribunal cum Labour Court, Ernakulam; and The Assistant Provident Fund Commissioner, Employees Provident Fund Organization

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **THURSDAY, THE 24[TH] DAY OF MARCH 2022 / 3RD CHAITHRA, 1944** **WP(C) NO. 8057 OF 2022** ## **PETITIONER/S:** GOBIN (INDIA) ENGINEERING (P) LTD. II FLOOR, PJ TOWERS, GOVERNMENT ENGINEERING COLLEGE PO, THRISSUR, REPRESENTED BY ITS MANAGING DIRECTOR, BINU S.GOPINATH, AGED 42 YEARS, SON OF K.P.GOPINATH, RESIDING AT GOBINS, KUTTUMUKKU ROAD, CHEROOR PO, THRISSUR 680 008., PIN - 680009 BY ADVS. B.ASHOK SHENOY C.B.MUKUNDAN (THRISSUR) P.S.GIREESH RAYMOND GEORGE DIAS ARJUN R NAIK ## **RESPONDENT/S:** 1 THE PRESIDING OFFICER, CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT 8TH FLOOR, KERALA STATE HOUSING BOARD, PANAMPILLY NAGAR, ERNAKULAM, PIN - 682036 2 THE ASSISTANT PROVIDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANISATION, SUB REGIONAL OFFICE, BHAVISHYA NIDHI BHAVAN, PB NO.1895, KALOOR, KOCHI, PIN - 682017 BY ADV SRI.THOMAS MATHEW NELLIMOOTTIL,SC, P.F. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.03.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **WP(C) NO. 8057 OF 2022** **2** ## **JUDGMENT** Petitioner management, a private limited Company indulged into a construction activity, which is covered and governed by the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (herein after called 'the Act') through the instant writ petition has assailed the orders of the Provident Fund Enforcement Commissioner, Ext.P1 and of the Tribunal dated 9.11.2020, Ext.P7. 2. On 20.11.2012, the Enforcement Officer under the Assistant Provident Fund Commissioner inspected the establishment of the petitioner and on account of the inspection report, the proceedings under Section 7A of the Act were initiated against the petitioner for the period September 2010 to September 2012 allegedly on account of omitted wages. Proceedings thereof was initiated on the premise that petitioner had paid contributions under the said Act only on Basic Wages component of the salary and Leave Salary, paid by them to their employees during the said **WP(C) NO. 8057 OF 2022** **3** period, and not paid contributions thereof on House Rent Allowance, Medical Allowance, Travelling and Conveyance Allowance as also Site Allowance components of the salary to the employees who were working on the site; by splitting of the wages as Basic Wages and allowances aforementioned. 3. Petitioner after having been served, appeared and alleged that there were no allowances being paid to any employees as per the terms and conditions of the contract of employment and the site allowance was also given to the employees who had actually been working at the site. In other words, the employees working in the administrative section were not given any site allowance or other allowances and as per the plain and simple reading of the provisions of Section 6 r/w Section 2(b) of the Act, allowances will not fall within the definition of basic wage, and requested the authority to drop the proceedings under Section 7A. 4. The Provident Fund Commissioner vide order dated 31.1.2014, Ext.P1 rejected the pleas of the petitioner and directed them to pay contribution of Rs.3,99,802/- and in case **WP(C) NO. 8057 OF 2022** **4** of any failure, which entailed into recovery of the amount as the arrears as per the provisions under Section 8B to 8G of the Act and prosecution under Section 14/14A of the Employees Provident Funds and Miscellaneous Act, 1952. It was also ordered that the amount assessed would be exclusive of penal damages to be leviable under Section 14B of the Act and interest payable under Section 7Q of the Act. Petitioner preferred a review application against the aforementioned order and the same was rejected vide order dated 21[st] of October 2014. An appeal bearing No. 1373(7) of 2014 was preferred before the Appellate Tribunal. Appellate Tribunal by relying upon the judgment of the Supreme Court in _**Regional Provident Fund Commissioner(II), West Bengal v. Vivekananda Vidyamandir and Others (2020) 17 SCC 643**_ as well as the Single Bench of this Court in _**Employees Provident Fund Organization v. M.S Raven Beck Solutions (India) Ltd. (W.P.(C) No.17507/2016)**_ and held that all the allowances except the HRA would be part of the basic pay. **WP(C) NO. 8057 OF 2022** **5** 5. Learned counsel appearing on behalf of the petitioner submits that the judgment of the Supreme Court in _**Regional Provident Fund Commissioner(II), West Bengal**_ (supra) is based upon the facts and circumstances of the case, thus, it cannot be applied by treating it to be a judgment in rem. All the documents and material brought on record did not establish that the employees working in the administrative wing of the petitioner were being paid allowances. The Site allowances were being paid only to the workers, who were working at the site as per the nature of job of the petitioner company, which is primarily engaged in the business of construction. The Tribunal misread and misinterpreted the para 13 of the counter of the respondent in the proceedings under Section 7A. There has been a travesty of justice much less misreading and order of the Tribunal is liable to be set aside. 6. Concededly, all the employees were not paid the allowances except the Site allowances. On plain and simple reading of the definition of 2(b) and 6 of EPF and MP Act, **WP(C) NO. 8057 OF 2022** **6** other allowances are not permissible, being not part and parcel of the basic wages, therefore, no contribution to that effect by adding those allowances in the basic wage was required to be deposited as a share of the employee. 7. I have heard the learned counsel for the parties and appraised the paper book. Enforcement Officer conducted the inspection on 20.11.2012 and found that there was an omission of contribution for the period September 2010 to September 2012 and in the enquiry initiated, petitioner was served with a notice to produce records like balance sheet, profit and loss and account, cash book, ledgers, payment registers, pay bills, vouchers relating to payment of wages/salary. The representative of the petitioner on some occasion appeared but thereafter did not appear and on their request the matter was again revived. The material reflected that the management/petitioner/employer was not paying any allowances to the employees working in the administrative wing or to the employees who were working at the site and were making the contribution only on the basis of the basic **WP(C) NO. 8057 OF 2022** **7** wages, by not adding the part of the allowances. The submission of the learned counsel for the petitioner by referring to paragraph 21 of the judgment of Supreme Court which was based upon the facts and circumstances of the case, in the first blush look attractive and impressive but the fact of the matter is that the Supreme Court, after noticing the definition of 2(b) read with Section 6 of the 1952 Act, by relying upon the other judgments on the issue, formed an opinion that the basic wage would also include the dearness allowance except the HRA. Both the authorities have also ordered the inclusion of the HRA in the basic wage. Though in Para 21, on the basis of the record, opinion was formed that the wage structure and component of salary was not placed on record to form an opinion on what allowances were the part of the basic wage. In fact, the basic wage was camouflaged as a part of the allowance and on that basis findings were arrived at against the employee. Withholding of the documents by the petitioner in the instant case would be insignificant, for, concededly it is a admitted case of the **WP(C) NO. 8057 OF 2022** **8** petitioner that, they had not at any point of time, paid the other allowances forming the part of the basic wage for the purpose of making contribution towards the Provident fund. The allowances would vary from work to work and it would not be applicable as a Universal formula across the world to all the employees. But the fact of the matter is, both the authorities formed an opinion that the said allowance would be applicable to all the allowances. That finding according to me required a detailed examination of the record by considering the nature and duties of the jobs including the timings etc. In other words, the Universal formula of adding all the allowances would not be appropriate as to what were the norms of the work prescribed for the workman during the relevant period. This is what the import of the judgment of the Supreme Court culled out in Paragraph 21, the same reads as under: _Applying the aforesaid tests to the facts of the present appeals, no material has been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that the allowances in question were not paid across the board to all employees in a particular category or_ **WP(C) NO. 8057 OF 2022** **9** _were being paid especially to those who avail the opportunity. In order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in. There is no data available on record to show what were the norms of work prescribed for those workmen during the relevant period. It is therefore not possible to ascertain whether extra amounts paid to the workmen were in fact paid for the extra work which had exceeded the normal output prescribed for the workmen. The wage structure and the components of salary have been examined on facts, both by the authority and the appellate authority under the Act, who have arrived at a factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. There is no occasion for us to interfere with the concurrent conclusions of facts. The appeals by the establishments therefore merit no interference. Conversely, for the same reason the appeal preferred by the Regional Provident Fund Commissioner deserves to be allowed._ Thus the orders of the Tribunal and the Provident Fund Commissioner requires a little modification to the extent that no doubt the basic wages would also include the allowances except the HRA, but it has to be varied from the nature and duties of the workers in terms of the findings recorded in Para 21 of the judgment, and for that the Enforcement Officer is required to undertake an exercise and thereafter by calling upon the petitioner to provide all details of the workers whether working in the administrative wing, outside the **WP(C) NO. 8057 OF 2022** **10** administrative wing, at the site, considering the nature and duties, and after noticing all the facts/verification shall raise the demand accordingly. Let this exercise be undertaken within a period of three months. Writ petition stands disposed of in the above terms. sab Sd/- **AMIT RAWAL JUDGE** **WP(C) NO. 8057 OF 2022** **11** ## **APPENDIX OF WP(C) 8057/2022** PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF ORDER NO.KR/KC/21556/ENF.II(6)/2013/15994 DATED 31.1.2014 PASSED BY 2ND RESPONDENT Exhibit P2 TRUE COPY OF ORDER NO.KR/KC/21556/ENF.II(6)/2014/7606 DATED 21.10.2014 PASSED BY 2ND RESPONDENT Exhibit P3 TRUE COPY OF MEMORANDUM OF APPEAL DATED 10.12.2014 IN APPEAL ATA 1373(7)2014 SUBMITTED BY PETITIONER BEFORE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, NEW DELHI Exhibit P4 TRUE COPY OF DEMAND DRAFT NO.906198DATED 25.11.2019 DRAWN ON FEDERAL BANK LTD., ERNAKULAM PAYABLE TO 2ND RESPONDENT Exhibit P5 TRUE COPY OF MEMO DATED 13.1.2020 FILED BY PETITIONER BEFORE THE 1ST RESPONDENT IN APPEAL NO.129 OF 2019 Exhibit P6 TRUE COPY OF COUNTER AFFIDAVIT DATED 5.8.2015 IN APPEAL 1373(7)2014 FILED BY 2ND RESPONDENT BEFORE THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, NEW DELHI Exhibit P7 TRUE COPY OF ORDER DATED 9.11.2020 IN APPEAL NO.129 OF 2019 (OLD NO.1373(7)2014) PASSED BY 1ST RESPONDENT