Kottayam Co-operative Urban Bank Ltd. v. State of Kerala and the Assistant Provident Fund Commissioner

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **WEDNESDAY, THE 23RD DAY OF OCTOBER 2019 / 1ST KARTHIKA, 1941** ## **WP(C).No.5371 OF 2014(V)** ## **PETITIONER:** **THE KOTTAYAM CO-OPERATIVE URBAN BANK LTD. THIRUNAKKARA, KOTTAYAM-686001, REP. BY ITS GENERAL MANAGER.** **BY ADV. SRI.SURIN GEORGE IPE** ## **RESPONDENTS:** - **1 STATE OF KERALA REP. BY THE SECRETARY, CO-OPERATION DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001.** - **2 THE ASSISTANT PROVIDENT FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANISATION, SUB-REGIONAL OFFICE, CMS COLLEGE ROAD, KOTTAYAM-686001.** ## **OTHER PRESENT:** **SRI.JOY THATTIL ITOOP, SC, EPF** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C).No.5371/14 2 ## **JUDGMENT** ## **Dated this the 23rd day of October 2019** - 1.This petition is filed by a Cooperative Urban Bank with the following prayers:- - “i)Call for the records relating to Ext. P4 and quash the same by issuing a writ of certiorari. ii)To declare that the 19 deposit collectors of the Bank are not employees of the Bank and that therefore they did not come under the purview of the EPF and MP Act, 1962 and that Exhibit P2 G.O.governs their conditions of service. - 2.Heard the learned counsel for the petitioner and the learned standing counsel appearing for the 2[nd] respondent as well as the learned Government Pleader. 3. It is submitted by learned counsel for the petitioner that the Deposit Collectors employed by the petitioner do not answer the definition of 'employees' under the Employees Provident Fund and Miscellaneious Provisions Act,1952 (the 'Act' for short). It is stated that the commission paid to them also does not answer the definition of 'basic wages' under the Act. The learned counsel for the petitioner relies on Exhibit P2 W.P.(C).No.5371/14 3 Government Order. It is stated that the conditions of service and the pay of Loan/Deposit Collectors under the Co-operative Societies in the State are revised by the said Government Order dated 13.11.2008. It is stated that the two-third of the commission payable shall be paid as emoluments to them on a monthly basis. A further condition is imposed that the said amount shall not exceed Rs.3000/-. The age of retirement is fixed and the rates of commission are also provided in the order. It is stated in Exhibit P2 that the issue with regard to grant of promotions to Collection Agents to sub-staff posts in the societies and the question with regard to the pension, PF etc.will be decided later. Relying on the said provisions, it is contended that the Deposit Collectors are not reckoned as employees of the society and that the commission payable to them is specifically excluded from the definition of wages and that as such, the finding in the order impugned is completely unsustainable. 4.A statement has been placed on record on behalf of the second respondent. It is stated that Exhibit P2 is only the revised W.P.(C).No.5371/14 4 service conditions of Deposit Collectors in the Cooperative Society. Relying on the definition of 'employee' at section 2(f) of the Act, it is contended that the Deposit Collectors employed by the bank answer the definition of employee. Further, it is submitted that the Deposit Collectors are paid 'commission' as 'wages' and no other amounts other than those mentioned in Exhibit P2 Government Order are payable to them. It is stated that in the above circumstances, the commission is definitely the emoluments due to the commission agents and answers the definition of 'basic wages' under the Act. 5.The learned counsel for the petitioner places reliance on the decision of a Division Bench of the Karnataka High Court in Writ Appeal No.6031 of 2001. It is contended that a similar question with regard to whether the 'commission' paid to Collection Agents answers the definition of 'basic wages' is considered by the said court and it was held that the commission paid, being excluded from the definition of basic wages, the EPF contribution cannot be levied with respect of W.P.(C).No.5371/14 5 such commission. The learned counsel also submitted that the said view has been followed by another judgment of the Karnataka High Court which was taken as SLP before the Apex court and the SLP was dismissed. The learned counsel would also place reliance on a later decision of the Apex Court in support of his contention that the definitions in other enactments cannot be imported, in view of the clear definition as contained in the Act. 6.The learned standing counsel appearing for the respondent would, on the other hand, rely on a decision on this very point of this Court reported in South Malabar Gramin Bank v. Regional Provident Fund Commissioner [2013 (1) KLT 753] which has been affirmed by a Division Bench of this Court in South Malabar Gramin Bank v. Regional Provident Fund Commissioner [2019(2) KHC 126]. It is submitted by the learned standing counsel that the issue whether Deposit Collectors would answer the definition of employee under Section 2(f) of the Act and the further issue whether commission paid to them would come within the definition of W.P.(C).No.5371/14 6 'basic wages' had been considered by this Court. It was found that Commission Agents are employees and further that commission paid according to the contract of employment would be basic wages under the Act. The Division Bench while affirming the judgment held as follows:- “7. It is clear from the above observation that, where the workers' remuneration is purely based on piece rate, the payment made would constitute basic wages. But production bonus is a bonus that is paid in addition to the basic wages dependent upon the performance of a worker in generating extra production and for the extra production that is generated, an extra payment is made which is the production bonus. Such production bonus or incentive wage was held to be outside the definition of basic wages. In the said case, therefore the Apex Court has not considered whether the commission paid to deposit collectors like those represented by the second respondent Union were workers for the purpose of coverage by the EPF Act. Apart from the above, the decision has taken note of the fact that where the entire payment that is made to a worker is on the basis of piece rate alone, the payment made would constitute his basic wages. In the present case, it is not in dispute that, the deposit collectors are paid only their commission. The commission would depend upon the terms of the agreement entered into between the bank and deposit collectors. The relevant clause extracted by the learned Single W.P.(C).No.5371/14 7 Judge in the judgment appealed against provides that an agent would be paid commission at the rate or rates determined by the Board of Directors of the bank from time to time. Therefore, it cannot be disputed that the commission so paid to the deposit collectors constitute their wages. In view of the above, we find no infirmity in the finding entered by the learned single Judge to the said effect. xx xx xx 10. Basic wages means all emoluments earned by an employee while on duty or on leave or on holidays with wages in either case “in accordance with the terms of the contract of employment” and paid or payable in cash to him. This definition therefore brings within its scope the commission paid to the deposit collectors which would include the only emoluments paid in accordance with the terms of the contract of their employment. It is clear from the above that, deposit collectors are persons who come within the definition of employee under the EPF Act and that the commission paid to them comes within the expression “basic wages” in S.2(b) of the Act. The learned Single Judge has therefore correctly held that the impugned orders are justified.” 7.In the above view of the matter, I am bound by the decision of the Division Bench of this Court. The decisions of the Karnataka High Court has only persuasive value and as such, I am of the opinion that the contention raised as against the W.P.(C).No.5371/14 8 impugned order cannot be sustained. The writ petition fails and the same is accordingly dismissed. In case the petitioner has any right of appeal to the Tribunal, the petitioner is free to seek the said remedy, in accordance with law. Sd/- **Anu Sivaraman, Judge** sj ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 EXHIBIT P1- TRUE COPY OF THE JUDGMENT DATED 1-7-2013 IN WPC 3741/2010. EXHIBIT P2 EXHIBIT P2- TRUE COPY OF G.O. DATED 13-112009. EXHIBIT P3 EXHIBIT P3- TRUE COPY OF SRO NO. 486/2006. EXHIBIT P4 EXHIBIT P4- TRUE COPY OF THE ORDER OF THE 2ND RESPONDENT DATED 20-9-2013.** True copy PS to Judge