Kottayam Co-operative Urban Bank Ltd. v. State of Kerala & Ors

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE AMIT RAWAL** ## **&** **THE HONOURABLE MRS. JUSTICE C.S. SUDHA** **TUESDAY, THE 4[TH] DAY OF APRIL 2023 / 14TH CHAITHRA, 1945 WA NO. 1254 OF 2022** **AGAINST THE ORDER/JUDGMENT DATED 23.10.2019 IN WP(C)** **5371/2014 OF HIGH COURT OF KERALA** ## **APPELLANT/PETITIONER:** THE KOTTAYAM CO-OPERATIVE URBAN BANK LTD., THIRUNAKKARA, KOTTAYAM-686001, REP: BY ITS GENERAL MANAGER. BY ADV SURIN GEORGE IPE ## **RESPONDENTS/RESPONDENTS:** 1 STATE OF KERALA REPRESENTED BY THE SECRETARY, CO-OPERATION DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.- 695 001. 2 THE ASSISTANT PROVIDENT FUND COMMISSIONER, EMPLOYEES PROVIDENT FUND ORGANISATION, SUB - REGIONAL OFFICE, CMS COLLEGE ROAD, KOTTAYAM686001. BY ADVS. SENIOR GOVERNMENT PLEADER (B/O) JOY THATTIL ITTOOP FOR R2 ## **OTHER PRESENT:** SR GP Sri T K Vipindas THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 04.04.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **WA NO. 1254 OF 2022** 2 ## J U D G M E N T ## Amit Rawal, J. This writ appeal by the petitioner is against the judgment of the learned Single Judge dated 23.10.2019 in WP(C) No.5371/2014, whereby the challenge made to order dated 20.09.2013, Ext.P4, passed under Section 7A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (“the Act”, for short) was declined. 2. The appellant/petitioner is an Urban Cooperative Bank registered under the Kerala Cooperative Societies Act, 1969 and classified as a primary credit society under Rule 15(1) of the Kerala Co-operative Societies Rules, 1969. For the purpose of carrying out the banking activities, had been availing services of daily deposit collectors/collection agents on commission basis. Inspector of the 2[nd] respondent Organisation inspected the premises of the appellant and found that there were about 30-38 employees working as **WA NO. 1254 OF 2022** 3 deposit collectors, but contribution on behalf of them was not deposited. Accordingly, show cause notice was issued to the appellant for submitting reply. Even though the appellant appeared and submitted reply along with certain documents, the appellate authority rejected the contention of the appellant and passed order under Section 7A of the Act. The aforementioned order was assailed before this Court in WP(C) No.3741/2010, and this Court vide judgment dated 01.07.2013, Ext.P1 in the writ petition, remitted the matter to the EPF Organisation for giving opportunity to the parties to produce documents. 3. In pursuance to the aforementioned judgment, Ext.P1, the appellant before Assessing Officer submitted Exts.P2 and P3, copies of the notification and the order of the Government specifying certain conditions with regard to deposit collectors. The assessing authority found that the said deposit collectors would fall within the definition of “employees” under Section 2(f) of **WA NO. 1254 OF 2022** 4 the Act, vide order dated 20.09.2013, Ext.P4. Aggrieved by the same, the writ petition was filed. 4. Before the learned Single Judge, in support of the grounds taken in the writ petition, the appellant/petitioner relied on the judgment of the Karnataka High Court in W.A.No.6031/2001 (The Assistant Provident Fund Commissioner v. The South Kanara Govt. Officer's Co-op. Bank Ltd.) , whereas the respondent Organisation relied upon the Division Bench decision of this Court in South Malabar Gramin Bank v. Regional Provident Fund Commissioner [2019 (2) KHC 126]. The learned Single Judge did not apply the ratio decidendi culled out in the judgment rendered by the Karnataka High Court having a persuasive value and relied upon the Division Bench judgment of this Court South Malabar Gramin Bank (supra). It is in these circumstances, the writ appeal has been filed. 5. Adv.Surin George, learned counsel appearing on behalf of the appellant, in support of **WA NO. 1254 OF 2022** 5 contention relied the order of the Hon'ble Supreme Court dated 5.10.2017 in Civil Appeal No.15680/2017, Annexure-A1, wherein certain parameters have been laid to ascertain whether the deposit collectors would fall within the definition of an “employee” or not. 6. The Assessing Officer had neither taken into consideration those parameters nor afforded a proper opportunity of hearing to the appellant. This fact has not been noticed even by the learned Single Judge, despite the fact that there were already directions in the previous round of litigation vide Ext.P1 judgment dated 1.7.2013. 7. On the other hand, learned Standing Counsel appearing on behalf of the respondent Organisation contended that the question with regard to the status of “employer-employee” relationship had already been considered before the Bombay High Court in The Pachora People's Co-op. Bank Ltd. v. The Employees Provident Fund Organisation (Ministry of Labour, Government of **WA NO. 1254 OF 2022** 6 India) [MANU/MH/0194/2014] , wherein by noticing the working hours/duty hours allotted to the deposit collectors, it was found that there would be a relationship of an “employer-employee” and therefore, non deposit of contribution would attract to stringent provisions of the Act. 8. Reliance is also placed on another judgment of the Hon'ble Supreme Court in Indian Banks Association v. Workmen of Syndicate Bank and Others [2011 KHC 1044 : AIR 2001 SC 946] , wherein plea of collection agents/deposit collectors working for the Bank of granting them pay scales, allowances and other service conditions was declined and the matter reached the Supreme Court. On analysis of the materials on record and rival contentions of the parties, it was found that there would not be any occasion for issuance of directions regarding absorption of deposit collectors as regular workmen. **WA NO. 1254 OF 2022** 7 9. We have heard the learned counsel appearing for the parties and appraised the paper book. 10. The genesis of the judgment impugned in this writ appeal is the judgment rendered by a Division Bench of this Court in South Malabar Gramin Bank (supra), wherein on preponderance of evidence placed before the EPF Organisation and materials on record, it was emphatically found that wages paid to the deposit collectors would fall within the definition of “basic wages” defined under Section 2(b) of the Act as well as the status of “employee” under Section 2(f) of the Act. For adjudication of the lis, it would be expedient to extract the terms “basic wages” and “employee” defined under Sections 2(b) and 2(f), respectively, of the Act: “ 2(b) : “basic wages” means all emoluments which are 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 which are paid or payable in cash to him, but does not include - **WA NO. 1254 OF 2022** 8 (i) the cash value of any food concession; (ii) any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment; (iii) any presents made by the employer.” “ 2(f) : “employee” means any person who is employed for wages in any kind of work, manual or 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, - (i) employed by or through a contractor in or in connection with the work of the establishment; (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961) or under the standing orders of the establishment.” 11. The question with regard to the burden of liability of making payment of HRA and other allowances much less commission has already been pondered by the Hon'ble Supreme Court in Regional Provident Fund Commissioner (II), West Bengal v. Vivekananda Vidyamandir and Others [(2020) 17 SCC **WA NO. 1254 OF 2022** 9 643] , wherein noticing all the facts, it was held that for arriving at a finding, whether the employer was remiss in not making contributions of the employees even if they were working as commission agents or deposit collectors, would depend upon the material. Paragraph no.21 of the judgment reads as under: “21. 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 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 **WA NO. 1254 OF 2022** 10 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.” ## 12. In this case, the Assessing Officer relied upon G.O. Dated 13.11.2009, Ext.P2, and arrived at the following findings: “From the above mentioned Ext.P2, the following are observed: - (a) the deposit collectors are not paid old-age benefits under any Rules/Act. - (b) They are paid wages (2/3 of commission amount, subject to a maximum of Rs.3,000/-) - (c) Their retirement age is 70 years. - (d) Bonus/Festival Allowance is provided. - (e) Medical assistance to deposit collectors/commission agents and their dependents is provided. - (f) Financial assistance to family on the death of deposit collectors/commission agents during service is provided. These shows, their service conditions regarding pay is defined.” **WA NO. 1254 OF 2022** 11 The aforementioned findings, in our view, would not suffice, requirement of law in according the status of deposit collectors as that of an “employee” as defined under Section 2(f) of the Act. 13. We would be failing in our duty in not extracting the parameters laid down by the Hon'ble Supreme Court in the order dated 5.10.2017 in Civil Appeal No.15680/2017, Annexure-A1. The following are the parameters laid down by the Hon'ble Supreme Court in Annexure-A1 order: “(a) xxx xxx (d) Based on the above documents, the EPF authorities must adjudicate on the following aspects: (i) Whether,the contracts/appointment orders have a semblance of employeremployee relationship? (ii) Whether, there is supervision, control and direction of the Bank over such agents? **WA NO. 1254 OF 2022** 12 (iii) Whether, these agents are under an obligation to work only for a particular Bank or it's Branches? (iv) Whether, these agents are permitted to work elsewhere or undertake any other business, job, profession or calling? (v) Whether, such agents are primarily dependent upon the work of collecting deposits for a particular Establishment? (e) Interrogate the Pigmy depositors to elucidate information about their exact nature of duties. (f) Based on the documents and an analysis upon considering the above mentioned factors, the APFC will have to arrive at a conclusion supported by reasons that such pigmy agents can be termed as “workmen” and share employer-employee relationship with the Bank and are being paid wages disguised as commission. The said commission amount would then be termed as basic wages under section 2(b) of the EPF Act.” 14. On a perusal of the same, it is evident that the Assessing Officer was required to examine entire material to arrive at a just and equitable finding with regard to the deficiency on the part of the employer in not making contribution or **WA NO. 1254 OF 2022** 13 otherwise. Even order of the Assessing Officer does not reflect any consideration on the report of the inspector, much less supply of copies to the establishment. 15. In our view, in the fitness of things, the parties should be given another chance to take into consideration all the documents as referred to in the findings of the Hon'ble Supreme Court in Annexure-A1 order. Accordingly, the writ appeal is allowed and the matter is remitted to the second respondent to consider the case afresh. The judgment impugned in this writ appeal and the order dated 20.09.2013, Ext.P4, impugned in the writ petition are hereby quashed. The parties to the lis will be given two effective opportunities to produce documents in support of their case. Thereafter, the second respondent shall pass orders thereon not later than two months therefrom. **WA NO. 1254 OF 2022** 14 The parties, through their representatives, are directed to appear before the second respondent on 24.05.2023. Sd/- Sd/- AMIT RAWAL JUDGE C.S.SUDHA JUDGE jg **WA NO. 1254 OF 2022** 15 ## **APPENDIX OF WA 1254/2022** PETITIONER ANNEXURES Annexure A1 JUDGMENT OF THE HON'BLE SUPREME COURT IN CIVIL APPEAL 15680/2017 DATED 05-102017.