M/S Gehana Gold Palace (P) Limited v. Employees Provident Fund Appellate Tribunal and Assistant Fund Commissioner, EPFO

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE V.G.ARUN** **FRIDAY, THE 20TH DAY OF SEPTEMBER 2019 / 29TH BHADRA, 1941** **WP(C).No.16126 OF 2014(M)** ## **PETITIONER/S:** **M/S.GEHANA GOLD PALACE (P) LIMITED DOOR NO.SBP IV/1093, MAIN ROAD, SULTHAN BATHERY, WAYANAD - 673 592 REPRESENTED BY ITS DIRECTOR, MR.ABDUL NASAR A.T.** **BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.P.GOPINATH (SR.) SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS** ## **RESPONDENT/S:** **1 EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL SCOPE MINAR, CORE II, 4TH FLOOR, LAXMI NAGAR DISTRICT CENTRE, LAXMI NAGAR, NEW DELHI -110 092. 2 THE ASST. FUND COMMISSIONER EMPLOYEES PROVIDENT FUND ORGANIZATION,SUB REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN,P.B.NO.1806, ERNAHIPALAM P.O., CALICUT -673 006.** **R1 BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL, SC P.F.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24.06.2019, THE COURT ON 20.09.2019 THE SAME DAY DELIVERED THE FOLLOWING:** W.P.(C) No.16126 of 2014 2 ## **JUDGMENT** The petitioner is a Private Limited Company engaged in the sale of jewellery and allied products. The Company commenced business in the year 2008 and with effect from 5.10.2008 the employees of the establishment are covered under the Employees Provident Fund. According to the petitioner, it had enrolled all eligible employees, except trainees, under the Provident Fund Scheme and had been promptly remitting the contributions with respect to the employees. Soon after commencement of business, the petitioner submitted a Draft Standing Order for certification under the Industrial Employment (Standing Orders) Act, 1946 (“the Standing Orders Act” for brevity). After issuing notice to the workmen and inviting objections, the Draft Standing Order was certified, as evident from Ext.P1. While so, in February, W.P.(C) No.16126 of 2014 3 2011, the second respondent initiated action under Section 7A of the Employees Provident Fund and Miscellaneous Provisions Act ('the EPF & MP Act' for short), on the basis of Ext.P2 report submitted by the Enforcement Officer. In Ext.P2 report, the Enforcement Officer had found that the petitioner had not remitted the provident fund contribution with respect to 19 trainees in the establishment, for the period August 2009 to November 2010. In the enquiry conducted by the second respondent, a specific contention was raised on behalf of the petitioner that the apprentices and trainees in establishments covered by the Standing Orders Act are exempted from the purview of the EPF& MP Act. The second respondent proceeded to hold that though the 19 trainees were engaged from August 2009 onwards, the Standing Orders was certified certified only on 23.3.2011, the petitioner W.P.(C) No.16126 of 2014 4 was liable to pay contribution for the period of engagement of the trainees up to the period when the Standing Orders came into effect. This period was fixed as August 2009 to November 2010 and the quantum of contribution as Rs.2,56,077/-. Aggrieved by Ext.P3 order, the petitioner preferred an appeal before the first respondent Tribunal. The Tribunal affirmed the findings in Ext.P3 and dismissed the appeal under Ext.P5 order. The writ petition is filed seeking to quash Exts.P3 and P5 orders and for a declaration that the petitioner is not liable to cover the trainees appointed under the Standing Orders nor liable to pay contribution in respect of the trainees engaged in the establishment prior to certification of the Standing Orders, as the Model Standing Orders will apply until the Standing Orders are certified. 2. The learned counsel for the petitioner relied on the W.P.(C) No.16126 of 2014 5 relevant provisions of the EPF & MP Act, the Standing Orders Act and the decision of the Honourable Supreme Court in **Regional Provident Fund Commissioner, Mangalore v. Central Arecanut and Cocoa Marketing and Processing Co. Ltd, Mangalore [(2006) 2 SCC 381]** in support of his challenge against Exts.P3 and P5. 3. The learned Standing Counsel for the EPF Organisation contended that being a beneficial legislation, a restrictive meaning cannot be given to the term 'employee' under Section 2(f) of the EPF & MP Act. It is contended that though termed as 'trainees', the 19 persons found to have been in the engagement of the petitioner were its employees. It is contended that the Commissioner is empowered to make a categorical factual finding as to whether the persons termed as trainees/apprentices are employees engaged for regular W.P.(C) No.16126 of 2014 6 work and if so, to insist for payment of provident fund contribution in respect of those employees. According to the learned Standing Counsel, the petitioner was liable to pay provident fund contribution for the period prior to the coming into effect of the Standing Orders and hence, the impugned orders do not warrant interference. 4. Section 2 (f) of the EPF&MP Act defines an 'employee' as 'any person who is employed for wages in any kind of work, manual or otherwise, in or 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 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 W.P.(C) No.16126 of 2014 7 under the Standing Orders of the establishment.' 5. The Standing Orders Act was enacted with the of the in industrial purpose requiring employers establishment to define with sufficient precision, the conditions of employment under them and to make the said condition known to workmen employed by them. As per Section 2(g) of the Standing Orders Act, 'Standing Orders' are defined as rules relating to matters set out in the Schedule. The matters set out in the Schedule to the Act include classification of workmen as permanent, temporary apprentices, probationers, badlis, or fixed term employment. Section 3 of the Act provides for submission of Draft Standing Orders by an industrial establishment. Section 5 deals with certification of Standing Orders by the Certifying Officer. Section 5(3) stipulates that the Certifying Officer shall, within W.P.(C) No.16126 of 2014 8 7 days of certification of the Standing Orders, send copies of the Certified Standing Orders, authenticated in the prescribed manner, to the employer and to the trade union or other prescribed representatives of the workmen. As per Section 7, Standing Orders shall come into operation on the expiry of 30 days from the date on which the authenticated copies are sent under sub-section (3) of Section 5. Section 12A is a deeming provision which provides that, for the period commencing on the date on which the Act becomes applicable to an industrial establishment and ending with the date on which the Standing Orders, as finally certified under the Act, came into operation under Section 7 in that establishment, the prescribed Model Standing Orders shall be deemed to be adopted in that establishment. The Model Standing Orders appended as Schedule 1 to the Kerala Industrial Employment (Standing W.P.(C) No.16126 of 2014 9 Orders) Rules, 1958 contains a provision regarding classification of workmen in the following manner: Workmen shall be classified as: - - i Permanent ii Probationers iii Badlis or substitutes iiiA Fixed term employment iv Temporary v Casual vi Apprentices Under the Clause, an 'apprentice' is defined as a learner who is paid an allowance during the period of his training. 6. The question as to whether 'trainees' would fall within the definition of 'employee' under Section 2(f) of the EPF & MP Act, for the purpose of coverage under the EPF W.P.(C) No.16126 of 2014 10 Scheme, with respect to an establishment covered by the Standing Orders Act and with respect to apprentices engaged prior to certification of the Standing Orders was considered by the Apex Court in **Regional Provident Fund Commissioner, Mangalore v. Central Arecanut and Cocoa Marketing and Processing Co.Ltd, Mangalore [(2006) 2 SCC 381].** In that case, 45 trainees engaged by the establishment was held to be employees by the officers of the EPF organisation. Consequently, the employer was found liable to pay contribution with respect to those employees. The establishment successfully challenged the demand for contribution before the High Court. Aggrieved, the EPF organisation took up the matter before the Apex Court. After considering the definition of 'employee' at Section 2(f) of the EPF&MP Act, Section 12A of the Standing Orders Act and the W.P.(C) No.16126 of 2014 11 ## Schedule to the Standing Orders Rules, the Apex Court held as ## follows:- _“12. In the present case, admittedly the Standing Orders were not at the relevant point of time certified. Therefore, in terms of Section 12-A of the Standing Orders Act, the model Standing Orders are deemed to be applicable. Section 2(f) of the Act defines an employee to include an apprentice, but at the same time makes an exclusion in the case of an apprentice engaged under the Apprentices Act or under the Standing Orders. Under the model standing orders an apprentice is described as a learner who is paid allowance during the period of training._ _13. In the case at hand, trainees were paid stipend during the period of training. They had no right to employment, nor any obligation to accept any employment, if offered by the employer. Therefore, the trainees were "apprentices" engaged under the "Standing Orders" of the establishment._ _14. Above being the position, it cannot be said that the 45 trainees concerned were employees in terms of Section 2(f) of the Act. In other words, an apprentice engaged under the Apprentices Act or under the Standing Orders is excluded from the definition of an "employee" as per Section 2(f) of the Act.”_ Similar view was taken by a Division Bench of this Court in W.P.(C) No.16126 of 2014 12 **EPF Organisation v. Malabar Business Centre (P) Limited** . **and another [judgment in W.A. 746 of 2014]** 7. Going by the dictum laid down in _**Central Arecanut and Cocoa Marketing and Processing Co.Ltd, Mangalore** (supra)_ , the Model Standing Orders is deemed to have been in effect during the period prior to the certification and coming into effect of the Standing Orders. The position is clear from a plain reading Of Section 12A of the Standing Orders Act also. If so, apprentices/trainees do not fall within the definition of 'employee' under the EPF & MP Act and are not covered by the Act. Therefore, the finding in Exts.P3 and P5 that the petitioner was liable to pay contribution with respect to 19 trainees engaged during the period from August, 2009 to November, 2010, viz; the period commencing from the engagement of the trainees up to the coming into effect of the W.P.(C) No.16126 of 2014 13 Standing Orders, is unsustainable. Therefore, Exts. P3 and P5 are quashed. The writ petition is allowed. No order as to costs. Sd/- **V.G.ARUN JUDGE** Scl/20.09 W.P.(C) No.16126 of 2014 14 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1** **EXT.P-1: TRUE COPY OF THE STANDING ORDER DATED 23.3.2011** **EXHIBIT P2** **EXT.P-2: TRUE COPY OF THE INSPECTION REPORT DATED 4.1.2010** **EXHIBIT P3 EXT.P-3: TRUE COPY OF THE ORDER DATED 3.5.2011 PASSED BY THE 2ND RESPONDENT EXHIBIT P4 EXT.P-4: TRUE COPY OF THE APPEAL MEMORANDUM (WITHOUT ANNEXURES) FILED BY THE PETITIONER BEFORE THE IST RESPONDENT. DATED 15.6.2011** **EXHIBIT P5** **EXT.P-5: TRUE COPY OF THE ORDER DATED 8.4.2014 PASSED BY THE IST RESPONDENT IN A.T.A NO.482(7) 2011.** **EXHIBIT P6** **EXT.P-6: TRUE COPY OF THE ORDER PASSED IN A.T.A NO.573(7) 2010 PASSED BY THE IST RESPONDENT DATED 18.1.2011** **EXHIBIT P7** **EXT.P-7: TRUE COPY OF THE ORDER DATED 21.3.2012 PASSED BY THE ASSISTANT PROVIDENT FUND COMMISSIONER, TRIVANDRUM.**