M/S.RAVENBECK SECURITIES (INDIA) LTD. vs EMPLOYEES PROVIDENT FUND ORGANISATION

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **&** **THE HONOURABLE MRS. JUSTICE C.S. SUDHA** **WEDNESDAY, THE 21[ST] DAY OF FEBRUARY 2024 / 2ND PHALGUNA, 1945 WA NO. 1496 OF 2020** **AGAINST THE JUDGMENT DTD 15.10.2020 IN WP(C) 17507/2016 OF HIGH** **COURT OF KERALA** ## **APPELLANT/RESPONDENT:** **M/S.RAVENBECK SECURITIES (INDIA) LTD. “RAVENBECK HOUSE”, CHETTICHIRA, SUBASH CHANDRA BOSE ROAD, VYTTILA P.O, KOCHI - 682019, REPRESENTED BY THE MANAGING DIRECTOR.** **BY ADVS.K.K.SATHISH SRI.PAUL ANTONY MANIAMKOT** ## **RESPONDENT/PETITIONER:** **EMPLOYEES PROVIDENT FUND ORGANIZATION REPRESENTED BY THE ASSISTANT PROVIDENT FUND COMMISSIONER(LEGAL), SUB-REGIONAL OFFICE, BHAVISHYANIDHI BHAVAN, P.B.NO. 1895, KALOOR, KOCHI - 682017.** **BY ADV SRI.S.PRASANTH, SC, EMPLOYEES PROVIDENT FUND ORGANISATION** **THIS WRIT APPEAL HAVING COME UP FOR FINAL HEARING ON 21.02.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Writ Appeal No.1496 of 2020** **2** **AMIT RAWAL & C.S.SUDHA, JJ.** **------------------------------------------------------Writ Appeal No.1496 of 2020 ---------------------------------------------------Dated this the 21[st] day of February, 2024** ## **J U D G M E N T** ## **C.S. Sudha, J.** This _intra_ court appeal has been filed by the respondent in W.P.(C)No.17507/2016 against the judgment dated 15/10/2020 by which the petition was partly allowed. The respondent herein is the petitioner in the writ petition. The parties and the documents will be referred to as described in the writ petition. 2. The writ petition was filed challenging Ext.P4 order dated 23/01/2009 in ATA 185(07) 2008 on the file of the Employees' Provident Fund Appellate Tribunal (the Tribunal), New Delhi. The Tribunal by Ext.P4 order quashed Ext.P1 order dated 06/12/2007 of the Assistant Provident Fund Commissioner (Enforcement) (APFC), Kochi. According to the APFC, the respondent, an establishment covered under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the **Writ Appeal No.1496 of 2020** **3** Act) was found to be paying monthly statutory EPF contribution and filing the returns showing a very low quantum of wages of the employees to be around ₹500/- per month. As this was found be an unrealistic monthly wage, an investigation was caused by a squad of Enforcement Officers, who submitted a report dated 07/05/2007 confirming that the establishment was contributing to the EPF only a fraction of the actual gross wages paid to the employees and that the major chunk of the wages was being kept out of the purpose of contribution by classifying them into different kinds of allowances. It was reported that _prima facie_ there existed a case of gross under reporting of wages and evasion of statutory contribution due towards EPF to the detriment of the employees especially in the light of the fact that the notified minimum wages [basic pay + Dearness Allowance (D.A.)] for Security Guards in the State was in excess of ₹2,500/-. Accordingly, an enquiry under Section 7-A of the Act was initiated and summons was issued to determine the outstanding EPF dues payable for the period from February 2004 to March 2006 on allowances which had not been subjected to any EPF contribution. During the course of the enquiry, the respondent/employer was given sufficient opportunity to present their case and show cause as to why the dues should not be determined. **Writ Appeal No.1496 of 2020** **4** 3. The respondent/employer during the course of the enquiry contended that they have been complying with the statute by paying EPF contribution on the Basic Pay paid to the employees and the remaining allowances being House Rent Allowances (HRA); Uniform Allowance; Washing Allowance; Food Allowance and Traveling Allowance are excluded allowances as per the terms of Sections 2(b)(ii) and 6 of the Act. The contribution is payable only with respect to the Basic Wages and D.A. It was also contended that the financial position of the respondent was such that they could not afford to pay the EPF contribution on gross wages and therefore a lenient view was requested to be taken. 4. The issue that came up before the APFC was whether or not the allowances paid by the respondent/employer to its employees could be taken as 'excluded allowances' for the purpose of EPF contribution. Relying on the dictum in **Rajasthan Prem Krishan Goods Transport Co. v. Regional Provident Fund Commissioner, New Delhi, (1996) 9 SCC 454** , it was held that it was up to the Commissioner to lift the veil and read between the lines to find out the pay structure fixed by the employer and to decide whether the splitting up of pay had been made only as a subterfuge to avoid its contribution to the EPF. The action of the employer in **Writ Appeal No.1496 of 2020** **5** categorising all the allowances as 'Excluded Allowances' resulted in not only a substantial loss to the employees by way of their rightful provident fund contributions being drastically reduced, but it also affected the long term social security available to them as the pension paid under the Employees' Pension Scheme depended on the contributory wages which had been reduced by the employer in his quest to minimise his liability. Finding so, it was held that the various allowances classified by the respondent/employer are nothing but 'Basic Wages' as defined under Section 2(b) of the Act and hence the employer was liable to make payment of EPF on these amounts. Thus, the employer was directed to remit a sum of ₹51,65,660/- towards statutory EPF contribution for the period from February 2004 to March 2006. Aggrieved by Ext.P1 order, the respondent/employer filed Ext.P2 appeal before the Tribunal. The Tribunal by Ext.P4 order dated 23/01/2009 held that the contribution to EPF is liable to be made only on Basic Wages, D.A. and retaining allowance as defined under Section 2(b) and Section 6 of the Act. The intention of the Legislature was to include all emoluments other than those which have been specifically excluded and hence there was no warrant to interpret Section 2(b) of the Act, to include allowances such as HRA ; uniform **Writ Appeal No.1496 of 2020** **6** allowance ; washing allowance ; food allowance ; travelling allowance and over time allowances within the term 'Basic Wages'. Finding so, Ext.P1 order was quashed and the appeal allowed. Aggrieved, the Employees' Provident Fund Organization (EPFO) filed the writ. 5. The learned Single Judge relying on the dictum in **Bridge and Roof Co. (India) Ltd. v. Union of India, AIR 1963 SC 1474** and **Regional Provident Fund Commissioner (II), West Bengal v. Vivekananda Vidyamandir, 2019 KHC 6257** held that the Tribunal had erred in quashing Ext.P1 order and so set aside Ext.P4 order. Ext.P1 order so far as it related to uniform allowance; washing allowance; food allowance and travelling allowance has been confirmed. The direction in Ext.P1 order to include HRA in the Basic Wage for the purpose of assessment and deduction of contribution to EPF was set aside. Thus, the present appeal by the respondent/employer. 6. The arguments advanced by the learned counsel for the respondent/employer are - (i) the writ petition was not maintainable in the light of Section 7-L of the Act; (ii) there was inordinate delay in filing the writ challenging Ext.P4 order, which delay had not been explained; (iii) the petitioner, the EPFO, being a quasi-judicial authority, had no _locus standi_ **Writ Appeal No.1496 of 2020** **7** to challenge Ext.P4 order of the appellate authority; and (iv) allowances that are being paid by the respondent/employer are excluded from the definition of the term 'Basic Wages' and hence the EPFO and the learned Single Judge went wrong in bringing the excluded allowances within the definition. _Per contra_ , it was submitted by the learned counsel for the EPFO that neither Ext.P1 order nor the judgment of the learned Single Judge suffers from any infirmity calling for an interference in this appeal. 7. Heard both sides. 8. Sub-section (4) to Section 7-L says that any order made by a Tribunal finally disposing of an appeal shall not be questioned in any Court of law. According to the respondent/employer, the writ petition was not maintainable in the light of the said Section and if at all any remedy was available, it was to file a review before the Tribunal. In reply, it was submitted by the learned counsel for the petitioner that when no remedy was available under the Act or the Rules, the only course open to the petitioner was to file a writ under Article 226 of the Constitution of India. The argument that the remedy available to the petitioner was to file a review under sub-section (2) to Section 7-L of the Act does not appear to be correct. Sub-section (2) says that a Tribunal may, at any time within **Writ Appeal No.1496 of 2020** **8** five years from the date of its order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1) and shall make such amendment in the order if the mistake is brought to its notice by the parties to the appeal. Therefore, the aforesaid provision can be invoked only when there is a mistake apparent on the face of the record and not when the case has been finally disposed of by the Tribunal on merits and one of the parties is aggrieved by the same. As held by the learned Single Judge the very fact that the order of the Tribunal disposing the appeal cannot be questioned in a Court of law makes the writ petition maintainable. 9. The next argument is that Ext.P4 order is dated 23/01/2009 whereas the writ petition challenging the same has been filed only on 17/05/2016. There is an inordinate delay of about seven years in filing the writ petition for which no plausible reason(s) or for that matter any reason has been given by the petitioner for condoning the delay and hence the writ ought to have been dismissed on the sole ground of inordinate delay and laches on the part of the petitioner. In support of the argument reference is made to the dictums in **Postmaster General v. Living Media India Limited, (2012) 3 SCC 563** and **KSEB, represented by its Secretary v.** **Writ Appeal No.1496 of 2020** **9** **Sherly N., 2018(2) KHC 507** . In reply it was submitted by the learned counsel for the petitioner that they had received a certified copy of Ext.P4 order only in the year 2016 and hence the reason for the delay. 9.1. The writ petition is seen filed on 17/05/2016. The same was admitted on 18/05/2016 and was disposed of on 15/10/2020. After having admitted the appeal and after a lapse of four years, the writ petition could not have been dismissed on the ground of delay alone. The respondent/employer ought to have brought the matter to the notice of the court at the earliest opportunity available and urged the court to adjudicate on the maintainability of the appeal on the ground of delay. That is not seen done and hence at this late stage it cannot be argued or canvassed that the writ petition ought to have been dismissed on the ground of delay and laches. 10. It was further argued that the APFC who has filed the writ petition on behalf of EPFO being a quasi-judicial authority, had no _locus standi_ to file the writ against Ext.P4 order of the appellate authority. This again was urged as a ground for dismissal of the writ petition. In support of this argument, reference was made to a decision of the High Court of Calcutta in **Regional Provident Fund Commissioner v. Employees** **Writ Appeal No.1496 of 2020** **10** **Provident Funds Appellate Tribunal, 2015(1) KLT SN 28** . In the said decision it has been held that a bare perusal of the provisions of the Act, particularly Section 7-A and Section 7-I of the Act discloses that while discharging jurisdiction under Section 7-A, the APFC discharges quasijudicial functions. When the order of the APFC is challenged in an appeal filed under Section 7-I of the Act and the Appellate Authority by discharging quasi-judicial functions dispose of the appeal, it would not be permissible for the former to challenge the order passed by the latter, reversing his order. However, it has been further held that if an Officer is specially authorised to do so, then there would be no impediment in challenging the order of the Appellate Authority. 10.1. In the affidavit seen filed along with the writ petition herein, the APFC has averred that he has been authorised to file the writ petition for and on behalf of the EPFO. We find no reasons to disbelieve the averment in the affiavit. Therefore, the argument that the petitioner had no _locus standi_ to file the petition is also liable to be rejected. 11. Now coming to the final and most important argument that the allowances paid by the respondent/employer do not come within the definition of the term 'Basic Wages' as contemplated under Section 2(b) of **Writ Appeal No.1496 of 2020** **11** ## the Act which reads - _“(b) "basic wages" means all emoluments which are earned by a 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 -_ _(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.”_ 12. We refer to the dictum in **Vivekananda Vidyamandir** ( _Supra_ ) where the question of law decided was whether special allowances paid by an establishment to its employees would fall within the expression of “basic wages” under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards EPF. It has been held that the crucial test is one of Universality. When wage is universally, necessarily or ordinarily paid to all across the board, such emoluments are basic-wages. However, where the payment is available and paid to those who avail of the opportunity, then it is not basic-wages. Any payment made by the **Writ Appeal No.1496 of 2020** **12** employer as a special incentive would not form part of the basic-wage. 13. In the case on hand, as held by the learned Single Judge, the respondent/employer has no case that uniform allowance; washing allowance; food allowance and travelling allowance were being paid to its employees as a special incentive or that the allowances were variable and linked to any incentive for getting more output from such employees. It is also not the stand of the respondent/employer that these allowances were not paid across the board to all employees. No material had been placed before the APFC to show that allowances such as uniform allowance; washing allowance; food allowance and travelling allowance were being paid to only a few employees who availed the benefit or opportunity and not to all. On the contrary, the pleadings and evidence showed that the case of the respondent/employer was that the allowances were being uniformly paid to all its employees. Thus the allowances like uniform allowance; washing allowance; food allowance and travelling allowance being paid by the respondent/employer formed an integral part of the basic-wages and as such the amount paid by way of these allowances were liable to be included in basic-wages for the purpose of assessment and deduction towards contribution to the EPF. As rightly held in Ext.P1, splitting of pay **Writ Appeal No.1496 of 2020** **13** of the employees by classifying it as payable under various heads of allowances certainly amounted to a subterfuge intended to avoid payment of EPF by the respondent/employer. 14. There is one error in Ext.P1, which is the inclusion of HRA in basic-wages for assessing and claiming deductions. HRA has been specifically excluded under Section 2(b)(ii) of the Act. To that extent, Ext.P1 order has been interfered with by the learned Single Judge. We find no grounds for interference. In the result, the appeal _sans_ merit is dismissed. Interlocutory applications, if any pending, shall stand closed. Sd/- **AMIT RAWAL JUDGE** Sd/- **C.S.SUDHA JUDGE** ami/