The Malanad Co-operative Agricultural and Rural Development Bank Ltd. v Employees Provident Fund Organisation (and Others)

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE AMIT RAWAL** **THURSDAY, THE 25[TH] DAY OF MAY 2023 / 4TH JYAISHTA, 1945** ## **WP(C) NO. 1901 OF 2012** ## **PETITIONER/S:** THE MALANAD CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LIMITED NO.K-362, NEDUMKANDAM P.O., IDUKKI DISTRICT, REPRESENTED BY ITS SECRETARY. BY ADV SRI.JOICE GEORGE ## **RESPONDENT/S:** |1|THE EMPLOYEES PROVIDENT FUND ORGANISATION,| |---|---| ||(MINISTRY OF LABOUR) GOVERNMENT OF INDIA,| ||REPRESENTED BY THE REGIONAL PROVIDENT FUND| ||COMMISSIONR, SUB REGIONAL OFFICE, BHAVISHYA NIDHI| ||BHAVAN, PATTOM, THIRUVANANTHAPURAM 695004| |2|THE REGIONAL PROVIDENT FUND COMMISSIONER,| ||OFFICE OF THE REGIONAL PROVIDENT FUND| ||COMMISSIONER, EMPLOYEES PROVIDENT FUND| ||ORGANISATION, BHAVISHYA NIDHI BHAVAN, PATTOM,| ||THIRUVANANTHAPURAM -695004.| |3|THE ASSISTANT PROVIDENT FUND COMMISSIONER,| ||EMPLOYEES PROVIDENT FUND ORGANISATION, SUB| ||REGIONAL OFFICE, CHALAKKUZHY BUILDING, CMS COLLEGE| ||ROAD, PB NO.36, KOTTAYAM - 686001.| |4|THE ENFORCEMENT OFFICER,| ||EMPLOYEES PROVIDENT FUND ORGANISATION, MUNNAR| ||P.O., IDUKKI DISTRICT.| |5|THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL,| ||(MINISTRY OF LABOUR & EMPLOYMENT), GOVERNMENT OF| ||INDIA, SCOPE MINAR, CORE II, 4TH FLOOR, LAKSMI| ||NAGAR, NEW DEHI 110092.| 2 ## **WP(C) NO. 1901 OF 2012** 6 THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO GOVERNMENT, DEPARTMENT OF LABOUR, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. *ADDL. THE KERLA STATE CO-OPERATIVE EMPLOYEES PENSION R7 BOARD, REPRESENTED BY ITS SECRETARY, PB NO.85, KALANIVAS, TC NO.XXVII/156, 157, CHINMAYA LANE, KUNNUMPURAM, NEAR AYURVEDA COLLEGE, THIRUVANANTHAPURAM. (ADDITIONAL R7 IS IMPLEADED AS PER ORDER DATED 24/01/2012 IN IA 1247/2012) *ADDITIONAL 7TH RESPONDENT IS IMPLEADED AS PER ORDER DATED 24.1.2012 IN IA NO.1247/12. BY ADVS. SRI.JOY THATTIL ITOOP, SC, EPF ORGANISA M.SASINDRAN SRI.JOY THATTIL ITOOP, SC, EPF ORGANISA SRI.K.R.SUNILSCCO-OP.EMP.PENSION BOAR THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25.05.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **WP(C) NO. 1901 OF 2012** 3 ## J U D G M E N T The order dated 13.3.1997, Ext.P3, of the assessing authority under Section 7A of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (“the Act”, for short) and of the appellate Tribunal dated 22.9.2011, Ext.P12, are under challenge in the present writ petition. 2. The petitioner is a Primary Cooperative Agricultural & Rural Development Bank registered under the provisions of the Kerala Co-operative Societies Act, 1969. It was registered on 22.2.1971 and started functioning with effect from 7.4.1971. Total number of employees were below 50. Contributions for the purpose of enrolling its members in the scheme formulated under Act 19 of 1952 were not made on the ground that the Society had a self contributory provident fund scheme for its employees introduced by the Department of Co-operation. The petitioner had been making contributions to the provident fund, **WP(C) NO. 1901 OF 2012** 4 which were deposited in the Kerala State Cooperative Agricultural and Rural Development Bank, the Apex Society of the petitioner. Subsequently, State of Kerala, Department of Labour (sixth respondent herein) introduced a contributory pension scheme for the employees of the Cooperative Societies in Kerala known as Kerala Cooperative Societies Employees Self Financing Pension Scheme, 1994 effective from 3.6.1993. The petitioner Co-operative Society had taken steps to enroll all its employees to the said Scheme introduced by the sixth respondent and also transferred the contributions deposited with the Apex Society to the Co-operative Pension Fund. However, received a communication, Ext.P1, alleging non-remittance of arrears/contributions from 8/1995 to 10/1995. Petitioner preferred an application under Section 17 of the Act for granting exemption vide Ext.P2. However, the third respondent dismissed the application in a most mechanical and sketchy manner. Aggrieved of the same, an appeal was preferred before the **WP(C) NO. 1901 OF 2012** 5 Tribunal, which was dismissed vide order dated 22.09.2011, Ext.P12. 3. Learned counsel appearing on behalf of the petitioner submitted that along with the appeal Ext.P6 all relevant materials, such as Ext.P7 statement of remittance of pension fund contribution etc., were enclosed. However, the appellate Tribunal in a most sketchy and mechanical manner dismissed the appeal vide order, Ext.P12, without adverting to the same. Therefore, the order, Ext.P12, is not sustainable. 4. The system followed by the petitioner society, i.e. payment of provident fund contributions to the self financing pension scheme introduced by the Co-operative Department, has been put to rest by the Division Bench decision of this Court in Employees Provident Fund Organisation, Thiruvananthapuram v. Kerala State Co-operative Employees Pension Board and Others [2016 (5) KHC 414] and Calicut City Service Cooperative Bank Ltd. No.D2777 v. The Employees Provident Fund Organisation and Ors. [2019(1) KLT **WP(C) NO. 1901 OF 2012** 6 876] . It was in that background the exemption application was filed, but the competent authority did not adhere to the same. The said order had been reiterated by the appellate Tribunal in the impugned order also. 5. On the other hand, learned counsel appearing on behalf of the respondent Organisation submitted that the employees cannot seek exemption, but it is only by the establishment. The establishment failed to place any materials at the time of submission of the application in the year 1996 to the competent authority. The case was attempted to be built at an appellate stage, which was not permissible in law. No material was placed on record in support of the notification dated 19.06.2006, Ext.P9, and therefore urged this Court for dismissal of the writ petition. 6. I have heard the learned counsel for the petitioner and appraised the paper book. 7. The order impugned, Ext.P12, reads as under: **WP(C) NO. 1901 OF 2012** 7 “The appeal in this case is preferred against the order passed by the PF authority under Section 7A of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 'Act') directing the appellant to deposit the dues. 2. The case of the appellant is that the appellant is a cooperative society registered under the Cooperative Societies Act. The staff strength of the appellant establishment never exceeded 50. The appellant was also not using the power. The EPF Authority initiated a proceeding under Section 7A of the Act and covered the establishment alleging that the appellant was using the power and the staff strength was more than 50 and assessed the dues. The impugned order is illegal. 3. The case of the respondent is that the appellant was using power and the staff strength was more than 50 so it was rightly covered and the assessment was made correctly. 4. It is contended that the appellant is an exempted establishment under Section 16(1)(a) and (c) and it was not using the power. 5. The advocate for the respondent supported the impugned order passed by the Authority. 6. To attract Section 16(1)(a) the appellant has to prove that the staff strength was below **WP(C) NO. 1901 OF 2012** 8 50 and it was not using the power. The burden to prove that the staff strength of the establishment never reached 50 lies upon the appellant. In the case of M/s Saraswati Construction Company Vs. Central Board of Trustees reported in 2010 LLR at page 684, the Hon'ble High Court of Delhi held that, “it is a settled legal position that if any establishment or employer is not covered under the said Act then it is for the employer to place sufficient cogent and convincing materials before the designated authority under an inquiry under Section 7A of the Act so as to satisfy the authority with regard to inapplicability of the Act and on failure to place any such material the onus cannot be shifted on the Authority to prove the applicability of the Act.". In this case, the appellant has not filed any document to prove his staff strength. On the other hand, the order of the Authority reveals that the appellant engaged more than 50 employees. Moreover, admittedly the appellant establishment is a bank and it is difficult to believe that the appellant was not using power for smooth functioning of its business. In the case of M/s Manas Nagrik Sahakari Bank Vs. Regional PF Commissioner in SCA No. 7436/2005, the Hon'ble High Court of Gujarat held that, "the bank works with the aid of power not only for the purpose of light and cooling to the employees it its customers but also for its computer and other gadgets used by the bank in **WP(C) NO. 1901 OF 2012** 9 providing effective service to its customers. In the 21 Century to contend that the establishment like cooperative bank working without the aid of power is ridiculous." So, it cannot be held that the bank was not using power. It is also contended that the appellant establishment was exempted under Section 16(1) (c). To attract Section 16(1) (c) it has to be proved that the affairs of the establishment are controlled by the Government and the employee of the establishment are member of Contributory Provident Fund or any Old Age Pension Scheme. In the case in hand, no document has been placed on record to show that the employees of the appellant were member of Contributory Provident Fund or any Old Age Pension Scheme. So, there is no material on record to hold that Section 16 (c) is attracted. 7. Thus in view of the discussion held above, no infirmity is noticed in the order of the Authority. Hence ordered, the appeal is dismissed. The order of the Authority is hereby upheld. Copy of be sent to the parties. File be consigned to record room.” Whereas, the grounds of appeal, Ext.P6, are ## extracted herein below: “The Malanad Co-operative Agricultural and Rural Development Bank Ltd. No.K.352, Nedumkandam was registered as a Primary Co- **WP(C) NO. 1901 OF 2012** 10 operative Society on 22-02-1971 and started functioning with effect from 07-04-1971. The Employees Provident Fund and Miscellaneous Provision Act (Act 15 of 1952) was not applicable to the petitioner Bank till 16.08.1995 as the total staff strength of the Bank was below 50. Malanad Bank had a Provident Fund Scheme for its employees which was duly approved by the registrar of Cooperative Societies, Thiruvananthapuram. As per the said scheme the subscription to the provident fund by the employees and the contribute by institution were invested in the Kerala State Co-operative Agricultural and Rural Development Bank Ltd., Thiruvananthapuram. Subsequently the Government of Kerala constituted a pension board for the employees of primary cooperative societies under the control of the Registrar of co-operative Societies. The petitioner Bank had joined the scheme with effect from 03.06.1993. Pursant to this steps were taken to transfer the management contribution of the provident fund to the CoOperative Pension Fund. While so, the petitioner Bank received from the Regional Commissioner, E.P.F. letter No.KR/12941/Cov/Enf.111(3) 96 dated nil, a true copy of which is being produced herewith and marked as exhibit P1. The Regional Commissioner, by this letter informed the Bank that the Employees Provident Fund and Miscellaneous Provisions Act 1952 along with **WP(C) NO. 1901 OF 2012** 11 the scheme framed thereunder is applicable to the Bank with effect from 01.08.1995 as the Bank has employed more than 50 persons from 17.08.1995 and calling up on the petitioner to remit the E.P.F contribution up to 15.11.1995 and to remit the employees pension contribution and employers share separately from 16.11.1995. In exhibit pl code No.012941 was assigned to the petitioner and call up on the petitioner to remit alleged arrears from 8/95 to 10/95 within 15 days. Under section 17 of the Act the Regional Commissioner, E.P.F. is competent to exempt may establishment either prospectively or retrospectively from the operation of the scheme, if the scheme prevalent in the establishment in the whole is not less favourable to the employees than the benefits provided under the Act and scheme. The Employees provident Fund Scheme proposed by the Regional Commissioner was not advantageous to the employees in comparison to the pension scheme introduced by the State Government. Being aggrieved submitted to the P.F. Commissioner an application dated 07/12/1996, a true copy of which is being produced herewith and marked as exhibit P2. In exhibit P2 application the Secretary brought the notice of the P.F. Commissioner that the petitioner bank had already joined the Pension Scheme introduced by the State Government and there for requested to exempt the bank from **WP(C) NO. 1901 OF 2012** 12 joining the Employees Provident Fund Scheme framed under Act 19 of 1952. Pursuant to exhibit P2 the Commissioner summoned the bank to appear before him on 04/02/1997 by his notice dated 09/01/1997, a true copy of which is being produced here with and marked as exhibit P3. In obedience to exhibit P3 notice the bunk appeared before the P.F. Commissioner for the enquiry under section A of the Act through its President and Manager of Kattappana Branch. The bank produced before the Commissioner the details of the Scheme existing in the establishment at present and appraised him that all the employees to continue in the existing scheme as it is more beneficial to them. There after the Commissioner by his order No.538/96-97 dated 13/03/1997, a true copy of which is being produced herewith and marked as exhibit P4, refused to grant exemption praying for in exhibit P2 on the alleged ground that the benefits contemplated under the scheme prevalent in the petitioner Bank are not on the whole at par or more beneficial than the statutory scheme under the E.P.F and M.P. Act 1952. But the Commissioner by exhibit P4 directed the petitioner to comply with the Act with effect from 17/08/1995 and to remit the entire dues with in fifteen days from the receipt of the copy of the exhibit P4 and threatened with prosecution under Section 14 and 14(a) of the Act in case of failure to comply with the direction in exhibit P4. **WP(C) NO. 1901 OF 2012** 13 Being aggrieved by exhibit P4 order all the employees of the bank together addressed to the P.F. Commissioner forwarded an application dated 21/03/1997, a true copy of which is being produced herewith and marked as P5 pointing out that the existing Pension Scheme for the Co-Operative employees are more beneficial to them than the statutory scheme, that they are already members of the CoOperative Pension Scheme and there for they may be exempted from joining the said scheme under the Act. They also pointed out that even though the present staff strength of the bank is 51 a new Primary Agricultural Development Bank is about to be registered for Peermade Taluk which is presently included in the area of operation of the bank, and on the formation of the new Agricultural Development bank a section of the employees presently working in the petitioner bank will be transferred to the new bank and the staff strength of the petitioner bank will be considerably reduced. It was also pointed out that since area of operation of the petitioner bank will be reduced there will be no recruitment of additional staff in the bank. It was also pointed out that the pension under the Cooperative pension scheme will be disbursed to the employees from the nearest district cooperative bank but such a convenience will not be available under the statutory scheme. Moreover the methods of computing the pension is also more benificial to the employees under **WP(C) NO. 1901 OF 2012** 14 the co-operative pension scheme than under the statutory scheme provided by the act. Under the employees pension scheme canvased by the P.F. commissioner, the monthly pension is computed by dividing the salary eligible for the pension by 70. For employees retiring after rendering 20 years of service the scheme provids for 2 bonus but under the co-operative pension scheme the monthly pension is computed by multiply the average salary with the number of years of service and then dividing the same by 60. The maximum period of service is fixed as 30. Thus looking from all angles the employees pension scheme contemplated by the Act is less beneficial to the employees in comparison to the existing co-operative pension scheme. Therefore, the ground stated in exhibit P4 that the co-operative pension scheme is not at par or more beneficial to the employees than the statutory schemes under the EPF and MP Act 1952 is factually incorrect and springs form an incorrect appreciation of the said 2 schemes. Exhibit p4 was received by the bank on 20.03.1997, 15 days time is granted in exhibit P4 to remit dues and to comply with the directions contained therein. If without properly looking in to the merits of the scheme objectively the employees of the bank will be put to irreparable injury and prejudice. Aggrieved with P4 the bank had filed O.P. No. 6360/97 to the honourable High Court of Kerala and the Honourable High Court **WP(C) NO. 1901 OF 2012** 15 on 30-07-1997 granted stay until further orders. The judgment copy is produced here with and marked as P6. On 12-10-1999 the newly formed Peermade Taluk Co-Op; Agrl. And Rural Devt. Bank Ltd. No.I 273 was started functioning on the basis of the agreement between The Malanad CoOperative Agricultural and Rural Development Bank Ltd. No. K.352 and the Peermade Taluk CoOp; Agrl And Rural Devt. Bank Ltd. No.I 273 dated 25-09-1999 service of three employees of Malunad Bank had diverted to the Peermade Taluk Co-Op; Agrl. And Rural Devt. Bank Ltd. No.I 273 and relieving order had been issued to the three employees accordingly on 11-101999. A true copy of which is being produced herewith and marked as exhibit P7. The Joint Registrar of Coop Societies Idukki as per order No.CRB 5500/99/K.Dis.dated 09-02-2000 has sanctioned the post. A true copy of which is being produced here with and marked as exhibit P8. After diverting 5 employees to Peermade Taluk Co-Op; Agrl. And Rural Devt. Bank Ltd. No.1 273 and terminated one employee from the service of the bank on 29-10-1998 and retirement of 9 employees from the service after the superannuation of the service now at present the bank have only 36 employees working in this institution (exhibit No.P9) The retired employees are availing monthly pension from the Co-operative Employees pension Board produced as exhibit No.P10. The **WP(C) NO. 1901 OF 2012** 16 Govt. of Kerala as per G.O.Ms No.44/2006 LBR has exempted the primary Co-operative societies in the state of Kerala from the application and operation of employees pension scheme 1995 (exhibit No.P11). Copy of the Govt. of Tamilnadu abstract GO MS. No.157/ dated. 27-09-2000 (Exhibit No.P12) and judgement on WP (C) No.18413/2005P (Exhibit No.P13) of Hon. High Court of Kerala exempting the employees of the Kozhikode Co-Op: Agrl. And Rural Devt Bank. from the purview of E.P.F and M.P. Act 1952. Approved list of employees with code numbers issued by the Secretary/Additional Registrar Kerala State Co-op: Employees Pension Board Thiruvananthapuram is produced as exhibit No.14 In the above circumstances we request you to kindly exempt this institution from joining the Employees Provident Fund Act and Scheme framed thereunder.” 8. It is evident that there was no advertence to such pleadings assuming that no arguments were addressed on behalf of the appellant. Quasi judicial authorities exercising plenary powers are required to be more pragmatic and considerate. Since earlier there was a divergent view, which was reviewed in the judgment cited supra and the reviewed judgment is being followed by various **WP(C) NO. 1901 OF 2012** 17 Benches of this Court, I am of the view that this is a fit case where the appeal, Ext.P6, is liable to be revisited at the level of the Tribunal. Accordingly, the impugned order dated 22.9.2011, Ext.P12, order is set aside. The Tribunal is directed to decide the appeal afresh, in accordance with law. The parties are at liberty to cite or rely upon the law and the documents or produce the same. This Court is sanguine of the fact that the Tribunal shall decide the appeal within a period of four months from the date of receipt of a certified copy of this judgment. Till such time, the interim order passed by this Court on 24.1.2012 shall continue. The writ petition is disposed of as above. Sd/AMIT RAWAL JUDGE jg 18 ## **WP(C) NO. 1901 OF 2012** ## **APPENDIX OF WP(C) 1901/2012** PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF THE COMMUNICATION NO. KR/12941/COV/ENF.III(3)-96 DATED NIL ISSUED BY THE 2ND RESPONDENT. EXHIBIT P2 TRUE COPY OF THE APPLICATION DATED 07/12/1996 SUBMITTED BY THE PETITIONER TO THE 2ND RESPONDENT. EXHIBIT P3 TRUE COPY OF THE ORDER NO.528/96-97 DATED 13/03/1997 PASSED BY THE 2ND RESPONDENT. EXHIBIT P4 TRUE COPY OF THE JUDGMENT DATED 29/09/2005 IN OP NO.6360/1997. EXHIBIT P5 TRUE COPY OF THE MEMORANDUM OF APPEAL FILED BEFORE THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL AS ATA NO.958(7)/2005. EXHIBIT P6 TRUE COPY OF THE STATEMENT (WITHOUT DOCUMENTS) FILED FOR AND ON BEHALF OF THE SECRETARY BEFORE THE APPELLATE TRIBUNAL ON 14/09/2007. EXHIBIT P7 TRUE COPY OF THE REMITTANCE DETAILS OF THE CONTRIBUTION TO THE KERALA STATE COOPERATIVE EMPLOYEES PENSION FUND BOARD DATED 01/03/1997. EXHIBIT P8 TRUE COPY OF THE COVERING LETTER OF THE REPRESENTATION DATED 21/03/1997 SUBMITTED BY THE EMPLOYEES BEFORE THE 2ND RESPONDENT. EXHIBIT P9 TRUE COPY OF THE GO(MS) 44/2006/LBR DATED 19/06/2006. EXHIBIT P10 TRUE COPY OF THE ORDER DATED 31/01/2011 PASSED BY THE 5TH RESPONDENT PROVIDENT FUND **WP(C) NO. 1901 OF 2012** 19 APPELLATE TRIBUNAL. EXHIBIT P11 TRUE COPY OF THE JUDGMENT DATED 10/06/2011 IN WPC NO.15633/2011. EXHIBIT P12 TRUE COPY OF THE ORDER DATED 22/09/2011 IN APPEAL NO.ATA NO.958(7)/2005 OF THE PROVIDENT FUND APPELLATE TRIBUNAL. EXHIBIT P13 TRUE COPY OF THE REPRESENTATION DATED 21/03/1997 SUBMITTED BY THE EMPLOYEES OF THE PETITIONER BEFORE THE 2ND RESPONDENT. ## RESPONDENT EXHIBITS ANNEXURE TRUE COPY OF THE ENFORCEMENT OFFICER'S R3(A) REPORT. ANNEXURE TRUE COPY OF THE STATEMENT SUBMITTED BY THE R3(B) PETITIONER.