The Officer in Charge, Sub-regional Provident Fund Office & Anr. v. M/S Godavari Garments Limited

INDU MALHOTRA, J. Delay condoned. Leave granted. 1. The present Civil Appeal has been filed to challenge the Order dated 27.04.2012 passed in W.P. No. 1615 of 1993 by the Bombay High Court, Aurangabad Bench. 2. The background facts in which the present Civil Appeal has been filed are briefly stated as under: 2.1. The Respondent Company is a subsidiary of the Marathwada Development Corporation, which is an undertaking of the Government of Maharashtra. It was covered under the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as “the EPF Act”) with ef fect from 01.01.1979. 2.2. The main objective of the Respondent Company , as per its Memorandum of Association, was to encourage, promote, develop, set-up or cause to be set-up a readymade garments industry in the Marathwada Region, with a view to provide gainful employment to people possessing skills in stitching, tailoring, and allied activities, especially to women from the economically weaker sections of the Society. 2.3. The Respondent Company engaged women workers who were provided with cut fabric, thread, buttons, etc. to be made into garments at their own homes. The sewing 1105 machines used by the women workers were owned by them, and not provided by the Respondent Company. 2.4. On 12.03.1991, Appellant No. 1 – Of ficer In-Charge, Sub- Regional Provident Fund Office, issued a Show Cause Notice to the Respondent Company calling upon it to pay the Provident Fund contributions for the women workers. The Balance Sheet of the Respondent Company for the year 1988 – 89, revealed large debits towards salary and wages for direct and indirect workers, but the Respondent Company made a false statement that it had only 41 employees. 2.5. On 30.1 1.1992, Appellant No. 1 issued summons to the Respondent Company for personal hearing under Section 7-A of the EPF Act. 2.6. The representative of the Respondent Company appeared before Appellant No. 1, and contended that the women workers who were fabricating garments for the Respondent Company, were not their employees, and hence not covered by Section 2(f) of the EPF Act. Therefore, even though wages were paid to those women workers, the Respondent Company was not liable to pay Provident Fund contribution in respect of them. 2.7. The Provident Fund Of ficer – Appellant No. 1 vide Order dated 19.04.1993 held that the women workers engaged for stitching garments were covered by the definition of “employee” under Section 2(f) of the EPF Act. An amount of Rs. 15,97,087/- was assessed towards Provident Fund dues of the Respondent Company for the period from November , 1979 to February , 1991. The Respondent Company was directed to pay the said amount within 7 days. 2.8. The Respondent Company challenged the aforesaid Order by filing W.P. No. 1615 of 1993 before the Bombay High Court. The Bombay High Court, Aurangabad bench vide Final Judgment and Order dated 27.04.2012 allowed the Writ Petition filed by the Respondent Company, and set aside the OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.] Order dated 19.04.1993 passed by the Appellant No. 1. It was held that the Respondent Company had no direct or indirect control over the women workers. The conversion of cloth into garment could be done by any person on behalf of the women workers. Hence, the Respondent Company did not exercise any supervisory control over the women workers. 2.9. Aggrieved by the aforesaid Judgment, the present Civil Appeal has been filed by the Provident Fund Office. 3. We have heard the learned Counsel for the parties, and perused the pleadings and written submissions filed by the parties. 4. Mr. R.R. Rajesh, learned Counsel appearing on behalf of the Appellants, submitted that the women workers employed by the Respondent Company fall within the definition of “employee” under Section 2(f) of the EPF Act. Reliance was placed on this Court’ s decision in M/s P.M. Patel & Sons and Ors. v. Union of India and Ors. 1to contend that the women workers employed by the Respondent Company were covered by the definition of “employee” under Section 2(f) of the EPF Act. Hence, the Respondent Company is liable to pay Provident Fund contribution in respect of those women workers. 5. Mr. Anoop Kandari, learned Counsel appearing on behalf of the Respondent Company , submitted that there was no employer-employee relationship between the Respondent Company and the women workers. The women workers were not employees under Section 2(f) of the EPF Act. They were independent contractors. It was further submitted that the sewing machines used by the women workers were owned by them, and not provided by the Respondent Company. The women workers worked from their homes, and not at the production centers of the Respondent Company . Hence, the work performed by them, could be done by their relatives, or any other person on their behalf. Furthermore, the women workers were not bound to report to the production centers regularly , nor were they required to work at the production centers. The Respondent Company exercised no supervisory control over the women workers. 1(1986) 1 SCC 32. 1107 6. The short issue which arises for consideration is whether the women workers employed by the Respondent Company are covered by the definition of “employee” under Section 2(f) of the EPF Act or not. Section 2(f) of the EPF Act is set-out hereinbelow for ready reference: “(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 dir ectly or indir ectly fr om the employer , and includes any person,— (i) employed by or thr ough a contractor in or in connection with the work of the establishment; (ii) engaged as an appr entice, not being an appr entice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing or ders of the establishment;” (emphasis supplied) 6.1. The definition of “employee” under Section 2(f) of the EPF Act is an inclusive definition, and is widely worded to include any person engaged either directly or indirectly in connection with the work of an establishment. 6.2. In the present case, the women workers employed by the Respondent Company were provided all the raw materials, such as the fabric, thread, buttons, etc. from the Respondent – Employer . With this material, the women workers were required to stitch the garments as per the specifications given by the Respondent Company. The women workers could stitch the garments at their homes, and provide them to the Respondent Company . The Respondent Company had the absolute right to reject the finished product i.e. the garments, in case of any defects. 6.3. The mere fact that the women workers stitched the garments at home, would make no difference. It is the admitted position that the women workers were paid wages OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.] directly by the Respondent Company on a per-piece basis for every garment stitched. 6.4. The issue in the present case is squarely covered by the decision of this Court in Silver Jubilee Tailoring House and Ors. v. Chief Inspector of Shops and Establishments and Ors.2 The appellants therein were engaged in the business of producing garments. They employed workers who were provided with the cloth, and were instructed by the appellants how to stitch it. The workers were paid on piece-rate basis. If a worker failed to stitch a garment as per the instructions, the appellants rejected the work, and asked the worker to re-stitch the garment. This Court held that such workers fell within the definition of “person employed” under Section 2(14) of the Andhra Pradesh (Telangana Area) Shops and Establishments Act, 1956. It was held that: “35. Quite apar t fr om all these cir cumstances, as the employer has the right to r eject the end pr oduct if it does not conform to the instr uction of the employer and dir ect the worker to r estitch it, the element of contr ol and supervision as formulated in the decisions of this Court is also pr esent.” (emphasis supplied) 6.5. On the issue where payment is made by piece-rate to the workers, would they be covered by the definition of “employee”, this Court in Shining Tailors v. Industrial Tribunal II, U.P., Lucknow and Ors. ,3 held that: “5. W e have gone thr ough the r ecord and especially the evidence r ecor ded by the T ribunal. The T ribunal has committed a glaring er ror appar ent on r ecor d that whenever payment is made by piece rate, ther e is no relationship of master and the ser vant and that such relationship can only be as between principal and principal and ther efor e, the r espondents wer e independent contractors. Frankly , we must say that the 2(1974) 3 SCC 498. 3(1983) 4 SCC 464. 1109 Tribunal has not clearly grasped the meaning of what is the piece rate, If every piece rated workmen is an independent contractor , lakhs and lakhs of workmen in various industries wher e payment is cor related to production would be car ved out of the expr ession ‘workmen’ as defined in the Industrial Disputes Act. In the past the test to determine the r elationship of employer and the workmen was the test of contr ol and not the method of payment. Piece rate payment meaning ther eby payment correlated to pr oduction is a well-r ecognised mode of payment to industrial workmen. In fact, wher ever possible that method of payment has to be encouraged so that ther e is utmost sincerity , efficiency and single minded devotion to incr ease pr oduction which would be beneficial both to the employer , the workmen and the nation at lar ge. But the test employed in the past was one of determining the degr ee of contr ol that the employer wielded over the workmen. However , in the identical situation in Silver Jubilee T ailoring House and Ors. v . Chief Inspector of Shops and Establishments and Anr. (1973) IILLJ 495 SC Methew , J. speaking for the Cour t obser ved that the control idea was mor e suited to the agricultural society prior to Industrial Revolution and during the last two de- cades the emphasis in the field is shifted fr om and no longer r ests exclusively or str ongly upon the question of contr ol. It was fur ther obser ved that a sear ch for a formula in the natur e of a single test will not ser ve the useful purpose, and all factors that have been r eferred to in the cases on topics, should be consider ed to tell a contract of ser vice. Approaching the matter fr om this angle, the Cour t obser ved that the employer ’s right to reject the end pr oduct if it does not conform to the instructions of the employer speaks for the element of control and super vision. So also the right of r emoval of the workman or not to give the work has the element of control and super vision. If these aspects ar e consider ed decisive, they ar e amply satisfied in the facts of this case. OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.] The T ribunal ignor ed the well laid test in law and completely misdir ected itself by showing that piece rate itself indicates a r elationship of independent contractor and er ror apparent on the r ecord disclosing a total lack of knowledge of the method of payment in various occupations in differ ent industries. The right of r ejection coupled with the right to r efuse work would cer tainly establish master ser vant r elationship and both these tests are amply satisfied in the facts of this case. V iewed fr om this angle, the r espondents wer e the workmen of the employer and the pr eliminary objection ther efore, raised on behalf of the appellant-employer was untenable and ought to have been over ruled and we her eby over rule it. ” (emphasis supplied) 6.6. In M/s P.M. Patel & Sons and Ors. v. Union of India and Ors.,4 the appellants therein were engaged in the manufacture and sale of bidis. The appellants engaged contractors, and the contractors engaged workers who rolled the bidis at their own homes after obtaining the raw materials either directly from the appellants, or through the contractors. The appellants contended that those workers were not covered by the definition of “employee” under Section 2(f) of the EPF Act. This Court rejected the contentions raised by the appellants therein, and held that: “8. … Clause (f) of Section 2 of that Act defines an “employee” to mean “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 dir ectly or indir ectly fr om the employer , and includes any person employed by or thr ough a contractor in or in connection with the work of the establishment.” It will be noticed that the terms of the definition ar e wide. They include not only persons employed dir ectly by the employer but also persons employed thr ough a contractor . Mor eover, they include not only persons employed in the factory but also 4(1986) 1 SCC 32. 1111 persons employed in connection with the work of the factory. It seems to us that a home worker , by vir tue of the fact that he r olls beedis, is involved in an activity connected with the work of the factor y. We ar e unable to accept the nar row constr uction sought by the petitioners that the wor ds “in connection with” in the definition of “employee” must be confined to work performed in the factor y itself as a par t of the total pr ocess of the manufactur e. ... 10. In the context of the conditions and the cir cumstances set out earlier in which the home workers of a single manufactur er go about their work, including the receiving of raw material, r olling the beedis at home and delivering them to the manufactur er subject to the right of r ejection ther e is sufficient evidence of the r equisite degree of contr ol and super vision for establishing the relationship of master and ser vant between the manufacturer and the home worker . It must be r emembered that the work of r olling beedis is not of a sophisticated nature, requiring control and super vision at the time when the work is done. It is a simple operation which, as practice has shown, has been performed satisfactorily by thousands of illiterate workers. It is a task which can be performed by young and old, men and women, with equal facility and it does not r equire a high or der of skill. In the circumstances, the right of r ejection can constitute in itself an effective degr ee of super vision and contr ol. We may point out that ther e is evidence to show that the rejection takes place in the pr esence of the home worker . That factor , however , plays a mer ely suppor tive r ole in determining the existence of the r elationship of the master and ser vant. The petitioners point out that ther e is no element of personal ser vice in beedi r olling and that it is open to a home worker to get the work done by one or the other member of his family at home. The element of OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.] personal service, it seems to us, is of little significance when the test of contr ol and super vision lies in the right of r ejection. ” (emphasis supplied) 6.7. The aforesaid judgments make it abundantly clear that the women workers employed by the Respondent Company are covered by the definition of “employee” under Section 2(f) of the EPF Act. 6.8. The EPF Act is a beneficial social welfare legislation which was enacted by the Legislature for the benefit of the workmen.5 This Court in The Daily Par tap v. The Regional Provident Fund Commissioner, Punjab, Har yana, Himachal Pradesh and Union T erritory, Chandigar h,6 held that: “9. … It has to be kept in view that the Act in question, is a beneficial social welfar e legislation meant for the protection of weaker sections of society , namely , workmen who had to eke out their livelihood fr om the meagr e wages they r eceive after toiling har d for the same.” Hence, the provisions under the EPF Act have to be interpreted in a manner which is beneficial to the workmen. 6.9. In the present case, the women workers were certainly employed for wages in connection with the work of the Respondent Company. The definition of “employee” under Section 2(f) is an inclusive definition, and includes workers who are engaged either directly or indirectly in connection with the work of the establishment, and are paid wages. In the present case, the women workers were directly engaged by the Management in connection with the work of the Respondent Company, which was set up as a ready-made garments industry in Marathwada. The women workers were paid wages on per-piece basis for the services rendered. Merely because the women workers were permitted to do the work off site, would not take away their status as employees of the Respondent Company. 5 Regional Provident Fund Commissioner v. The Hooghly Mills Company Ltd. and Ors. , 2012 (1) SCALE 422. 6(1998) 8 SCC 90. 1113 7. The Respondent Company placed reliance on this Court’ s decision in C.E.S.C. Limited and Ors. v. Subhash Chandra Bose and Ors.,7wherein it washeld that: “14. … In the textual sense ‘supervision’ of the principal employer or his agent is on ‘work’ at the places envisaged and the wor d ‘work’ can neither he constr ued so br oadly to be the final act of acceptance or r ejection of work, nor so narrowly so as to be super vision at all limes and at each and every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two extr emes. When the employee is put to work under the eye and gaze of the principal employer , or his agent, wher e he can be watched secr etly, accidentally , or occasionally , while the work is in pr ogr ess, so as to scrutinise the quality ther eof and to detect faults ther ein, as also put to timely r emedial measur es by dir ections given, finally leading to the satisfactory completion and acceptance of the work, that would in our view be supervision for the purposes of Section 2(9) of the Act.” The decision in C.E.S.C. Limited (supra) however , is not applicable to the facts of the present case. In that case, this Court interpreted the meaning of the term “supervision” as used in the definition of “employee” Section 2(9) of the Employees’ State Insurance Act, 1948. However, the term “supervision” is nowhere used in the definition of “employee” under Section 2(f) of the EPF Act. The decision in P.M. Patel(supra) could not be used to interpret the word “supervision” under the Employees’ S tate Insurance Act, 1948 because the said word has not been used in Section 2(f) of the EPF Act. 8. In view of the aforesaid discussion, the judgment passed by the Bombay High Court vide the Impugned Order dated 27.04.2012, being contrary to settled law, is set aside. The Order dated 19.04.1993 passed by the Appellant No. 1 is restored. The Respondent Company is directed to deposit the amount assessed by Appellant No. 1 towards Provident Fund dues of the women workers within 1 month from the date of this Judgment. OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.] 7(1992) 1 SCC 441. Ordered accordingly. Nidhi Jain Appeal allowed. The Civil Appeal is allowed in the aforesaid terms. All pending Applications, if any, are accordingly disposed of.