Contract Employees are eligible for Provident Fund: Supreme Court Judgment in Pawan Hans Ltd V Aviation Karmachari Sanghatana CA No 353 of 2020 dated 17.1.2020
A Bench of Judges of the Supreme Court Justice Uday Umesh Lalit and Justice Indu Malhotra passed Judgment said that Provident Fund is applicable to the Contract employees, in the case of Civil Appeal No. 353 of 2020 in PAWAN HANS LIMITED & ORS Vs. AVIATION KARMACHARI SANGHATANA ORS filed by the company and passed directions. The issue for consideration was whether the contractual employees of the Appellant Company are entitled to provident fund benefits under the Pawan Hans Employees Provident Fund Trust Regulations or under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees' Provident Fund Scheme, 1952 framed thereunder.
Back Ground of the Case
The Company was incorporated on 15.10.1985 under the Companies Act, 1956, and is registered as a Government of India company with the Registrar of Companies, Delhi. The Government of India holds 51% shareholding in the Appellant- Company and the remaining 49% is held by Oil and Natural Gas Company Ltd. (ONGC). The Company was incorporated with the primary objective of providing helicopter support services to the oil sector for its off- shore exploration operations, services in remote and hilly areas, and charter services for promotion of tourism. It is classified as a non- scheduled operator under Rule 134 of the Aircraft Rules, 1937.
On 01.04.1986, the Appellant- Company framed and notified the Pawan Hans Employees Provident Fund Trust Regulations (hereinafter referred to as "the PF Trust Regulations") for giving provident fund benefits to all the employees of the Appellant- Company.
On 26.03.1987, the Appellant- Company instituted the Pawan Hans Employees
Provident Fund Trust ("PF Trust") wherein the management started depositing its
share
towards the provident fund contribution with respect to employees on the regular
cadre of the Company; correspondingly, the regular employees started depositing
the matching contribution with the PF Trust.
Out of a total workforce of 840 employees, the Company had engaged 570
employees on regular basis, while 270 employees were engaged on 'contractual'
basis. The Company implemented the PF Trust Regulations only with respect to the
regular employees, even though the term "employee" had been defined to include
"any person" employed "directly or indirectly" under the PF Trust Regulations.
The Company having framed its own PF Trust Regulations, was claiming exemption
from the applicability of the EPF Act and EPF Scheme under Section 16 of the EPF
Act.
On 08.01.1989, the Ministry of Labour, Government of India, issued a
communication to the Central Provident Fund Commissioner, New Delhi, pertaining
to the grant of exemption to departmental undertakings under the control of the
Central/State Government statutory bodies. The Central Provident Fund
Commissioner was directed to instruct the Regional Provident Fund Commissioners
to carefully review the cases of departmental undertakings and statutory bodies
falling under the categories specified in Section 16(1)(b) and 16(1)(c) of the
EPF Act, and take further action as indicated in the said letter.
The Central Government, in exercise of the powers under S.1(3)(b) of the EPF
Act, issued a Notification dated 22.03.2001, making the provisions of the EPF
Act applicable to aircraft or airlines establishments employing 20 or more
persons, excluding aircraft or airlines establishments owned or controlled by
the Central or State Government. The said Notification was brought into
force w.e.f 01.04.2001.
Correspondingly, amendments were made to the EPF Scheme framed under Section
5 of the EPF Act. Clause 3 (b)(ci) was inserted vide Notification No. S-
35016/1/1997- SS II dated 22.07.2002, by which the EPF Scheme was made
applicable to aircraft or airlines establishments other than the aircraft or
airlines establishments owned or
controlled by the Central or State Government.
The members of the Respondent- Union made several representations on
18.09.2012, 29.09.2012, 13.03.2013, 19.11.2014 to extend the benefit of the PF
Trust Regulations since they were directly engaged by the Company on contractual
basis, some of whom were working for almost 20 years. The Company failed to
respond to the representations.
Being aggrieved by the inaction of the Company, the Respondent- Trade Union,
filed CWP No.325 of 2017 on 20.12.2016 against the Company praying for the
following reliefs:
"(a) A declaration that the members of the RespondentTrade Union and other similarly situated employees, employed on contract basis by the Appellant- Company are entitled to the benefit of Provident Fund as per the EPF Act and the EPF Scheme, and that the Appellant- Company be directed to forthwith enrol all such eligible contract employees under the EPF Scheme and deposit their contribution with the Respondent No. 3- Regional Provident Fund Commissioner, Employees' Provident Fund Organisation, from the date they are eligible till remittance, and thereafter, till they are in the employment of the Appellant- Company.
(b) Alternatively, the Appellant- Company forthwith be directed to
suitably amend the PF Trust Regulations to permit the enrolment of contract
workers as members of the PF
Trust instituted by the Appellant- Company and to make all eligible contract
employees members of the PF Trust from their respective dates of entitlement and
continue to contribute amounts to the PF Trust in respect of contract
employees."
During the pendency of the Writ Petition, the Regional Provident Fund
Commissioner, Bandra issued a letter dated 24.05.2017 to the Company wherein it
was stated that even though the EPF Act would not apply to establishments
owned/controlled by the Central Government as per S.16(1)(b) and (c), however
social security benefits such as provident fund must be provided to all
"employees/workers who are engaged on contractual/casual/daily wages basis"
since there is no distinction between a person employed on permanent, temporary,
contractual, or casual basis under S.2 (f) of the EPF Act.
The High Court vide the impugned Judgment & Order dated 12.09.2018 allowed the
Writ Petition in terms of prayer (a), with the direction that the benefits under
the EPF Act be extended to the members of the Respondent Trade Union, and other
similarly situated employees. It was held that a liberal view must be taken in
extending social security benefits to the contractual employees. The High Court
directed the Company to enrol all eligible contractual employees under the EPF
Scheme, and deposit their contribution with Respondent No.3 - Regional Provident
Fund Commissioner from the date they became eligible till remittance, and
thereafter till they are in employment of the Company. This was to be carried
out latest by 31.12.2018.
Observation of Supreme Court
The Supreme Court said that After hearing the parties at length, and in light of the peculiar facts and circumstances of this case, we affirm the Judgment & Order dated 12.09.2018 passed by the Bombay High Court in W.P.No.325/2017 holding that members of the Respondent- Union are covered by the EPF Act. However, we modify the direction of the High Court to grant the benefits under the EPF Act, and direct that the members of the Respondent- Union and other similarly situated contractual employees be enrolled under the Pawan Hans Employees Provident Fund Trust Regulations so that there is uniformity in the conditions of service of all employees of the Appellant- Company.
Furthermore, the direction of the High Court to pay the contribution from the date of their eligibility till the date of remittance is also modified in terms of the directions given in this Judgment.
Direction passed by the Supreme Court
The Supreme Court passed the following Directions:
(i) The interests of justice would be best subserved if the benefit of Provident Fund is provided to the members of the Respondent- Union, and other similarly situated contractual employees, from January 2017 when the Writ Petition was filed before the High Court.
(ii) Respondent No.3 - the Regional Provident Fund Commissioner,
Regional Office, Bhavishya Nidhi Bhawan, 341 Bandra (E), Mumbai is directed to
determine and compute the amount to be deposited by the Company on the one hand,
and the members of the Respondent- Union and other similar situated employees on
the other hand. The computation would be required to be made for the past period
i.e. January
2017 to December 2019;
(iii) The Company shall be liable to pay Simple Interest @ 12% p.a. on the amount payable by it towards contribution of provident fund for the past period, i.e., January 2017 to December 2019, as per Section 7Q of the EPF Act,1952 ;
(iv) The statement of computation made by Respondent No.3 will be placed before this Court within a period of 12 weeks from the date of this Judgment, and thereafter the matter will be listed for issuance of necessary directions, so that the amount can be remitted from the deposit made before this Court, directly to the PF Trust;
(v) The employees will be obligated to deposit their matching contribution for the past period i.e. January 2017 to December 2019, within a period of 12 weeks along with interest @ 6% p.a., after the contribution of the Company has been remitted to the PF Trust;
(vi) With respect to the period from January 2020 onwards, the Company and the members of the Respondent- Union as also other similary situated employees, will make their respective contributions as per the PF Trust Regulations;
(vii) The benefit shall not be extended to those employees who have superannuated, expired, resigned, or ceased to be in the employment of the Company on the date of this Judgment ;
(viii) We consider it appropriate to award Costs of Rs.5,00,000 (Rupees Five Lacs) to the Respondent Union towards litigation expenses incurred in the High Court and in this Court.
(ix) After the aforesaid amounts are disbursed, the balance amount lying deposited in this Court shall be refunded to the Appellant- Company.