1. Challenge to the vires of the Employees Provident Funds Act and notifications extending its application to hotels and restaurants. (Para 1 , 2 , 3 )
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1962 Supreme(SC) 355
SUPREME COURT OF INDIA
B.P. SINHA, C.J.I., P.B. GAJENDRAGADKAR, K.N. WANCHOO, K.C. DAS GUPTA AND J.C. SHAH, JJ.
Mohmedalli and others, Petitioners
Versus
Union of India and another, Respondents.
Petn. No. 56 of 1962.
Advocates appeared
Mr. N. C. Chatterjee, Senior Advocate (M/s. S. K. Kapur and K. K. Jain, Advocates, with him), for Petitioners; Mr. H. N. Sanyal, Additional Solicitor General of India (M/s. M. S. K. Sastri and R. H. Dhebar, Advocates, with him), for Respondents.
Advocates:
H.N.SANYAL, K.K.JAIN, M.S.K.Shastri, N.C.CHATTERJI, R.H.Dhebar, S.K.KAPOOR
H.N.SANYAL, K.K.JAIN, M.S.K.Shastri, N.C.CHATTERJI, R.H.Dhebar, S.K.KAPOOR
Delegation of power to extend the Employees Provident Funds Act to specific establishments is not excessive if guided by the legislative policy of social justice. Additionally, there is no legal distinction between 'salary' and 'wages' regarding the Act's applicability to employees.
Headnote:(A) Employees Provident Funds Act, 1952 - Sections 1(3)(b), 5, 16 and 17 - Constitution of India - Article 14 - Delegation of power - Power to specify establishments to be brought under the Act is not uncontrolled or uncanalised - Legislative policy of social justice and the institution of provident funds for employees provides sufficient guidance - Power of exemption under Section 17 ensures that employees are not deprived of benefits, avoiding duplication of schemes (Paras 6, 8, 9).
(B) Employees Provident Funds Act, 1952 - Section 2(b) - Definition of wages - No legal distinction between 'salary' and 'wages' as both are emoluments paid as recompense for labour - Act applies to both salaried and wage-earning employees (Para 10).
(C) Constitution of India - Article 14 - Discrimination - Exemptions granted to co-operative societies and newly set up establishments under Section 16 are based on reasonable classification and do not amount to hostile discrimination (Para 11).
Facts of the case:
A partnership firm running a restaurant and general store employing 43 persons challenged the constitutionality of notifications extending the operation of the Employees Provident Funds Act to hotels and restaurants, and the scheme framed thereunder, alleging excessive delegation of power and discrimination.
Findings of Court:
The power delegated to the Central Government is not excessive as it is guided by the policy of the Act; the distinction between salary and wages is non-existent in principle; and the exemptions under Section 16 are based on reasonable classification.
Issues: Whether Section 1(3)(b) confers uncontrolled and uncanalised power on the Government; whether the Act applies only to wage-earners and not salaried employees; and whether the Act is discriminatory under Article 14.
Ratio Decidendi: Delegation of power is valid if the legislature indicates the underlying principle and standards, leaving the application to the executive. Since the Act's objective is social justice for employees, the discretion is presumed not to be abused. Furthermore, remuneration for labour, whether termed salary or wages, falls within the Act's purview.
Result: Petition dismissed.
Legal Category Hierarchy
Table of Contents
2. Validity of delegated power under Section 1(3)(b), applicability to salaried employees versus wage-earners, and alleged discrimination under Article 14. (Para 5 )
3. The Act pursues social justice; delegated powers are guided by clear legislative policy; no legal distinction exists between salary and wages; exemptions are reasonable. (Para 6 , 7 , 8 , 9 , 10 , 11 )
4. Delegation of power is not excessive if the legislature indicates the underlying principle and standards, leaving only the application to the executive. (Para 9 )
5. Petition dismissed with costs. (Para 12 )
6. Does the power to specify establishments under the Employees Provident Funds Act constitute excessive delegation?
No, because the legislature indicated the underlying principle of social justice and provided clear standards, leaving the executive to apply these principles to specific classes of establishments. (Para 6 , 8 , 9 )
7. Is there a legal distinction between salaried employees and wage-earners for the purpose of the Act?
No. Both salary and wages are emoluments paid as recompense for labour, and the Act makes no distinction between the two. (Para 10 )
8. Are the exemptions provided under Section 16 of the Act discriminatory under Article 14?
No. Exemptions for co-operative societies and new establishments are based on reasonable classifications intended to foster growth and reduce initial burdens. (Para 11 )
Judgment
SINHA, C.J.I. : This petition under Art. 32 of the Constitution challenges the vires of certain provisions of the Employees Provident Funds Act (XIX of 1952) (which hereinafter will be referred to as the Act), and the scheme framed thereunder. The respondents to this petition are the Union of India and the Regional Provident Fund Commissioner.
2. The petition is found on the following allegations. The petitioners, 5 in number, are citizens of India and are carrying on business of running a restaurant and general stores under the name and style of "Messers George Restaurant and Stores" at 20, Appollo Street, Fort. Bombay-1, since September 1958. They are running this business as a partnership firm, registered under the Indian Partnership Act. The firm employs 43 persons, including cooks, waiters, tea makers, bill clerks and two store clerks. Besides paying salary to their employees, the petitioners give them free food and other personal allowances, which it is not necessary to set out in detail. In exercise of the powers conferred by S. 1(3) (b) of the Act, the Central Government issued the notification No. G.S.R. 704, dated May 16, 1961, in the following terms :
"G.S.R. 704 - In exercise of the powers conferred by clause (b) of sub-sec. (3) of S. I. of the Employees Provident Funds Act 1953 (19 of 1952) the Central Government hereby directs that with effect from the 30th June, 1961, the said Act shall apply to the following classes of establishments, in each of which twenty or more persons are employed, namely;
i. Hotels.
ii. Restaurants."
As a result of the notification aforesaid, the operation of the Act has been extended to hotels and restaurants, including the one run by the petitioners. Subsequently, the Central Government issued a notification under S. 5, read with S. 7(1) of the Act, the relevant portions of which are in these terms :
"G.S.R. 783- In exercise of the powers conferred by S. 5 read with sub-sec. (1) of S. 7, of the Employees Provident Funds Act, 1952 (19 of 1952), the Central Government hereby makes the following Scheme further to amend the Employee s Provident Fund Scheme, 1952, namely :
1. This Scheme may be called the Employees Provident Funds (Third Amendment) Scheme, 1961.
2. In the Employee s Provident Fund Scheme, 1952. In cl. (b) of sub-paragraph (3) of paragraph 1, sub-clause (xvii) shall be renumbered as sub-clause (xix) thereof and the following shall be inserted as sub-clauses (xvii) and (xviii), namely : "(xvii) as respects hotels and restaurants covered by the notification of the Government of India in the Ministry of Labour and Employment No. G.S.R. 704 dated the 16th May, 1961 come into force on the 30th day of June, 1961 :"
3. The said notification introduced the scheme known as the Employees Provident Funds (Third Amendment) Scheme, 1961. The petitioners challenge the constitutionality of the scheme aforesaid, and the section of the Act in pursuance of which it was brought into existence. The petitioners pray for a writ or order or direction quashing the said notifications and for issue of a mandamus to the respondents not to apply the said scheme to the petitioners establishment.
4. Before dealing with the specific grounds of attack raised in support of the petition, it is necessary to set out briefly the relevant provisions of the Act. The Act applies to every establishment which is a factory engaged in any industry specified in Schedule 1 and in which 20 or more persons are employed, and to any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf. Employee has been defined in S. 2(f) as follows :
" 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 directly or indirectly from the employer, and includes any person employed by or through a
