1995 Supreme(Bom) 171

IN THE HIGH COURT OF BOMBAY
(O.O.C.J.)
S.H. Kapadia, J.
Rhone-Poulenc Employees Union.... Petitioners.
Versus
Regional Provident Fund Commissioner and others.... Respondents.
Writ Petition Nos. 1910 2346 of 1992, 1051, 1946, 1972 2176 of 1993, 1007 1507 of 1994, decided on 15-3-1995.
Advocates appeared :
J.P. Cama i/b K.P. Anilkumar, for the petitioner in the W.P. No. 1910 of 1992, 1946,1972, 1946, 1972 and 2176 of 1993, 1007 and 1507 of 1994.
R.A. Dada. A.S.G. with R.C. Master and L.S. Vyas and Anup Mohta, for respondent No. 1 in the W.P. Nos. 1910, 2346 of 1992, 1051, 1946,1972 and 2176 of 1993, 1007and 1507 of 1994.
Mrs. Pushpa Menon, for the petitioner in the W.P. No. 2346 of 1992.
S.S. Pakale with Piyush Shah, for respondent No. 3 in the W.P. No. 2346 of 1992.
M.N. Bhatkar with P.L. Naik, for the petitioner in the W.P. No. 1051 of 1993.
L.S. Vyas and Anup Mohta, for the respondent in the W.P. No. 1051 2176 of 1993, 1007 of 1994 and 1507 of 1994.
S.F. Parekh, for respondent Nos. 2 and 3 in the W.P. No. 1946 of 1993.
S.A. Kher, for respondent Nos 2 and 3 in the W.P. No. 1972 and 2176 of 1993.
M.N. Bhatkal i/b P.L. Naik, for the petitioner in the W.P. No. 1007 of 1994.

Headnote:Sections 5 (1), 5 (13) and 5-A, Schedule II, Item I-Exemption-Printing not right - Fit conditions can be imposed by Commission.

       Section 5 (1) of the Act contemplates, therefore, that the Statutory Scheme is required to be framed by the Central Government. That the said Statutory Scheme shall be for the establishment of a Statutory Provident Fund under the said Act. That the said Provident Fund shall be for the benefit of employees or for class of employees. That the scheme shall specifically specify the establishments or clear of establishments to which the Statutory Scheme shall apply. That after the Statutory Scheme is framed, a Statutory Provident Fund is required to be established in accordance with the provisions of the Act and the Statutory Scheme. In other word., the Statutory Provident Fund is conceptually different from a Statutory Scheme. At this stage it may be clarified that in the above circumstances, the Act contemplates two types of Funds, namely, Statutory Provident Fund and the Private Provident Fund. This contradistinction must be kept in mind. An employee is required to become a member of the Fund. An employee who is working in an establishment to which the Act applies is duty bound to become member of the Statutory Fund. The Fund is vested in the Central Board constituted under Section 5-A of the Act. Under Section 5 (13) it is provided that subject to the provisions of the Act, the Statutory Scheme framed under Section 5 (1) may provide for all or any of the matters specified in Schedule II to the Act. Schedule II lays down the matters required to be taken into account by the Government while framing the Scheme. Item No. 1 of Schedule II lays down that the Statutory Scheme was for employees or class or employees who shall joint the Statutory Fund and the conditions under which employees may be compete from joining Fund or from making any contribution therein. The word shall in item 1 of Schedule II is important. It shows that in the first instance employees shall be required to join the Statutory Fund and he can opt out of the Statutory Scheme only on conditions and within framework of the Statutory Scheme. It also shows that individual employee or a class of employees can seek emption only as a matter of privilege and not as of right and therefore the R.P F.C. is entitled to impose such conditions as he deems fit. Under Section 5(2) it is further provided that the Statutory Scheme under sub-section (1) may also provide that any of its provisions shall take effect prospectively or retrospectively or on and from such date as may be specified in that behalf under the Scheme.

       This sub-section is important because in the present case, the R.P.F.C. seeks to impose the revised conditions uniformally and with retrospective effect so as to cover even those employees who were earlier covered by the exemption given which is seriously opposed by the petitioners. Section 5-A deals with the constitution of the Central Board. Under Section 5-A (3) the Central Board is required to administer the Statutory Fund which is vested in the Central Board in such a manner as may be specified in Statutory Section 5-D deals with the appointment of Officers. Under Section 5-D-(3) the Central Board may appoint the Central Regional Provident Fund Commissioner to assist the Board with regard to administration of the Statutory Fund which vests in the Central Board. Under Section 5-E the Central Board is empowered to delegate to any of its Officers including the R.P.F.C. subject to such conditions and limitations, if any, as it may specify, such of its powers and functions under this Act as it may deem necessary to give effect for the efficient administration of the Scheme.

       Sections 8, 8 (a), 8 (b) and 17-Seope of.

       Section 8 deals with the mode of recovery of moneys due from employers. Section 8 (a) deals with recovery of the amount payable by an employer in relation to any establishment to which the Act applies whereas Section 8 (b) provides for recovery of any amount due from employer of an exempted establishment. This section also indicates that it is the employer who alone is required and who is responsible to pay the contributions, accumulation charges and damages. He is the person concerned who has to administer and manage the Fund which is vested under any scheme. If it is a Private Provident Fund, he is the Officer who has to administer the Private Provident Fund Scheme and if he makes defaults with regard to such contributions he will be responsible as an employer in relation to an establishment. Secondly, the said section also indicates that be will be responsible even as an employer in relation to an exempted establishment. In other words, the entire scheme of the Act deals with the liability and the responsibility of the employer in relation to any establishment to which a Statutory Scheme applies. Similarly, it deals with the responsibility of an employer in relation to an exempted establishment. It is not open to the employer to say that because he bas not applied for exemption be is not liable to pay the amount under Section 8 (b) of the Act. This is because Section 17 contemplates on exemption being granted whether by the Appropriate Government to the establishment or by the R. P. F. C. to a class of employees it results in exempted establishment.

       Section 8-G deals with application of certain provisions of the Income-tax Act to the provisions of the Provident Fund Act and the Statutory Scheme. In this connection it is important to note that the provisions of II and III Schedule to the Income Tax Act, 1961 is made applicable mutatis mutandis subject to certain modifications to the provisions of the Act. The provisions of the Income Tax Act indicates that it is the employer who is required to manage the Private Provident Fund. The said Private Provident Fund vests in the Trustees who are required to comply with the conditions of the Income Tax Act. It is not the employee or the subscriber or the beneficiary who is required to comply with the conditions of the Act but the employer who is solely responsible to comply with the conditions under the Income-tax Act, In other words under Section 8-G of the Act read with Section 9 of the Act the Private Fund must be a Fund which is approved under the Income-tax Act. Section 10 of the said Act deals with protection against the attachment.

       It says that the amount standing to the credit of any member in the Fund or of any exempted employee in a provident fund shall not be capable of being assigned or charged and shall not be liable to attachment under any decree or order of any Court m respect of any debt or liability incurred by the employee or the exempted employee. Section 11 (1) (a) deals with priority of payment of contribution in relation to an establishment to which the Act applies whereas Section 11 (1) (b) relates to priority of payment of contributions by an employer in relation to exempted establishment where the employer or the Company becomes insolvent or is ordered to be wound up. Here also dichotomy is seen between the provisions of Section 11 (1) (a) and the provisions of Section 11 (1) (b). This dichotomy also supports the contention of the respondent that it is the employer who has to take stags to administer and protect the Fund and the liability accrues to him if he fails. Such employer may be an employer in relation to an establishment to which the Act applies or he may be an employer, in relation to an exempted establishment. Here also there is no exemption separately mentioned under Section 17 (1) or under Section 17 (2) of the Act.

       In other words, once the appropriate Government grants exemption under Section 17 (1) of the Act or where the R. P. F. C., grants exemption under Section 17 (2) of the Act for the purposes of the Act, net result is that it is an exempted establishment. The idea being that it is only in such circumstance that the R. P. F. C., or the Government can control and ensure the viability of the Fund and can make the employer liable both in relation to an establishment to which the Statutory Scheme applies or in relation to an exempted establishment in respect of contributions payable under the Act. In the circumstances all the above provisions discussed shows that the it is an exempted establishment which results on account of exemptions being granted under Section 17 (1) or exemption being granted pursuant to an order under Section 17 (2) of the Act and. therefore, the R. P. F. C. is certainly justified in imposing such conditions as he deems fit under the provisions of Section 17 (2) of the Act. If the net result of grant of exemption is an exempted establishment then the R. P. F. C" is certainly authorised to impose revised conditions. In the present case, he has bodily lifted those conditions which were made applicable by the Central Government to control the Industries in 1987.

       In the above circumstances, the Scheme of the Act and the Statutory Rules and the Statutory Scheme clearly indicate that Section 17 read as a whole constitute one complete code dealing with exemptions and it is not possible to bifurcate the parameters of Section 17 (1) vis-a-vis Section 17 (2) of the Employees Provident Funds Act because it will defeat the very object of the Act and it will defeat the entire Scheme of the Provident Fund Act, 1952. Under Section 13 (2) the Inspector is therefore required to inquire whether conditions of exemption under Section 17, have been complied with or not. The section also indicates that the Act applies clearly not only to the establishment covered by the Act and the Statutory Scheme but also the establishments to whom the exemptions are expressly granted under Section 17 of the Act which as stated hereinabove is the effect of the exemption being granted either under Section 17 (1) or 17 (2) of the Act. Similarly, Section 14-B deals with the power to levy and recover damages where there is non-fulfilment of the conditions of exemption under Section 17. This section also does not indicate any distinction between the conditions under Section 17 (1) or conditions under Section 17 (2) of the Act.

       The uniformity is maintained throughout all the provisions of the Act which I have referred to above. It is for this reason that the Legislature has used the word exempted establishment under Section 2 (fff) of the Act read with Section 5 of the said Act, 1952. In cases of Private Provident Fund which are in existence prior to the Act or the scheme it is provided that funds are transferable to the Scheme under the Act vide Section 15 (2) of the Act. Section 17 deals with the power to exempt. Section 17 (1) empowers the Appropriate Government to grant exemption to an establishment, prospectively or retrospectively, from the operation of all or any of the provisions of the Statutory Scheme whereas Section 17 (2) of the Statutory Scheme 1952 provides for exemption from the Statutory Scheme to be given to any person or class of persons employed in an establishment to which the Scheme applies. Section 17 (2) read with para. 27 given power to R. P. F. C., to grant exemption on such conditions as may be specified in the order Proviso to para. 27 of the Scheme 1952 lays down that an employee is entitled to exemption if the benefit in the nature of provident fund, gratuity or pension under the Private Scheme is more favourable than under the Statutory Scheme.

       In other words, Section 17 (1) gives power to the Government to exempt an establishment from the scheme whereas Section 17 (2) read with para 27 gives power to R. P. F. C., to grant exemption to an employee if the employee fulfills the conditions laid down by the Commissioner Section 17 (3) of the Act provides, inter alia, that where in respect of any person or class of persons exemption is granted under Section 17, whether such exemption is granted to the establishment or to a person or class of persons such exemption shall be given subject to the employer maintaining accounts filing returns, making investments etc., as the Central Government may direct Section 17 (5) lays down that where any exemption under Section 17 is cancelled, the amount of accumulations shall be transferred from the Private Fund to the statutory under Section 17 (3), therefore, indicates that exemption under Section 17 is one and only exemption and there is no separate exemption contemplated as contended by the petitioners. In other words, all the above provisions of the Act indicate that the Legislature has not segregated exemptions into two separate compartments but the Legislature only referred to exemption under Section 17 as a whole and not Section 17 (1) or Section 17 (2).

       This is because, as stated above, effect of exemption under Section 17 (1) or 17 (2) is the same. It results in an establishment falling in the definition of the word exempted establishment as defined under Section 2 (fff). It is because both the Statutory Fund as well as Private Fund is required to be supervised by the R. P. F. C., as well as the Government. The R. P. F. C. Government are not Trustees for the Private Provident Fund. But they have to supervise the administration, management, the viability and protection of the Private Fund. A Private Fund also be exposed to risk factors. For example when the Companies are wound up or dissolved on several occasions this Court finds that not with standing the provisions of Sections 17 (3), Section 17 (4) and Section 17 (5) of the Act, the R. P. F. C., is not able to recover the amount.

       On several occasions the Companies come within the purview of B. I. F. R. In such cases the revised conditions playa very important role. For example if a Trustee of a Private Provident Fund is required to give undertaking to the R. P. F. C. If the R. P. F. C. is able to take collateral/ security then III such cases R. P. F. C. can enforce the conditions qua the Trustees of the Private Provident Fund. From 1952 to 1988 I find that none of the establishments herein have ever applied for exemption. None of the establishments have agreed or undertaken to the R. P. F. C., to implement the conditions and over the years only individual employee or class of employees have obtained exemptions which cannot save the Fund or Of, protect the Fund from risk factors which arises on account of economic or financial adverse circumstances. The submission of returns as directed by the Government or making investments in Government securities or taking penal action for not maintaining accounts or for violation of the Statutory conditions, although necessary, may not be foolproof and in the circumstances the R. P. F. C., can certainly insist on additional conditions which could protect the Private Find from the risk factors. It is in this light that all the revised conditions may be seen.

       Section 17(1) & (2)-Employees Provident Funds Scheme, 1952, Para 27 -Act and Scheme dichotomy between-Individual gives privilege-No right opt out of the Scheme.

       It is contended on behalf of the petitioners that the Central Government can impose conditions for granting exemption and that RPFC cannot impose the .above conditions. It is contended on behalf of the petitioners that the above 28 conditions are virtually usurping the power of the Central Government. It is contented on behalf of the petitioners that the RPFC has only to consider under the proviso to para 27 whether the benefits receivable by an individual under the Private Provident Fund Scheme are more beneficial than the benefits under the Statutory Scheme and if that condition is satisfied, the RPFC is duty bound to give exemption. It is contended that the RPFC however, has extended his authority by imposing 28 conditions which are similar to 29 conditions imposed by the Central Government vide Notification dated 16-4-1987. There, no find any merit in the said contention. If one goes through the above provisions of the Act and the Scheme 1952, there is a dichotomy between the Scheme and the Fund an individual in given the privilege to opt out of the scheme.