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2000 Supreme(Cal) 120
High Court Of Calcutta
Basudeva Panigrahi
TIN PRINTERS PVT.LTD - Appellant
Versus
REGIONAL PROVIDENT FUND COMMISSIONER, WEST BENGAL - Respondent
W. P. 13605 Of 1999
Decided On : 03/10/2000
ANIL GUPTA, ASHISH SANYAL, BAPPADITYA SEN, UTTAM KUMAR MAJUMDER
Directors of a Private Limited Company receiving salary and having master-servant relationship with the Company are covered under the definition of 'employee' under section 2 (9) of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.
Headnote:
EMPLOYEES' PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952 - SECTION 2 (9), 2 (22), 7A - PARTNERSHIP FIRM CONVERTED INTO PRIVATE LIMITED COMPANY - DIRECTORS RECEIVING SALARY - WHETHER DIRECTORS CAN BE TREATED AS EMPLOYEES - APPLICABILITY OF THE ACT.
Fact of the Case:
Partnership firm engaged in printing and composing work converted into a Private Limited Company. Inspection by Provident Fund Commissioner revealed that the establishment engaged 16 employees and 5 Directors who were also shown as employees. Demand for contribution towards Provident Fund made. Petitioners challenged the applicability of the Act claiming that the Directors were not employees.
Finding of the Court:
Directors of a Company cannot be equated with partners of a partnership firm. Directors receiving salary as employees and having master-servant relationship with the Company are covered under the definition of 'employee' under section 2 (9) of the Act. Inclusion of working Directors as employees while considering the applicability of the Act is justified.
Issues: Whether Directors of a Private Limited Company receiving salary can be treated as employees for the purpose of applicability of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.
Ratio Decidendi: The definition of 'employee' under section 2 (9) of the Act includes any person employed for wages in or in connection with the work of an establishment. The Apex Court in Employees' State Insurance Corporation v. Apex Engineering Private Limited held that a Managing Director/Director of a Company cannot be treated on par with a partner of a partnership firm who has been given some remuneration for extra work. The Court distinguished the facts of Ramanuja Match Industries case, relied upon by the petitioners, and held that the Directors of a Company are covered under the definition of 'employee' if they satisfy the conditions laid down in section 2 (9) of the Act.
Final Decision: Writ petition challenging the applicability of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 dismissed. Working Directors treated as employees and the Company directed to pay PF Contribution.
( 1 ) THIS writ petition has been filed by the petitioners for issuing a writ of mandamus against the respondents from not giving effect and a further effect to the impugned order dated 28th May, 1999 vide annexure K to the writ petition and be further declared that the petitioner No. 1 is not covered under the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act 1952 and schemes framed thereunder.
( 2 ) THE essential facts led to filing of the writ petition is as follows :"the petitioners had started a Partnership business under a Deed of Partnership and were engaged in printing and composing work since 1984. At the beginning, there were only five employees with two partners. But in gradual course of time the number of Partners were increased from two to five and later on eleven employees were engaged. Subsequently in March 1996, the Partnership business was dissolved and it was converted into a Private Limited Company under the name and style as S. G. Tin Printers Pvt. Ltd. having been incorporated under the provisions of the Companies' Act being incorporated No. 2173632 of 1995. "
( 3 ) THERE was an inspection by the Inspector of the Provident Fund Commissioner and at such time it was noticed that the establishment engaged sixteen employees and five Directors were shown to be also the employees of the Company. The provisions of the E. S. I. Act was attracted since 1986. The enforcement officer of the respondent No. 1 in his letter dated 30th December, 1994 had communicated to the petitioners that the provisions of Employees' Provident Fund and Miscellaneous Provisions Act 1952 (hereinafter be served the said Act), is applicable since it had engaged more than twenty employees. In response to the said letter the petitioners gave befitting reply by denying the applicability. The matter was, however, enquired into under section 7 (A) and the respondents were of the view that since the petitioners' establishment covered under the Act, therefore, they cannot disown their liability to make contribution towards the Provident Fund. They demanded Rs. 2,32,196/- (Rupees Two lakhs thirty two thousand one hundred and ninety six only) up to October 1998 as their contribution.
( 4 ) IT has been submitted by the petitioners that they constituted a partnership firm and the partners have agreed to share profit and loss of the business carried on by all of them, even they received their salary/pay for the works rendered to the firm, notwithstanding such receipt of salary, the firm shall not be liable to pay any contribution. If the Directors who have been working as workers in the establishment are excluded from computing the number of persons engaged in the establishment, then, it shall not be covered under the Act.
( 5 ) IT may be noted here that the petitioners have claimed that- (A)there was a contract to serve and that contract must be free act of the servant. (B)the servant must agree to be under the control of the master, both as to the work which he shall execute as also the details of the work and the manner of its execution. (C)the relationship has to be distinguished from such relationships as exist between the principal and agent, bailor and bailed and the like.
( 6 ) IN view of the existence of the relationship between the partnership and the firm, therefore, it was not open to the authority to treat the partners as an employee so that to make the firm liable to pay the contribution.
( 7 ) THE petitioners filed a supplementary affidavit by enclosing all the necessary documents/orders communicated by the respondents 1 to 3. Respondent Nos. 1 to 3 filed an affidavit-in-opposition by controverting all the materials of the writ petition. It has been claimed by the respondents that although a partnership firm was constituted from 1st April, 1984 till 31st March, 1996 but subsequently it was registered as a Private Limited Company and continued its operation till date from 1995. The establ
