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Gujarat High Court
Judgename :HONOURABLE MS. JUSTICE R.M.DOSHIT
SWASTIK TEXTILE ENGINEERS PVT.LTD. - Appellant
Versus
VIRJIBHAI MAVJIBHAI RATHOD - Respondent
SPECIAL CIVIL APPLICATION 4336 of 1999
Decided On : 09/27/2007
Whether back wages paid on reinstatement setting aside termination constitute basic wage attracking liability of employer for P.F. contribution?
Head Note :
Employees Provident Fund and Miscellaneous Provisions Act, 1952 (Central Act 19 of 1952) - Section 7-A - Employees Provident Fund Scheme, 1952 - Paragraph 26-B - Provident Fund contribution by employer - Back wages - Awarded setting aside termination - Liability - Finding as to - Petitioner had terminated the services of workman - In ensuring litigation the petitioner was directed to reinstate the workman in service and to pay 75% of back wages - Award was complied with but petitioner did not deduct amount of P.F. and also did not make statutory contribution on the back wages paid to workman - Court held that amount of back wages paid to the workman did not constitute the basic wages as envisaged by the Act to enforce liability or obligation on the part of employer to make statutory contribution to P.F. - The payment of back wages to the workman is not the same as payment of wages for duties performed or for the period deemed to have been spent on duty hence would not amount to basic wage Court accordingly quashed and set aside the impugned order passed by Commissioner imposing liability of petitioner to make its contribution to P.F.
Held :
The service of the workman was terminated, which was held to be illegal and the workman had been reinstated in service with continuity in service. Whether, the continuity in service ordered by the Labour Court would amount to the period spent on duty. If it is to be treated as the period spent on duty then, necessarily the workman would be entitled to receive the entire salary, would be liable to make contribution to the provident fund and, in that case, the employer would be liable to make statutory contribution to the provident fund. But, in my view, the continuity in service does not carry the meaning the period spent on duty. The purpose to allow continuity in service would be that such period would not be treated as break in service for the purpose of service benefits like; pay, increments, leave, allowances, pension, etc. In absence of a specific order that such period should be treated as period on duty, such period cannot be held to be the period spent on duty. Besides, the fact that the Labour Court had awarded only part of the back-wages, would also tend to show that the period of absence from duty on account of termination from service was not intended to be treated as the period spent on duty. [Para 11]
When the Court awards back-wages for the period the employee was kept away from duty, what the Court does is to award damages assessed in terms of whole or part of the wages the workman would have earned had he been continued in service without interruption. It is not the same as payment of wages for the duties performed or for the period deemed to have been spent on duty. The amount of damages or the compensation awarded by a Court would not constitute the basic wages as envisaged by the Act. [Para 12]
Court is of the opinion that the amount of back-wages paid to the workman did not constitute the basic wages as envisaged by the Act. The petitioner was, therefore, under no obligation to make statutory contribution to the provident fund under the Act. [Para 13]
Law Laid Down :
When Court awards back wages for period employee was kept away from duty it would not constitute the basic wages as envisaged by the Act 1952.
Case Law Analysis :
Feed Matter
Conclusion :
On reinstatement back wages paid to employee donot constitute basic wage as provided under the Act and therefore, employer not liable to P.F. Contribution.
Cases Referred :
Shree Changdeo Sugar Mills & Anr. vs. Union of India & Anr., AIR 2001 SC 557;; Prantiya Vidhyut Mandal Mazdoor Federation etc. vs. Rajasthan State Electricity Board & Ors. etc., AIR 1992 SC 1737;; Union of India & Anr. vs. Ogale Glass Works, 1971 LLJ 513.
Decided in Favour of :
Appellant
Petition Allowed
( 2 ) THE dispute is in connection with the liability of the petitioner to make provident fund contribution in respect of the amount of back-wages paid to the respondent no. 1 " workman in compliance with the order passed by the Labour Court.
( 3 ) THE petitioner had terminated the service of the workman on 7th June, 1982. In ensuing litigation, by award published on 27th September, 1991, the petitioner was directed to reinstate the workman in service and to pay him 75% of the back-wages. The workman was reinstated in service and was paid the back-wages in the sum of Rs. 61,079=10. The petitioner, however, did not deduct the amount of provident fund from the said amount of the back-wages. Nor did it make statutory contribution.
( 4 ) PURSUANT to the complaint lodged by the workman in respect of the contribution of the provident fund amount by the employer, an inquiry under Section 7a of the Act was initiated. By order made by the Assistant Provident Fund Commissioner, it was held that the petitioner was liable to make statutory contribution in respect of the said sum of Rs. 61,079=10 paid as back-wages. The petitioner was directed to remit the sum of Rs. 6,107=91 by way of its contribution to the provident fund for the period from January, 1982 to February, 1992. Feeling aggrieved, the petitioner made representation under Section 19a of the Act. The said representation came to be allowed by the Employees Provident Funds Appellate Tribunal by its order dated 17th March, 1999. The Appellate Tribunal remanded the matter to the Commissioner to reconsider and decide the matter afresh. Pursuant to the said order, a fresh inquiry under Section 7a of the Act was initiated. While the said inquiry was underway, by order dated 18th February, 1999 made by the Commissioner, the said inquiry under Section 7a was ordered to be concluded and a fresh case under paragraph 26b of the Scheme was initiated. By the impugned order made on 21st April, 1999 in the proceedings under paragraph 26b of the Scheme, the Commissioner was of the opinion that the back-wages awarded by the Labour Court was the wages for the period the workman was out of service. The amount of back-wages, therefore, constitute the basic wages as defined in the Act. The petitioner was, therefore, liable to make its contribution to the provident fund. Feeling aggrieved, the petitioner has preferred the present petition.
( 5 ) MR. CLERK has assailed the impugned order dated 21st April, 1999. He has submitted that the impugned order was made by the Commissioner without the authority of law. He has submitted that the Appellate Tribunal had directed the Commissioner to hold inquiry under Section 7a of the Act afresh. The Commissioner was, therefore, required to conduct and complete the inquiry under Section 7a of the Act. Instead, in the middle of the inquiry, the same was cancelled and a fresh inquiry under paragraph 26b of the Scheme was started. The action of the Commissioner was evidently contrary to the directions issued by the Tribunal. He has next submitted that an employer is duty bound to make contribution to the provident fund in respect of the wages earned by an employee. In other words, the wages paid to an employee for the services rendered by him would be the basic wages within the meaning of the Act and it is the basic wages in respect of which the employer is required to make contribution to the provident fund. The amount of back-wages
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