The main legal point established is that while the bank was exempt from the Employees' Provident Funds Act for a specified period, the deducted amounts must be transferred to the Employees' Provident Fund under the statutory Scheme, and any excess demand beyond the statutory rate could be objected to by the bank.

1. The petitioner is the North Malabar Gram in Bank. It was established on 12-12-1976 under the Regional Rural Banks Act, 1976 (Act 21 of 1976). The effect of S.16 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is that the Act would not apply to an establishment such as the petitioner-Bank for a period of three years from the date on which it was set up. That means the petitioner was exempt from any liability to pay any amount towards provident fund for the period between 12-12-1976 and 11-12-1979. However, notwithstanding this exemption (which is generally referred to as infancy protection) the petitioner on the basis of certain directions from the Reserve Bank of India and the Central Government made deductions from the salaries payable to its employees with a view to crediting them to its own provident fund scheme under contemplation. However, no such scheme was adopted by the Bank. But the amounts deducted from the salaries of the employees towards the contemplated provident fund scheme stood to their credit. These amounts were deducted during the period from 1-12-1978 to 1-12-1979. By the impugned orders Exts. P12 and P14, the respondents have directed the petitioner to transfer these amounts to the Employees' Provident Fund established under S.5 of the Act.

2. The petitioner's counsel Shri. M. Ramachandran contends that the Bank was entitled to the protection of S.16 and was, therefore, not under any obligation to make any deduction from the employees' salaries or to pay the employer's contribution towards provident fund. The Bank did not pay the employer's contribution. The Act did not apply to the Bank at the relevant time and consequently the scheme mentioned under S.5 had no application to the Bank in respect of the sums collected during the period of infancy. The sums were collected in the bona fide belief that the scheme which is not governed by the Act, but which is purely contractual, would be adopted in the best interest of the employees. But the scheme was not adopted. In such circumstances, the only obligation of the Bank is to refund the amounts to the employees from whose salaries they were deducted.

3. Ext. P12 is the order of the Provident Fund Inspector. That order speaks of the contributions made by the employees as well as the employer. The petitioner is called upon by that order to transfer to the Fund under the Scheme not only the amounts deducted from the salaries, but also its part of the contributions which it would have made had its scheme been adopted. But in Exts. P10 and P14 which are orders of the Regional Provident Fund Commissioner, there is no reference to the employer's contribution.

4. Shri Aziz, appearing for the respondents, refers to S.15(2) and submits that the liability of the employer arises as soon as his establishment falls under the Act and upon that event all amounts seen as accumulations in any provident fund of that establishment to the credit of the employees must stand transferred to the Fund under the Scheme. I agree.

5. S.1(3) which refers to the applicability of the Act, says: "1(3) Subject to the provisions contained in S.16, it applies "

This shows that the applicability of the Act is limited by S.16. S.16 says:

"16. Act not to apply to certain establishments. (1) This Act shall not apply

(b) to any other establishment employing fifty, or more persons or twenty or more, but less than fifty persons until the expiry of three years in the case of the former, and five years in the case of the latter, from the date on which the establishment is, or has been, set up.

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Accordingly for the period of exemption, the Act has no application. S.15(2) provides:

"On the application of any Scheme to an establishment the accumulations in any provident fund of the establishment, standing to the credit of the employees who become members of the fund established under the scheme shall, notwithstanding anything to the contrary contained i