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PUNJAB & HARYANA HIGH COURT
A.N.Grover, J.
Hindustan Electric Co.Ltd.
Versus
Regional Provident Fund Commissioner
Civil Writ No. 1068 of 1957,
Decided On : SEPTEMBER 5, 1958
EMPLOYEES PROVIDENT FUNDS ACT, 1952 - CONSTITUTIONALITY - SECTION 5 - VALIDITY - ARTICLE 14 AND 19(1)(F) OF THE CONSTITUTION - CLASSIFICATION OF FACTORIES AND EMPLOYEES - REASONABLENESS - RETROSPECTIVE OPERATION - SECTION 16(1)(B) - INTERPRETATION - DATE OF ESTABLISHMENT OF A FACTORY - CHANGE OF OWNERSHIP - SECTION 2(F) - DEFINITION OF "EMPLOYEE" - WAGES AND SALARY - EMPLOYEES PROVIDENT FUND SCHEME, 1952 - PARA 2(F) - VALIDITY.
Fact of the Case:
The petitioner companies challenged the constitutional validity of Section 5 of the Employees Provident Funds Act, 1952, on the grounds that it violated Articles 14 and 19(1)(f) of the Constitution. They also contended that the Act could not be made applicable to their factories for at least three years from the date of their establishment as private concerns, and that the Employees Provident Fund Scheme, 1952, went beyond the provisions of the Act and was unenforceable.
Finding of the Court:
1. Section 5 of the Employees Provident Funds Act, 1952 does not infringe Article 14 or Article 19 (1) (f) of the Constitution. 2. The period of three years under Section 16 (1) (b) of the Act is to be counted from the date of, the original establishment of the factories in the present cases and not from the date when they ceased to be owned by the Government and started working as non-Government factories. 3. The manufacture of stoves would fall within the expression "mechanical or general en- gineering products" as used in Schedule I of the Act. 4. The definition of the word "employee" as given in the Act must be restricted to such employees who are paid wages and who do not receive compensation or monthly salary in excess of Rs. 200/-. 5. Para 2 (f) of the Scheme as framed is ultra vires the Act to the extent mentioned above.
Issues: 1. Whether Section 5 of the Employees Provident Funds Act, 1952, violates Articles 14 and 19(1)(f) of the Constitution? 2. How is the period of three years under Section 16(1)(b) of the Act to be calculated? 3. Whether the manufacture of stoves falls within the expression "mechanical or general en- gineering products" as used in Schedule I of the Act? 4. What is the scope of the definition of the word "employee" as given in the Act? 5. Is Para 2(f) of the Employees Provident Fund Scheme, 1952, ultra vires the Act?
Ratio Decidendi: 1. Section 5 of the Act does not violate Article 14 as it provides a reasonable classification of factories and employees and lays down a policy for the guidance of the executive in the matter of selection or classification. It does not violate Article 19(1)(f) as the restrictions imposed are reasonable and in the interest of the general public. 2. The period of three years under Section 16(1)(b) is to be calculated from the date of the original establishment of the factories and not from the date when they ceased to be owned by the Government. 3. The manufacture of stoves falls within the expression "mechanical or general en- gineering products" as used in Schedule I of the Act. 4. The definition of the word "employee" as given in the Act is restricted to such employees who are paid wages and who do not receive compensation or monthly salary in excess of Rs. 200/-. 5. Para 2(f) of the Scheme is ultra vires the Act to the extent that it does not exclude employees drawing monthly compensation or salary in excess of Rs. 200/-.
Final Decision: All the petitions were allowed to the extent that the respondents were directed not to enforce the scheme without bringing para 2 (f) of the Scheme in conformity with law. There was no order as to costs in the Court.
A.N.Grover, J.
1. This judgment will also dispose of the other two connected petitions (Civil Writs Nos. 1067 and 1069 of 1957) as common points of law are involved. The facts in Civil Writ No. 1068 of 1957 may be shortly stated.
2. The Government of India started a general engineering workshop at Faridabad in which according to the petitioner-company ordinary stoves meant for domestic use were being manufactured. The Government decided to dispose of the factory and invited tenders for its sale. The tender of the petitioner-company was accepted and an agreement was entered into on 17-2-1955 by virtue of which the company purchased the factory for Rs. 3,56,045/8/-.
It is alleged that after the purchase of the factory ihe company utilised the engineering workshop for the manufacture of parts required for installing a motor factory up to June 1950. By means of a letter dated 31-7-1956 the company was informed by the Regional Provident Fund Commissioner that the factory in question fell within the purview of the Employees Provident Funds Act, 1952.
The company was required to deposit the dues on account of contribution and administrative charges in respect of such employees who wore entitled to the benefit of the scheme which had been framed by the Central Government. It was further mentioned in the letter that the date from which the factory started functioning under the Rehabilitation Ministry would be deemed to be the date of its establishment.
The company, however, took up the position that the factory had been established by it in October 1955 and the Act was not applicable for three years as provided in Section 16(b). Oilier objections were raised which need not be stated. As respondent No. 1 did not accept the position advanced by the company the present petition was filed under Article 226 of tlie Constitution.
2a. Mr. S. K. Kapur who appears for the company has raised certain points which are common to all the petitions and it would be convenient to deal with them first. It is contended that Section 5 of the Act is unconstitutional and ultra vires as it violates Article 14 of the Constitution, The validity ot Section 5 of the Act is further assailed on tlte ground that its provisions place unreasonable restrictions on the right to hold property and thus come into conflict with the provisions of Article 19(l)(f) of the Constitution.
3. In order to decide the questions that have been canvassed the provisions of the Act before its amendment by Act 94 of 1956 atone will be relevant as they would govern the decision of the case.
4. Section 5 is as follows:
"(1) The Central Government may, by notification in the Official Gazette, frame a Scheme to be called the Employees Provident Fund Scheme for the establishment of provident funds under this Act for employees or for any class of employees and specify the factories or class of factories to which the said scheme shall apply and there shall be established, as soon as may be after the framing of the Scheme, a Fund in accordance with the provisions of this Act and the Scheme.
(2) A Scheme framed under Sub-section (1) may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may e specified in this behalf in the Scheme". Section 6 provides for the contributition which shall be paid by the employer to the fund. According to Section 7 the Central Government may by notification add to. amend or vary any scheme framed under the Act.
Section 16 deserves to be set out in its entirety and its provisions are as follows: "(1) This Act shall not apply to - (a) any factory belonging to the Government or a local authority, and
(b) any other factory, established whether before or after the commencement of this Act, unless three years have elapsed from its establishment.
Explanation: For the removal of doubts it is hereby declared that the date of the establishment of a factory shall not be deemed to have been changed merely by reaso
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