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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT

HYDERABAD

HON’BLE SRI JUSTICE NAGESH BHEEMAPAKA

WRIT PETITION No. 14335 OF 2010

05.03.2026

Between:

Mr. R. Adinarayana

.. Petitioner

And

The Assistant Provident Fund Commissioner,

Sub-Regional Office, Kukatpally, Hyderabad

& another

..Respondents

O R D E R:

Petitioner is stated to be a contractor engaged in the

business of supply of manpower to various establishments

including Government Departments and that he is duly

registered with the Office of the Labour Office under Section

12(1) of the Contract Labour (Regulation and Abolition) Act,

1970 and he has been carrying on such activity in accordance

with law. It is stated, in the course of business, he entered into

an agreement with the 2^nd Respondent Department for the

purpose of supplying certain persons as required by the said

Department. Petitioner states that the agreement was initially

for a period of six years commencing from 25.01.2002 and

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ending on 24.01.2008 and that the same was extended from

time to time till February, 2010.

1.1. Under the terms of the said Agreement, petitioner

was required to supply manpower in respect of the categories of

posts mentioned therein and that the wages payable to such

personnel were specifically fixed in the Agreement itself. The

Agreement stipulated that he shall assume responsibility for

payment of minimum wages as fixed by the Government from

time to time and he should also be responsible for payment of

Employees Provident Fund, Employees State Insurance and

other allowances as required by law. Certain other

responsibilities were also fixed upon him in his capacity as

contractor, though the same are not germane to the present

issue. For the services rendered by him in providing specified

manpower to the 2^nd Respondent, he was offered only 3%

service charge on the total bill amount paid to the persons

employed in the specified posts and that the commission

payable to him was confined strictly to 3% of the total billing

amount.

1.2. Petitioner contends that a reading of the entire

Agreement would show that though the contractor was required

to adhere to statutory provisions such as the Minimum Wages

Act, Workmen Compensation Act, EPF, ESI and other allied

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Acts, the structure of the contract clearly indicates that the

principal employer, namely the 2nd Respondent was to assume

responsibility for matching contribution towards provident fund

and other statutory payments to the workers. This is evident

from the fact that he was paid only 3% of the total billed

amount as commission, whereas the matching contribution

under the Provident Fund Act and the payments contemplated

under ESI would come to nearly 12.5% to 13% of the total bill

amount. Therefore, it is abundantly clear that it is the principal

employer ie. the 2^nd Respondent, which has to assume

responsibility of making payments under the respective

enactments.

1.3. Petitioner states that the Agreement itself

specifically provided the minimum amount payable to each

outsourced employee and that the said amount was a

consolidated payment inclusive of the wages payable to the

employees. It is not the case of Respondents that the 2^nd

Respondent was making a lump sum payment to him without

fixing the amount payable to each employee. On the contrary,

the amount payable to each outsourced employee was

predetermined in the Agreement itself. The 2^nd Respondent

Department ensured that he paid the minimum amounts

specified in the Agreement to each of the employees by

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deploying one of its own employees to supervise and ensure that

the specified wages were paid. It is stated, petitioner was not

paid any additional amount over and above the wages fixed in

the Agreement so as to enable him to make matching

contributions towards provident fund and other statutory

benefits.

1.4. Petitioner contends that the stipulation that he

should make matching contribution for provident fund and also

contribute towards ESI of the outsourced employees is

inequitable and unconscionable inasmuch as