Source – Supreme Court

Why in News?

Recently, the Supreme Court in the matter of M/S Mathosri Manikbai Kothari College of Visual Arts v. The Assistant Provident Fund Commissioner has resolved the legal position relating to the clubbing of different institutes for the purpose of coverage under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act).

What was the Background of M/S Mathosri Manikbai Kothari College of Visual Arts v. The Assistant Provident Fund Commissioner Case?

• The Ideal Fine Arts Society runs two institutions, namely, the Ideal Institute of Fine Arts and Mathosri Manikbai Kothari College of Visual Arts.
• Both the Institutions are being run in the same campus and the Ideal Institute employed 8 people, whereas the Arts College had 18 employees.
• Based on the report of the Enforcement Officer dated 1^st July 2003, it was reported that there being total 26 employees working in both the Institutes, which are managed by the same Society and within the same premises, the establishment would be covered under the provisions of the EPF Act w.e.f. 1st March 1988.
• An order was passed under Section 7-A of the EPF Act, assessing the amount of contributions to be made by the appellant under various schemes of the EPF Act.
• The aforesaid order was challenged by the appellant through statutory appeal before the Tribunal, which was later dismissed.
• Thereafter, the appellant filed a writ petition challenging the order passed by the Tribunal before the single judge bench of the High Court of Karnataka.
• The Single Judge bench of the HC upheld the order passed by the Tribunal and also upheld the application of EPF Act to the appellant’s institution.
• In writ appeal, the order of the learned Single Judge was upheld by the Division Bench of the High Court of Karnataka.
• Thereafter an appeal was filed before the SC which was later dismissed.

What were the Court’s Observations?

• The Bench of Justices Hima Kohli and Rajesh Bindal observed that, from a perusal of the material available on record and the settled position of law, it can be safely opined that there is financial integrity between the Society of the appellant as well as the Ideal Institute as substantial funds have been advanced to the Institutes by the Society. Further, both the Institutes are functioning from the same premises.
• The Bench concluded that the two institutions can be interconnected for the purpose of coverage.

What are the Legal Provisions Involved in it?

• About:
  • It is a social security legislation which is enacted for the betterment of the future of the workers on their retirement or for the dependents of the workers in case of their death.
  • This Act provides for the institution of provident funds, pension funds and deposit-linked insurance funds for employees in factories and other establishments.
• Applicability of the Act
  • Section 1(3)(a) of this Act states that this act is applicable to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more people are employed.
  • Section 1(3)(b) of this Act states that this act is applicable to any other establishment employing twenty or more persons or a class of such establishments which the Central Government may, by notification in the Official Gazette, specify on this behalf.
    • Provided that the Central Government may, after giving not less than two months’ notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than twenty as may be specified in the notification.
• Section 7-A of the EPF Act
  • Section 7-A deals with the determination of money due from employers. It states that-
    • (1) The Central Provident Fund Commissioner, any Additional Central Provident Fund Commissioner, any Deputy Provident Fund Commissioner, any Regional Provident Fund Commissioner, or any Assistant Provident Fund Commissioner may, by order, —
    • (a) in a case where a dispute arises regarding the applicability of this Act to an establishment, decide such dispute; and
    • (b) determine the amount due from any employer under any provision of this Act, the Scheme or the Pension Scheme or the Insurance Scheme, as the case may be, and for any of the aforesaid purposes may conduct such inquiry as he may deem necessary.
    • (2) The officer conducting the inquiry under sub-section (1) shall, for the purposes of such inquiry, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), for trying a suit in respect of the following matters, namely: —
    • (a) enforcing the attendance of any person or examining him on oath;
    • (b) requiring the discovery and production of documents;
    • (c) receiving evidence on affidavit;
    • (d) issuing commissions for the examination of witnesses; and any such inquiry shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860).
    • (3) No order shall be made under sub-section (1), unless the employer concerned is given a reasonable opportunity to represent his case.
    • (3A) Where the employer, employee or any other person required to attend the inquiry under sub-section (1) fails to attend such inquiry without assigning any valid reason or fails to produce any document or to file any report or return when called upon to do so, the officer conducting the inquiry may decide the applicability of the Act or determine the amount due from any employer, as the case may be, on the basis of the evidence adduced during such inquiry and other documents available on record.
    • (4) Where an order under sub-section (1) is passed against an employer ex parte, he may, within three months from the date of communication of such order, apply to the officer for setting aside such order and if he satisfies the officer that the show cause notice was not duly served or that he was prevented by any sufficient cause from appearing when the inquiry was held, the officer shall make an order setting aside his earlier order and shall appoint a date for proceeding with the inquiry.

Provided that no such order shall be set aside merely on the ground that there has been an irregularity in the service of the show cause notice if the officer is satisfied that the employer had notice of the date of hearing and had sufficient time to appear before the officer.

Explanation. —Where an appeal has been preferred under this Act against an order passed ex parte and such appeal has been disposed of otherwise than on the ground that the appellant has withdrawn the appeal, no application shall lie under this sub-section for setting aside the ex parte order.

• • • (5) No order passed under this section shall be set aside on any application under sub-section (4) unless notice thereof has been served to the opposite party.

What are the Major Case Laws in Relation to the Coverage of EPF Act?

• In the Associated Cement Co. v. Workmen (1960) case, the SC held that it is impossible to lay down any one test as absolute and invariable for all cases to determine the issue regarding the clubbing of two establishments for the purpose of coverage under the EPF Act.
• In Noor Niwas Nursery Public School v. Regional Provident Fund Commissioner and Ors. (2001) case, the SC held that no straight jacket formula or test can be laid down for the purpose of clubbing of the two establishments and coverage under the EPF Act.