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Judgment
P. Sathasivam, J.—Aggrieved against the order of the second respondent dated August 13, 1996, November 21, 1996, and the
consequential order issued in the month of February. 1997. the petitioner has filed the present writ petition on various grounds.
The petitioner is a handloom weaving cooperative society registered under the Tamil Nadu Co-operative Societies Act and Rules. They are
governed by their own bye-laws and special bye- laws. The main object of the petitioner is to uplift the weaving community in and around
Madathupatti area by providing employment. The Central and the State Governments have made contribution through share for operating the
society. The petitioner- society has engaged only about 8 office staff to maintain records and to do the work relating thereto. The weavers are the
members of the society, originally there were about 355 members. However, only 230 members are carrying on the work only when they are able
to get yarn. The petitioner-society does not have any looms. The yarn is directly supplied to its members and in turn the members weave the yarn
in their home and supply the finished cloth to the society.
It is further contended that all the persons who supply yarn are only the members of the petitioner-society and as such, there is no master and
servant relationship. The Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter known as ""the E.P.F. Act""), will not
apply to the petitioner-society. Only, recently, i.e., on November 1, 1996, the board of management took over the management. The petitioner
came to understand that the Assistant Provident Fund Commissioner in his notice dated August 13, 1996, in exercise of the powers conferred u/s
7-A of the Employees'' Provident Funds Act had directed the petitioner to remit a sum of Rs. 2,67,437 towards Employees'' Provident Fund
contribution and Rs. 74,206.2 towards contribution and administrative charges. In total a demand of sum of Rs. 3,41,643.20 was made by the
Assistant Provident Fund Commissioner. The notice also stated that belated remittances would attract levy of damages u/s 14-B of the Act. The
petitioner further submitted that on an erroneous appreciation of facts, the respondents have wrongly come to the conclusion that the petitioner is
covered under the Employees'' Provident Funds Act and- it is also liable to pay contributions and further directed the bank in which the petitioner
has its account to deduct the amount of Rs. 3,41,643.20 from the account of the petitioner-society. In these circumstances, the petitioner has
approached this Court to quash the said orders.
Respondents Nos. 1 and 2 have filed a counter-affidavit. The defence set out by them in their counter-affidavit is briefly stated here-under;
The petitioner establishment is a weavers co-operative production and sales society and is covered under the Employees'' Provident Funds Act.
Since the production of weaver employees was not taken into account for computing the employment strength of the establishment by the
petitioner-society, the respondent authorities summoned the petitioner-society to appear for an enquiry u/s 7-A of the Act. On June 14, 1994, the
petitioner''s representative one Mr. Sivaprakasam appeared and produced some records. He explained that the production weavers are not to be
treated as employees of the society. The authority, after scrutinising the records and after considering the oral representations made on behalf of
the petitioner, arrived at a conclusion that the production weavers are the employees of the society, since they are engaged in the work of the
society. Accordingly, the coverage was regularised u/s 1(3)(a) of the Act. Further, enquiry was initiated for assessing the provident fund dues for a
period from February, 1994, to February, 1996, fixing the enquiry on July 30. 1996. On that date one N. Balusamy. clerk and representative of
the establishment, appeared for the enquiry. The authority assessed the quantum payable by the petitioner-society. Since even after several
demands and steps to recover the amount, the petitioner neglected to pay the same, proceedings were initiated against the bankers in order to
release the amount due to the respondent.
It is further contended that the weavers in question do the work in connection with the work of the petitioner establishment. They are also paid
wages on the basis of their work. The cloth woven by the weavers is sold by the petitioner establishment. The yarn is supplied to the weavers by
the petitioner establishment. Thus, it would be seen that the weavers are engaged for the work in connection with the work of the petitioner
establishment. Therefore, there is an employer and employee relationship between the petitioner establishment and their weaver workers. Hence,
the decision arrived at by Respondents Nos. 1 and 2 is correct and in order. The weaver workers are entitled for provident fund benefits and the
petitioner establishment has to enrol them and remit the provident fund contributions in respect of them. The Act covers all types of employees
employed directly and indirectly, permanent or casual and the petitioner establishment cannot absolve itself of its liability under the Act in respect of
their weaver workers. There is no order of the Government of Tamil Nadu exempting the petitioner establishment from payment of provident fund
dues in respect of their employees. The Act is a piece of social legislation conferring certain retiral benefits on the working class of people. It is a
beneficial enactment pursuant to constitutional mandate keeping in view the basic human rights of individuals in a democratic country. In those
circumstances, the writ petition deserves to be dismissed.
In the light of the above pleadings I have heard Mr. S. Silambannan, learned counsel appearing for the petitioner and Ms. Radha Srinivasan,
learned counsel appearing for the'' respondents.
According to Mr. Silambannan, learned counsel appearing for the petitioner, the impugned order of the second respondent and consequential
notice are arbitrary, illegal and violative of Articles 14 and 16 of the Constitution of India. He submitted that the second respondent has passed an
order u/s 7-A of the Act without proper application of mind. He further submitted that the petitioner-society does not engage in manufacturing
process by utilising any machinery and the society does not have any looms of its own. There is no employer-employee or servant and master
relationship between the members and the petitioner-society. On the other hand, Ms Radha Srinivasan, learned counsel appearing for the
respondents, after taking me through the relevant provisions of the Act submitted that inasmuch as weaver workers work for the petitioner-society,
the petitioner-society paid wages to them, they are the petitioner''s employees as per the definition in the statute.
She also submitted that in the enquiry held u/s 7-A of the Act the liability and quantum have been specifically determined after giving proper
opportunity to the petitioner. She finally submitted that the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act covers
all types of employees employed directly and indirectly, permanent or casual, hence the petitioner establishment cannot absolve itself of its liability
under the said Act in respect of their weaver workers.
I have carefully considered the rival submissions.
In order to appreciate the contentions of both sides, I snail first refer to the definitions of ""employer"" and ""employee"" as found in Section 2(e) and
(f) of the Employees'' Provident Funds Act, 1952:
(e) ''employer'' means:
(i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal
representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under Clause (f) of Sub-section
(1) of Section 7 of the Factories Act, 1948, the person so named; and
(ii) in relation to any other establishment, the person who or the authority, which, has the ultimate control over the affairs of the establishment, and
where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent;
(f) ''employee'' means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an
establishment, and who gets his wages directly or indirectly from the employer, and includes any person -
(i) employed by or through a contractor in or in connection with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the
establishment.
In the light of the above definition, it is the case of the petitioner that the members of the society get yarn from the society and after finishing the
product they sell it to the society. In turn, the petitioner society pays wages to them. According to learned counsel appearing for the petitioner,
inasmuch as the persons who do work for the society are members they cannot be either termed as employees or equated as employees of a
factory. At this juncture, he relied on a decision in Chintaman Rao and Another Vs. The State of Madhya Pradesh, . The said decision arose under
the Factories Act. In the said decision, their Lordships have observed thus at p 256:
The concept of employment involves three ingredients: (1) employer (2) employee and (3) the contract of employment. The employer is one who
employs, i.e., one who engages the services of other persons. The employee is one who works for another for hire. The employment is the
contract of service between the employer and the employee whereunder the employee agrees to serve the employer subject to his control and
supervision.
In this case, according to the petitioner, in view of the test laid down above, mere is no relationship of employer and employee.
In All India Railway Institute Employees'' Association v. Union of India (1991) I LLJ 265 (SC), if there is no relation as employer and employee, it
is not open to any one to claim benefits under the statute. In the light of the above factual position, in our case, I am not persuaded, to accept the
contention of the Learned counsel appearing for the petitioner.
Now, let me consider the decisions referred to by learned counsel appearing for the respondents. In Silver Jubilee Tailoring House and Others
Vs. Chief Inspector of Shops and Establishments and Another, , the following conclusion of their Lordships is very relevant and the same is
extracted at p. 503:
The right to control the manner of work is not the exclusive test for determining the relationship of employer and employee. It is also to be
considered as to who provides the equipment. It might be that little weight can nowadays be put upon the provisions of tools of minor character as
opposed to plant and equipment on a large scale. But so far as tailoring is concerned, the fact that sewing machines on which the workers do the
work generally belong to the employer is an important consideration for deciding that the relationship is that of master and servant.
Further,
Apart from this when the employer has the right to reject the end product if it does not conform to the instructions of the employer and direct the
worker to restitch it, the element of control and supervision is also involved. The fact that the employees take up the work from other tailoring
establishments and do that work in the shop in which they generally attend for work and that they are not obliged to work for the whole day do not
militate against their being employees of the proprietor of the shop where they attend for work.
It is further observed that at p. 504:
.... even if a person is not wholly employed if he is principally employed in connection with the business of the shop, he will be a ''person
employed'' within the meaning of the sub-section. Therefore, even if he accepts some work from other tailoring establishments or does not work
whole time in a particular establishment, that would not in any way derogate from his being employed in the shop where he is principally
employed.
In Pondicherry State Weavers'' Co-operative Society Vs. Regional Director, Employees'' State Insurance Corporation, Madras, a Division
Bench of this Court has held that at p. 19:
It is well established that a co-operative society, on registration, becomes a body corporate with a perpetual succession and it is legally
independent of its members who constitute the society. This is made clear by Section 38 of the Pondicherry Co-operative Societies Act, 1972.
Once the society is independent of its members and has a separate legal existence apart from its members, then there is no bar for the society
employing its members and there being a contract of employment between the society and its members. If such a contract of employment is
entered into between the society and its members, then the members so employed should be taken to have two independent capacities - one as a
member of the society and the other as an employee of the society. We do not think that there is any merger of the said two positions or
capacities. One''s position as a shareholder is different from one''s position as an employee of the society"".
Again, after analysing the decision of the Privy Council as well as the Supreme Court, the Bench has further held at p. 20:
Having regard to the legal position enunciated in the decisions referred to above, it is clear that a shareholder of a co- operative society registered
under the Pondicherry Co-operative Societies Act, 1972, can also be its employee if a contract of employment is established. The fact that an
employee happens to be a shareholder of a co-operative society does not make him any the less of an employee. In this case that there was an
employment of persons who were shareholders of the co-operative society is clear from the registers of the society wherein the amounts paid to
the employees as wages, have been debited against the company and the employees'' names also find a place in the attendance register, therefore,
can it be said that merely because the employees were members holding shares in the co-operative society, they cease to be its employees? Thus,
it cannot be said that they are not entitled to be covered by the Employees'' State Insurance Act. In this view of the matter, we have to uphold the
decision of the Employees'' Insurance Court and dismiss the appeal.
The above decision is directly on the point and I am of the view that the principle laid down by the Bench is applicable to our case.
In P.M. Patel and Sons v. Union of India, , their Lordships with regard to home workers have concluded thus:
In our opinion, the home workers are ''employees'' within the definition contained in Clause (f) of Section 2 of the Employees'' Provident Funds
Act.
The next question is whether having regard to the peculiar features of the home workers'' system of employment, the provisions of the
Employees'' Provident Funds Act and Scheme can be applied on their terms to home workers. The principal contention in this connection is that
no retirement age is fixed in the case of home workers and therefore, the scheme cannot be implemented in respect of them. Clause (a) of sub-
para (1) of para 69 of the Employees'' Provident Funds Scheme provides that a member may withdraw the full amount standing to his credit in the
fund on retirement from service after attaining the age of 55 years.'' It seems to us that the law does not envisage the fixation of a retirement age
before that provision can apply. A worker is entitled to withdraw the amount standing to his credit in the Fund if he retires at any time after attaining
the age of 55 years. There is no reference to any pre-determined age of superannuation. The expression ''retirement'' does not, in the absence of
anything more, necessarily imply a fixed age for leaving service. It has a wide connotation. In a context where no age of superannuation has been
fixed, the expression must take on its ordinary meaning of the normal cessation of service by an act of employer or of the worker. That a person
may ''retire'' even before reaching any specified age is exemplified by Clause (b) of sub-para (1) of para 69 which speaks of ''retirement on
account of permanent and total incapacity for work due to bodily or mental infirmity''. We may point out that in Delhi Cloth and General Mills Co.,
Ltd. Vs. Workmen and Others etc., this Court has held that a gratuity scheme could be effective even if no age of superannuation was fixed.
Learned counsel for the petitioners has referred us to The Regional Provident Fund Commissioner, Andhra Pradesh Vs. Sri. T.S. Hariharan,
where this Court observed in respect of the Employees'' Provident Funds Act at pp 418-419 as follows:
The Act was brought on the statute book for providing for the institution of a provident fund for the employees in factories and other
establishments. The basic purpose of providing for provident funds appears to be to make provision for the future of the industrial worker after his
retirement or for his dependents in case of his early death. To achieve this ultimate object the Act is designed to cultivate among the workers a
spirit of saving something regularly, and also to encourage stabilisation of a steady labour force in the industrial centres.
and it is pointed out that the Court rejected the plea that the Act could apply to short-term employees also. The case, in our opinion, is
distinguishable because the workers there were taken in employment on account of an emergency and for a very short period necessitated by an
abnormal contingency. That is not the position here. In the present case, the employment was entered into in the regular course of business. We
hold that there is no substance in the contention of the petitioners that the provisions of the Employees'' Provident Funds Act and the Scheme
cannot be applied at all to home workers. There is no reason why the provisions of the Act and Scheme should not apply where their terms permit
such application.
We may also point out that the Beedi and Cigar Workers (Conditions of Employment) Act, 1966, and the Rules made thereunder by the
Maharashtra Government have been framed specifically on the basis that, in certain matters, home workers enjoy a status akin to the general
category of workers. Not only do these provisions apply to ''industrial premises'' as defined under Clause (i) of Section 2 of that Act but also to an
''establishment'' as defined in Clause (h) of Section 2 of the Act. There are several provisions which apply to employees in establishments and are
not confined to industrial premises. An ''establishment'', by the terms of its definition, is wide enough to include the dwelling house of a home
worker. A home worker would be entitled, therefore, to annual leave with wages and wages during leave period among other things. In the
Maharashtra Beedi and Cigar Workers (Conditions of Employment) Rules, 1968, there is specific provision in respect of the payment of wages to
home workers. The rules relating to the issue of raw material by the employer would extend to home workers also.
Accordingly, we reject the contention that the provisions of the Employees'' Provident Funds Act and the Schemes cannot be implemented at
all in respect of the beedi industry.
In Writ Appeals Nos. 2308 to 2317 of 1996, a Division Bench of this Court dated April 4, 1996, after referring to earlier decisions, more
particularly P.M. Patel and Sons'' case (supra), has held thus:
It is, in this context, it has also been further held that acceptance of the work would also be ''supervision'' for the purpose of Section 2(9) of the
Employees'' State Insurance Act. If that be so, it would be more so, in the case of the definition u/s 2(f) of the Act. Therefore, it is not possible to
hold that the ring labellers are not employees of the petitioner appellant. In view of what is stated above, they become the employees of the
manufacturers of beedis. That being so, the decision of the learned single Judge does not call for interference.
Finally, in the latest decision Madras Government Servants Co-operative Society Ltd., Madras Vs. Employees'' State Insurance Corporation,
Madras, , a Division Bench of this Court considered the question, viz., whether a co-operative society engaged in financing members for their use
and recovering the same with interest would be a ""shop"" and could come within the coverage of the Employees'' State Insurance Act. The Division
Bench, after analysing the provisions of the Employees'' State Insurance Act, 1948, and various decisions of the Apex Court, has arrived at the
following conclusion:
The charging of interest and sharing the profits among the various members will be sufficient to bring the impugned notification within the ambit of
the Act, the interest charged by the petitioner society is the price for rendering services. We are in agreement with the finding of the learned Judge
that the petitioner cannot impeach the notification. It is in evidence of P.W.-1 and can also be seen from the averments in the petition that the
petitioner is doing money-lending business and interest is also charged from the debtors. By self-imposed restrictions, the facility is extended only
to its members and not to the public at large. But it cannot be disputed that what the petitioner is doing is systematic commercial or economic
activity, and it is one of its ''ordinary occupations''.
I am satisfied that the decisions referred to by learned counsel appearing for the respondents, make the position clear and in view of the fact
that the petitioner-society paid wages to them (members), they are petitioner''s employees as per the definition in the statute. The weavers in
question who are the members of the society do the work in connection with the work of the petitioner establishment, they are also paid wages on
the basis of their work, the cloth woven by the weavers is sold by the petitioner-society, the yarn is supplied to the weavers by the petitioner
establishment, thus it would be seen that the weavers are engaged for the work in connection with the work of the petitioner establishment.
Therefore, I hold that there is an employer and employee relationship between the petitioner-society and their weaver/workers.
Further, there is no dispute that during the enquiry u/s 7-A, the petitioner-society was given ample opportunity to put forth their case. There is
also no order by the Government of Tamil Nadu exempting the petitioner establishment from the payment of provident fund dues in respect of their
employees. The Employees'' Provident Funds and Miscellaneous Provisions Act, 1952, is a piece of legislation intended for conferring certain
benefits on the working class of people. As rightly contended by learned counsel appearing for the respondents it is a beneficial enactment pursuant
to the constitutional mandate keeping in view the basic human rights of the individual in a democratic country.
Under these circumstances, I do not find any merit in any one of the contentions of learned counsel appearing for the petitioner; consequently
the writ petition fails and the same is dismissed. No costs. Time for payment four weeks.
In view of the dismissal of the main petition W.M.Ps. Nos. 7302 and 7303 of 1997 do not survive and the same are also dismissed.