Padiyur Sarvodaya Sangh vs Union of India (UOI) and Others

Sathasivam, J.—The only question that arises out of all the above writ petitions is whether the artisans engaged by Sarvodaya Sanghs are

governed by the provisions of Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 or not? In the light of the only common issue,

all the writ petitions are being disposed of by the following common order.

The petitioners, all Sarvodaya Sanghs, have approached this Court to issue a writ of mandamus to the respondents to forbear from

implementing the provisions of Employees'' Provident Funds and Miscellaneous Provisions Act, 1952, against the respective petitioner in each case

so far as it is concerned with the artisans engaged by them.

For the convenience, I shall refer the case of the petitioner in W.P. No. 3292 of 1997. It is stated that Sarvodaya Sangh was founded by

Mahatma Gandhi with an object to provide job opportunities to the poor and downtrodden people and to improve Khadi and Village Industries.

The Central Government has promulgated an Act, namely, Act VI of 1956 under which Khadi and Village Industries Commission was established.

All the Sarvodaya Sanghs in Tamil Nadu are units under Khadi and Village Industries Commission (hereinafter referred to as KVIC) which is an

establishment to promote Khadi and Village Industries production and sales activities by providing financial and technical assistance to the

institutions and artisans engaged in these activities. The Sangh has already enrolled their monthly paid staff under the Provident Funds Act. There

are several artisans earning their livelihood by self employment through the Sangh. They are home workers, working without any duty hour, without

any supervisor or compulsion about their attendance or duration of work. They are self employed people. A section of these artisans purchase

their raw materials from the Sangh and sell their finished products to the Sangh. Another section of these artisans who, due to their financial

position, could not pay for raw materials, are provided with raw materials by the Sangh itself and the Sangh collected their finished products and

raw materials. The payment will vary from day-to-day and week to week. There will not be any uniformity in either contribution. They are not

workers engaged by the Sangh. The question of applicability of the existing labour laws to these Khadi and Village Industries activities are

examined by several committees appointed by Government of India. The Sarvodaya Sanghs were exempted from Income Tax Act, Central Sales

Tax Act, Tamil Nadu General Sales Tax Act, Employees'' State Insurance Act, Tamil Nadu Shops and Establishments Act and Bonus Act, as they

are service oriented and are being run on ""no profit and no loss"" basis. The Sanghs are having schemes, namely, Welfare Scheme and Incentive

Scheme which are beneficial to artisans. Both the schemes together contribute about 18-1/3 per cent of their earnings as welfare and incentive. It is

remarkable to note that the artisans need not contribute any amount towards the scheme. Thus, it is more beneficial to the artisans when compared

to the schemes framed under the Employees'' Provident Funds Act. Meanwhile, some of the Sarvodaya Sanghs received notices and letters from

the Provident Fund Commissioner to produce files and other records relating to artisans to consider their obligation to contribute towards fund for

artisans. However, the recommendations made by various committees are not yet implemented. Those recommendations are not taken note of by

the respondents. If it is taken note of, the Sangh would not have received notice or letter for its contribution towards the fund. All the Sarvodaya

Sanghs are not independent bodies and they depend on KVIC for financial assistance. Each Sangh is a unit under the KVIC which is an

establishment belonging to Central Government. u/s 16, the application of the provisions of Employees'' Provident Funds Act is not feasible, if the

unit is an establishment belonging to Central Government. In such circumstances having no other efficacious remedy, the petitioner has filed the

present writ petition as stated above.

On behalf of the respondents, Assistant Provident Fund Commissioner, Madras, has filed a common counter-affidavit. The case of the

respondent as seen from the common counter-affidavit is briefly stated hereunder. The petitioners Sarvodaya Sanghs are branch units of Khadi and

Village Industries Commission. All the units of the Sarvodaya Sanghs have been brought under the purview of the Employees'' Provident Funds

and Miscellaneous Provisions Act, 1952, and the schemes framed thereunder, for quite a long time. The writ-petitioners have been complying with

the provisions of the Act. The petitioners establishments have enrolled only a section of their employees to provident fund benefits, leaving a sizable

section of a class of their employees, namely, weavers, spinners and other artisan employees engaged in the work of the establishments, viz.,

carpentry, manufacturing of soap, manufacturing of chappals and shoes, etc., as uncovered to provident funds benefits, on the plea that these

categories of their employees are entitled to artisan''s welfare fund. The weavers, artisans or workers as the case may be, are provided with the

raw-materials by the respective Sanghs and that the so-called artisans or weavers convert the raw-materials into finished product, and return the

same to the Sanghs. The difference in value of the finished products, and raw materials is nothing but ""wages"" paid to the workers. The work had

to be done under the direction of the establishments with reference to the design or the specification and their supervision is possible, having regard

to the skill needed for its performance. In the light of the law laid down by the Supreme Court in P.M. Patel and Sons and Others Vs. Union of

India (UOI) and Others, the artisans or weavers of the Sarvodaya Sanghs undoubtedly fall under the ambit of ""employees"" as defined u/s 2(f) of

the said Act. Khadi and Village Industries Commission units are coverable under the Act and they should comply with the provisions of the Act.

The petitioner''s request for exemption from application of labour law as for the Khadi and Village Industries sectors on account of various

difficulties experienced was carefully considered by the Government and the Government of India, Ministry of Labour, have to ensure safety to

workers and to provide them with minimum social security benefits. Further, the coverage under the Act, is a pre-requisite and hence the

petitioners have to bring all home workers artisans workers besides the casual and contract labourers of the Khadi and Village Industries

Commission under the purview of the Act. The object of the enactment of the Act is to provide social security cover to the workers, to protect

their families in their old age through old age and survivors pension. The Act provides for grant of exemption from the implementation of the

scheme to an establishment as a whole or its class of employees where the employees are in enjoyment of provident fund, the benefits of which are

not less favourable than that available under the statutory scheme. Therefore it is open to the Sanghs to seek exemption from the Employees''

Provident Fund Scheme as the establishment as a whole or to the employees a class after implementing the provisions of the Act. Since the Act is a

social beneficial welfare legislation, because of the inaction of the Sanghs, the workers are being denied the benefits of the Act. With these

averments, they prayed for dismissal of the writ petition.

The petitioners have filed a reply affidavit reiterating the stand taken by them in the main affidavit.

In the light of the above pleadings, I have heard Shri A.L. Somayaji, learned senior counsel for the petitioner and Sri V. Vibhishanan for the

respondents.

Shri A.L. Somayaji, learned senior counsel for the petitioner, has raised the following contentions:

(i) Artisans are not employees of the petitioners-Sarvodaya Sanghs and no master and servant relationship exists.

(ii) In the light of the admission in the counter-affidavit that Sarvodaya Sanghs are units of Khadi and Village Industries, they ought to have

exercised the power u/s 16(2) of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 and issued notification exempting from

the provisions of the said Act.

(iii) The authorities failed to consider the various representations as well as the reports of specially constituted bodies regarding the claim of the

petitioners.

On the other hand, Sri V. Vibhishanan, learned counsel for the respondents, after taking me through the relevant provisions of the Act and

schedule made thereunder as well as the various particulars furnished in the counter-affidavit, would contend that the artisans or weavers of

Sarvodaya Sanghs fall under the ambit of ""employees"" as defined u/s 2(f) of the Act. He further contended that regarding the nature of the work

being done by the artisans or weavers, undoubtedly the provisions of the Act are applicable to them consequently no writ in the nature of

mandamus need be issued as claimed by the petitioners. He further contended that inasmuch as other category of persons were already brought

under the purview of the Act, if the Sarvodaya Sanghs want an exemption from the purview of the Act in so far as the artisans are concerned, it is

open to them to approach the Government of India u/s 17(1) of the said Act.

I have carefully considered the rival submissions.

There is no dispute that except the artisans, all the units of Sarvoday Sanghs have been brought under the purview of the Employees'' Provident

Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act) and the schemes framed thereunder for quite a long time and

admittedly the writ- petitioners have been complying with the provisions of the Act. In other words, the Sarvodaya Sanghs have already enrolled

their monthly-paid staff under the provisions of the Act. Regarding artisans, according to the petitioners, they are earning their livelihood by self

employment through the Sangh. They are home workers, working without any duty hour, without any supervisor or compulsion about other

attendance or duration of work. They are self-employed people. It is explained that a section of these artisans purchase their raw materials from

the Sangh and sell their finished products by paying the difference of value of finished products and raw materials. The payment will vary from day-

to-day and week-to-week. There will not be any uniformity in their contribution. In such circumstances, according to them, they are not workers

engaged by the Sanghs. In support of the above position, it is also brought to my notice, the report of the several committees. No doubt, some of

the committees have recommended for exclusion of artisans or weavers from the purview of the provisions of the Act. It is also brought to my

notice that the Sarvodaya Sanghs were exempted from Income- tax Act, Central Sales Tax Act, Tamil Nadu General Sales Tax Act, Employees''

State Insurance Act, Tamil Nadu Shops and Establishments Act and Bonus Act, since they are service oriented and are being run on ""no profit and

no loss"" basis. It is also stated that all the Sarvodaya Sanghs are not independent bodies and they depend on Khadi and Village Industries

Commission for financial assistance. The Sanghs have to submit their financial requirements to Khadi and Village Industries Commission which in

turn is provided with financial assistance by the Central Government. The fixation of rates of products of Khadi sector, the rates of raw materials,

wages, margins for overheads are fixed by the Khadi and Village Industries Commission which is an establishment belonging to Central

Government.

In order to appreciate the rival contentions, it is better to refer the relevant provisions of the Act. Section 2(e) of the Act defines ""employer"" as

follows:

Section 2(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 (63 of 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.

Section 2(f) defines ""employee"" as follows:

Section 2(f) - ''employee'' means any person who is employed for wages in any kind of work, manual or otherwise, is 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 (56 of 1961) or under the Standing Orders of the

establishment.

Section 2(g) - ''factory means any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is

ordinarily so carried on, whether with the aid of power or without the aid of power"".

Section 2(i) - defines ""industry"" as follows:

Section 2(i) ''industry'' means any industry specified in Schedule I, and includes any other industry added to the schedule by notification u/s 4"".

By virtue of Section 4 of the Act, it is open to the Central Government by notification in the Official Gazette, to add to Schedule I any other

industry in respect of the employees whereof it is of opinion that a provident fund scheme should be framed under this Act. Section 16 of the Act

speaks about certain establishments to which provisions of the Act are not applicable. Section 16(2) of the Act enables the Central Government to

exempt any establishment from the provisions of the Act Section 17 deals with power of the appropriate Government to exempt, whether

prospectively or retrospectively, from the operation of all or any of the provisions of any scheme, of any establishment on fulfilling certain

conditions.

In the light of the scheme of the Act and in view of the fact that the works are being entrusted with the artisans, even though it is stated that

there is no control over their work, I am of the view that they satisfy the definition of ""employee"" mentioned in Section 2(f) of the Act. Even from

the information furnished by the petitioners, it is clear that a section of these artisans, who are unable to pay for raw materials due to their financial

position, are provided with raw materials by the Sanghs themselves and the Sanghs collected their finished products by paying the difference of

value of finished products and raw materials. It is also seen that the payment will vary from day- to-day and week-to-week and there will not be

any uniformity in their contribution. The weavers/artisans or workers as the case may be are provided with raw materials, by the perspective

Sanghs and those artisans or weavers converted the raw materials into finished products and thereafter returned the same to the Sanghs. This

aspect has not been disputed by the petitioners. If that is so, the difference in value of the finished products and raw- materials is nothing but wages

paid to the workers in the sense of the same being remuneration for the physical or mental effort in connection with the works, which are ultimately

utilised by the Sanghs. Even though Sri Somayaji, learned senior counsel for the petitioners, had contended that the artisans or weavers need not

follow any standard guidelines or directions, undoubtedly the work had to be done under the direction of the establishment with reference to the

design or specification, as rightly contended by the learned counsel for the respondents, their supervision is possible, having regard to the skill

needed for its performance. For example, the person who gets leather or cotton has to return the finished products in accordance with the

establishment''s design and demand. Accordingly, the persons are doing the work for monetary benefits and the work done by them is the work of

the establishment. In other words, the nature of finished products have nexus with the ideals and objectives of the Sarvodaya Sangh. No doubt, it

is true that the very object of the Sangh is to provide job opportunities to the village artisans so as to enable them to earn their livelihood by

employment through Sanghs.

In this regard, a decision of the Supreme Court reported in P.M. Patel and Sons and Ors. v. Union of India; (supra), is very much pressed into

service by the learned counsel for the respondents. In that decision, the Hon''ble Supreme Court has held as follows, in Paras 11 to 14:

In our opinion, the home workers are ''employees'' within the definition contained in Clause (f) of Section 2 of the Employees'' Provident

Funds and Miscellaneous Provisions 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 the 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 royal 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 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.

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 cases, 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. Any ''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 Employees'' Provident Funds Act and the Scheme cannot be implemented at all in

respect of the beedi industry.

Even though the learned senior counsel for the petitioners contended that the said decision is not applicable to our cases, it is clear from the said

decision that the ""home workers"" are employees within the definition of Clause (f) of Section 2 of the Act. It is also clear that as ""establishment"" by

the terms of the definition is wide enough to include the dwelling house of a home worker. Following the said decision, the Division Bench of this

Court in Writ Appeal No. 308 of 1996, dated April 4, 1996, has observed that:

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.

In Madathupatti Weavers Cooperative Production and Sales Society Ltd. v. Regional Provident Fund Commissioner, : (1998)ILLJ824Mad

has an occasion to consider the applicability of Employees'' Provident Funds and Miscellaneous Provisions Act with regard to the weavers who

are members of the Society. After considering P.M. Patel and Sons case (supra), and other decisions, I had concluded as follows:

...... The weavers in question who are the members of the society to 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.

Apart from the above decision, Sri V. Vibhishanan has very much relied on a Division Bench decision of the Patna High Court reported in

Saharsa Zila Khadi Gramodyog Sangh v. Union of India; 1996 III LLJ 246. Almost similar questions were considered in that decision. After

considering Sections 2(f), 2(i), 7A and 17 of the Employees'' Provident: Funds and Miscellaneous Provisions Act, 1952, and after referring to

P.M. Patel and Sons case (supra), the learned Judges have concluded thus:

In view of the aforesaid decision even if the said submission advanced on behalf of the petitioner is accepted that the workers are not employed in

the factory, there is no escape from the fact that they are employed in connection with the work of the factory and as such the Act is applicable in

the case of the petitioners"":

The learned Judges have also held thus:

..... The definition of the employees clearly shows that even a person employed for wages even in connection with the work of an establishment is

included in the definition of the employee and, as such the definition of employee cannot confine to the work only performed in the factory itself...

Likewise, after referring to Khadi and Village Industries Commission Act, 1956, they held that the Act applies to Khadi Industries also. The

decision of the Patna High Court is directly applicable to our case.

Sri A.L. Somayaji, learned senior counsel for the petitioners, has very much relied on a Single Judge decision of the Punjab and Haryana High

Court in Punjab Khadi Mandal Vs. The Regional Provident Fund Commissioner and Another, . No doubt, there also the very same question was

considered and after referring to the definition of the words ""employer"" u/s 2(e) and ''employee'' u/s 2(f) and after considering the decision of the

Supreme Court in P.M. Patel and Sons case (supra), and after distinguishing the said position of the Supreme Court, the learned Judge has held

thus:

..... But in the present case, there is no question of rejection of the cloth or supervision by the petitioner over the weavers and there is no question

of compelling them to do the work. Further, the Punjab Khadi Mandal is a non profitable organisation only to help the poor weavers to have their

own cotton industries in their own villages. On a consideration of the facts and circumstances of the case, I am of the opinion that the weavers who

take the cotton yarn to their homes for weaving the cloth from the Punjab Khadi Mandal, are not employees of the Khadi Mandal within the

meaning of Section 2(f) so as to attract provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952. I am, therefore, of

the opinion that the provisions of the Act are not applicable to the case in hand. Therefore, the petitioner cannot be directed to contribute towards

the provident fund....."" In the light of the provisions of the Act as already referred to and in view of the fact that even the artisans or weavers have

to return the finished products in a prescribed manner and in a particular design, with respect I am unable to share the view expressed by the

learned Single Judge of the Punjab and Haryana High Court. On the other hand, the decision of the Patna High Court in 1996 III LLJ 246 , and in

the earlier decision of this Court reported in : (1998)ILLJ824Mad (supra), support the stand of the respondents and I am in agreement with the

same.

Even at the beginning, I have observed that all the units of Sarvodaya Sangh are brought under the purview of the Act. Only some of the

persons like weavers, spinners and other artisan employees engaged in the work of the establishments viz., carpentry, manufacturing of soaps,

manufacturing of chappal and shoes, etc., have not been covered by the provident fund benefits. Even though it is stated that they are entitled to

artisan''s welfare fund,"" as rightly contended by the learned counsel for the respondents, this welfare fund cannot be equated to the employees

provident fund benefits available under the Act and these categories of employees are not forming part of excluded employees as defined under

Para. 2(f) of the Employees'' Provident Fund Scheme, 1952, framed under the Act. It is specifically pleaded in the counter- affidavit that the work

had to be done under the direction of the establishments with reference to the design or the specification and their supervision is possible having

regard to the skill needed for its performance. The very object of the Sanghs is to provide job opportunities to the village artisans so as to enable

them to earn their livelihood by employment through Sanghs.

Apart from this, it is also brought to my notice that the Government of India have also suggested that if the petitioners are willing they may even

seek for exemption u/s 17 of the Act, which may be considered on the basis of the appropriate application and after fulfilling certain prescribed

conditions. I am also satisfied that for the purpose of applicability of the Act, an establishment need not be a profit earning one. The object of the

enactment of the Act is to provide social security cover to the workers to protect their families in their old age through old age and survivors

pension. Therefore, the provisions of the Act cannot be equated with the ""Artisans Welfare Fund"" as claimed by the petitioner.

In the light of what is stated above, I hold that the artisans or weavers or workers of the Sarvodaya Sanghs undoubtedly fall under the ambit of

the expression ""employees"" as defined u/s 2(f) of the Act, accordingly I do not find any acceptable reason to grant the relief as claimed by the

petitioners. Net result, all the writ petitions are dismissed. No costs. Consequently, all the stay petitions and vacate stay petitions are dismissed. It

is made clear that the dismissal of the writ petitions will not be a bar in approaching the Government of India for claiming exemption u/s 17 of the

Act.