Uttarpara Children''s Own Home High School vs Union of India and Others

Jayanta Kumar Biswas, J.—The petitioner in this Article 226 petition dated November 7, 2005 is questioning the orders of the Assistant Provident Fund Commissioner, S.R.O. Howrah dated August 12, 2005 and September 28, 2005, Annexures P30 and P31 at pp. 119 and 142, made under Sections 7A and 7B respectively of the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952 (in short the Act 19 of 1952). The state government made rules called the Recognized Non-Government Secondary Institutions Pension Rules stating (a) that they would come into force from April 1, 1966, and (b) that they would apply to permanent employees (both teaching and non-teaching) serving in recognized non-government secondary institutions participating in the grant-in-aid scheme. It then issued an order no.2156-Edn(S) dated September 20, 1967 notifying its decision to sanction the contributory provident fund-cum-pension scheme for all approved permanent whole-time teaching and non-teaching staff of recognized non-government secondary schools which had come or might come under the grant-in-aid scheme. The petitioner is a secondary school recognized by the West Bengal Board of Secondary Education under provisions of the West Bengal Board of Secondary Education Act, 1963 with effect from January 1, 1975 as a junior high school. In 1978 it was upgraded to a high school. In view of the recognition, all rules, regulations, orders, instructions, made and issued by the state government and the board, including the 1966 rules, the order dated September 20, 1967 and the Management of Recognized Non-Government Institutions (Aided and Unaided) Rules, 1969 made under the West Bengal Board of Secondary Education Act, 1963, became applicable to it; and according to the rules and order it was taking steps for ensuring deposit of provident fund contributions with respect to its employees.

The second pay commission set up by the state government in terms of finance department resolution no.9716-F dated November 16, 1977 made recommendations for allowing retirement benefits to the teaching and non-teaching employees of various different educational institutions, and after careful consideration of the recommendations the state government decided that retirement benefits at the rates described in the West Bengal Recognized Non-Government Educational Institutions Employees (Death-cum--Retirement Benefit) Scheme, 1981 would be admissible to all whole-time approved teaching and non-teaching employees of the non-government aided institutions, and for the purpose the government issued an order no. 136-Edn(B) dated May 15, 1985. According to the order dated May 15, 1985, a member of the staff opting for the benefit of pension-cum-gratuity was to refund the state government the employer''s share of provident fund contributions with interest, credited to his contributory provident fund account, and his own share of the contributions with interest was to be transferred to the general provident fund account. There is no dispute that the institute acted accordingly. The order further provided that While the head of the institute would maintain the general provident fund or contributory provident fund account, as the case may be, the entire contributory provident fund would be made available to the director, the employer''s share with interest would be credited to the revenue head of the government and the employee''s share would be credited to his newly opened general provident fund account; and that the amount of employer''s share of contributions to the general provident fund together with interest to be refunded or actually refunded would have to be recorded in an appropriate space in the service book under proper attestation.

Provisions of the Act 19 of 1952 were not applicable to any educational institute until a notification no. S.O. 986 dated February 19, 1982 was issued under provisions of Section 1 of the Act 19 of 1952. In view of the notification, provisions of the Act 19 of 1952 became applicable to any school, whether or not recognized or aided by the central or a state government, with effect from March 6, 1982. Therefore, one can say that with effect from March 6, 1982 provisions of the Act 19 of 1952 became applicable to the institute, though it was recognized by the board and aided by the state government. However, no step was taken either by the provident fund authority to enforce the provisions of the Act 19 of 1952 or by the institute to comply with them. On the contrary, the institute was complying with the existing provisions of the government rules, orders and schemes. When the things were in such position, the West Bengal Non-Government Educational Institutions and Local Authorities (Control of Provident Fund of Employees) Act, 1983 was enacted by the state Legislature. There is no dispute that the institute complied with the provisions of this Act.

On April 26, 1987 an enforcement officer of the provident fund organization visited the institute and initiated investigation concerning applicability of the Act 19 of 1952 to the institute. The investigation continued for years and ultimately by a letter dated May 31, 1991, Annexure P12 at p.82, the provident fund authority informed the institute that the Act 19 of 1952 would apply to it. It was called upon to comply with the provisions with effect from August 1, 1982. By a letter dated July 18, 1991, Annexure P13 at p.85, the institute disputed the claim of the provident fund organization. Taking cognizance of the dispute, the provident fund authority initiated the Section 7A proceedings and issued a summons dated July 23, 2004, Annexure P22 at p.98. After hearing the representative of the institute, the authority made the final order dated August 12, 2005 u/s 7A. He held that the institute was liable to comply with the provisions of the Act 19 of 1952 from March, 1982. The institute filed a Section 7B application dated August 30, 2005. The review application was rejected by the authority by the order dated September 28, 2005. The authority rejected the institute''s case that in view of the provisions of Section 16(1)(b) of the Act 19 of 1952 the provisions thereof would not be applicable to it saying "no documentary evidence have been furnished in support of entitlement of C.P.F. or old age Pension in respect of the employees".

The provisions of Section 16 of the Act 19 of 1952 existing before the 1988 amendment were as follows:

''''16. Act not to apply to certain establishments.- (1) This Act shall not apply-

(a) to any establishment registered under the Co-operative Societies Act, 1912(2 of 1912), or under any other law for the time being in force in any State relating to co-operative societies, employing less than fifty persons and working without the aid of power; or

(b) to any other establishment employing fifty or more persons or twenty or more, but less than fifty persons until the expiry of three years in the case of former and five years in the case of the latter, from the date on which the establishment is, or has been, set up.

Explanation - For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location.

(2) If the Central Government is of opinion that having regard to the financial position of any class of establishments or other circumstances of the case, it is necessary or expedient so to do, it may, by notification in the official Gazette, and subject to such conditions as may be specified in the notification, exempt that class or establishments from the operation of this Act for such period as may be specified in the notification."

The provisions of Section 16 of the Act 19 of 1952 existing before the 1998 amendment, whereby cl. (d) of Sub-Section (1) was omitted, were as follows:

"16. Act not to apply to certain establishments.- (1) This Act shall not apply-

(a) to any establishment registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State relating to co-operative societies, employing less than fifty persons and working without the aid of power; or

(b) to any other establishment belonging to or under the control of the Central Government or a State Government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits; or

(c) to any other establishment set up under any Central, Provincial or State Act and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that Act governing such benefits;

(d) to any other establishment newly set up, until the expiry of a period of three years from the date on which such establishment is, or has been, set up. Explanation. - For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly set up merely by reason of a change in its location.

(2) If the Central Government is of opinion that having regard to the financial, position of any class of establishments or other circumstances of the case, it is necessary or expedient so to do, it may, by notification in the Official Gazette, and subject to such conditions as may be specified in the notification exempt whether prospectively or retrospectively that class of establishment from the operation of this Act for such period as may be specified in the notification."

Relying on Regional Provident Fund Commissioner Vs. Sanatan Dharam Girls Secondary School and Others, , Mr Bihani, counsel for the petitioner, has argued that on the facts and in the face of the provisions of Section 16(l)(b) of the Act 19 of 1952, there was absolutely no reason for the provident fund authority to hold that the provisions of the Act 19 of 1952 were applicable to the institute. On the other hand, Mr. Prasad, counsel for the provident fund authority, relying on Gyan Bharti Vs. Regional Provident Fund Commissioner and Others, , has submitted that the authority rightly applied the provisions of the Act 19 of 1952 to the establishment.

After the applicability notice dated May 31, 1991 was served, by the letter dated July 18, 1991 the institute informed the provident fund authority that in view of the grant-in-aid rules of the state government, control of the state government, management of the affairs of the institute under the control of the board according to the management rules, and management of provident funds of employees according to statutory provisions, there was no reason to say that the provisions of the Act 19 of 1952 were applicable to the institute. It is evident that after seventeen years from the date the investigation was started and thirteen years from the date the applicability notice was issued and served, the authority initiated the Section 7A proceedings and issued the summons dated July 23, 2004 without any application of mind.

By several letters including the one dated August 8, 2004 at p.99 the institute informed the authority that it was under the direct administrative control of the state government through the district inspector of schools concerned.

It is evident from the Section 7A order dated August 12, 2005 that the authority did not give any attention to the institute''s contention based on the provisions of Section 16(1) (b) of the Act 19 of 1952. The authority rather said that the institute failed to produce any documentary evidence to show that it was a "partly Govt. aided school". He asked the institute to pay Rs. 33,02,816 and interest according to Section 7Q, for the period from March, 1982 to September, 2004. The Section 7B application submitted by the institute seeking review has been rejected, once again without giving due attention to the contention based on Section 16(l)(b). The authority held that, since the employees of the institute were not entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the state government, the Act 19 of 1952 would apply to it.

It is unfortunate that the matter has been dealt with and decided by the provident fund authority in a very casual manner. The enforcement officer inspecting the institute for ascertaining the relevant facts concerning applicability of the Act 19 of 1952 did his job in a slipshod manner. The authority making the Section 7A order, in spite of repeated written representations from the institute, did not make necessary enquiry for ascertaining whether, in the face of the provisions of Section 16(l)(b), the provisions of the Act 19 of 1952 would at all be applicable to the institute. It was his duty to make necessary enquiry for ascertaining whether the institute was right in saying that in view of the provisions of the statutes enacted by the state legislature and the rules, orders and scheme made by the state government, the Act 19 of 1952 was not applicable to it. He could not make an order of applicability of the Act 19 of 1952 to the institute citing the institute''s failure to produce documentary evidence to show that the institute was a "partly Govt. aided school", - an evident misconception, for the proceedings u/s 7A are essentially inquisitorial, not adversarial.

The institute is under the complete administrative control of the state government that exercises its control through its officials, viz., the Secretary, Education Department, the Director of School Education, West Bengal and the District Inspector of Schools (S.E.), Howrah, and the board. The institute gets hundred per cent grant-in-aid from the state government. The employer''s share of provident fund contributions for the employees opting provident fund-cum-gratuity scheme is paid by the state government. In view of the 1981 scheme, the members of the staff enjoy the benefit of old age pension. The affairs of the institute are managed according to the 1969 rules. The managing committee constituted according to these rules is to be approved by the board, and can be superseded on the basis of adverse report of the district inspector of schools. As to disciplinary action against the members of the staff, the institute has to obtain approval of the board. Thus over the institute the state government exercises total financial, functional and administrative control. Hence the case is fully covered by Section 16(l)(b) of the Act 19 of 1952.

One may say that in view of the notification no. S.O. 986 dated February 19, 1982 issued u/s 1of the Act 19 of 1952, the provisions thereof were applicable to the institute for the period from March 6, 1982 to August 1, 1988 when the present Section 16(1)(b) was substituted for the previous one. But the question is whether the issue was at all relevant on May 31, 1991 when the applicability notice was issued. Even if the Act 19 of 1952 was applicable to the institute during the period between March 6, 1982 and August 1, 1988, from August 1, 1988 it could no longer be applicable. The applicability notice could not be issued in 1991, because, even if it was found that during that period the institute was liable to deposit the provident fund and other allied dues to the statutory fund, asking it to deposit the dues in 1991 would have been an exercise in futility, for during the period in question provident fund contributions were deposited according to the rules, orders and instructions issued by the state government and benefits including old age pension were given to the members of the staff, and, in any case, after August 1, 1988 the provident fund authority would have incurred an obligation to transfer the accumulated amounts to the treasury of the state government.

The decision in Regional Provident Fund Commissioner Vs. Sanatan Dharam Girls Secondary School and Others, , fully supports the case of the petitioner. There questioning orders of the state government asking non-government aided educational institutes to comply with the Act 19 of 1952 and transferring accumulated provident fund amounts from the state treasury to the provident fund organization, the aggrieved institutes filed twenty-one writ petitions, which were allowed by the high court holding that in view of Section 16(l)(b), the Act 19 of 1952 was not applicable to the institutes. While affirming the decisions of the high court, their Lordships ascertained (paras 33-34) the meaning of the word "control" and, noticing (para. 30) the financial, functional and administrative control of the state government over the institutes, held (paras 32, 35) that to the institutes, under the control of the state government, the Act 19 of 1952, in view of Section 16(l)(b) thereof, would not be applicable. The division bench decision of this Court in Gyan Bharti Vs. Regional Provident Fund Commissioner and Others, , relied on by counsel for the authority, has no manner of application to the present case. There the question was whether dearness allowance paid by the state government would form part of the basic wages for the purpose of determining contributions payable by an employer u/s 6 of the Act 19 of 1952.

For these reasons, I allow the writ petition. The impugned Section 7A order dated August 12, 2005 and Section 7B order dated September 28, 2005 are hereby set aside. Amount, if any, deposited by the institute in the statutory fund maintained by the provident fund organization shall be transferred with all accumulated amounts to the treasury of the state government within a fortnight from the date of communication of this order to the commissioner. There shall be no order for costs. Urgent certified xerox of this order, if applied for, shall be supplied to the parties within three days from the date of receipt of the file by the section concerned.