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Judgment
The batch of writ petitions can be dealt with under a common judgment. It is enough if the facts in Writ Petition No. 1800 of 1978 alone are
noted. The petitioner-establishment carried on business of manufacturing Jamakalams (carpets) otherwise know as Thari Carpets, which are
manufactured by using 22 looms and 2 permanent employees. As such, according to it the Employees'' Provident Funds Act, 1952 (hereinafter
referred to as the Act) would not apply to the petitioner. Under the Act, the establishment should have at least 20 employees employed therein.
This being so, the second respondent, viz., the Regional Provident Fund Commissioner, Madras-14, issued a memo to the petitioner calling upon it
to submit a return in Form 9 prescribed under the Employees'' Provident Fund Schemes, 1952 and also a return in Form 3(FPF) prescribed under
paragraph 15 of the Employees'' Family Pension Scheme, 1971. Since the petitioner was contending that the Act itself would not apply in view of
the fact that there being two permanent employees, all the others were merely independent contractors, and as such they are not employees, a
petition was filed on 11th February, 1977, before the Central Government under S. 19A of the Act. In that application it was prayed that Central
Government might decide whether the Act would apply to the petitioner-establishment. This was duly informed to the second respondent. The first
respondent, before whom this application was filed, passed the following order on 5th May, 1978 :
No. S-35011/13(1-A)/78-PPC
Government of India,
Ministry of Labour,
New Delhi, the 5th May, 1978.
To
M/s. A.K.N. Textiles,
Bhavani P.O.,
Tamil Nadu,
Sub :- Coverage of carpet manufacturers in Tamil Nadu under the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952 -
Representation under S. 19A of the said Act.
Dear Sir,
With reference to your representation dated 11th February, 1977 on the above subject, I am to say that it is now settled law that completion of the
proceedings under S. 7A of the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952 by the Provident Fund Authorities
concerned are mandatory before a party can approach the Central Government under S. 19A of the said Act. The following passage from the
judgment of Delhi High Court in Raj Narayan Aggarwal v. Regional Fund Commissioner, 1976 Lab. I.C.131, is relevant in this context, namely :
The primary enquiry under S. 7A cannot be got over by resorting to S. 19A even where the employer applies under S. 19A. The matters to be
decided by the Government under S. 19A may be decided after necessary facts are gathered and after an enquiry postulated by S. 7A is made, if
the facts are in dispute. If the procedure under S. 7A is adopted there will be full, fair and effective opportunity for a dialogue between an
employer and the officer concerned; this will not be feasible at least to the same extent and measure under S. 19A. Order passed by the
Government under S. 19A without primary enquiry under S. 7A is not valid.
The Gujarat High Court in a recent judgment in Textile Allied Industries Research Organisation (TAIRO) Board v. R.R. Sahee Regional Provident
Fund Commissioner, Gujarat, 1977 18 G.L.R.540 has also reiterated the same view.
(2) It is seen from the facts narrated in your representation that the Regional Provident Fund Commissioner has not yet instituted the inquiry under
S. 7A of the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952 and his findings on the question whether the Act and the
Scheme are applicable to your establishment have not been recorded. In view of judgments of Delhi High Court and Gujarat High Court referred
to in para. I above, your representation under S. 19A of the aforesaid Act is premature and cannot be entertained as it has been submitted to the
Central Government before the completion of proceedings under S. 7A by the Regional Provident Fund Commissioner and passing of the order
thereunder.
(3) The case is accordingly remanded to the Regional Provident Fund Commissioner for holding an inquiry under S. 7A by giving an adequate
opportunity to you for being heard in the matter of applicability of the Employees'' Provident Fund and Miscellaneous Provisions Act, 1952, to
your establishment and for passing a speaking order.
(4) Your petition is, therefore, dismissed.
Yours Faithfully,
(Sd.) B. M. Masukar
Legal Adviser to the Govt. of India.
It is under these circumstances the present writ petition has been preferred for certiorari.
Learned counsel for the petitioner urges that the jurisdiction to decide whether the provisions of the Act are applicable to the petitioner or not, in
that excepting the two permanent employees whether the others are independent contractors or not, is vested only in the Central Government. The
Central Government cannot abdicate its function and then direct the matter be remitted to the Regional Provident Fund Commissioner, under S.
7A of the Act. Section 7A is the section under which the Regional Provident Fund Commissioner determines the quantum of monies due to the
employees. When the petitioner is disputing the applicability of the Act itself, there is on reason why he should be called upon to face an enquiry
under S. 7A of the Act. Several decisions have taken the view that the Jurisdiction to determine about the applicability of the Act in spite of the
presence of the hierarchy of the authorities, is entrusted only with the Central Government. For instance, in Annamalai Mudaliar and Bros. Vs.
Regional Provident Fund Commissioner, Madras and Others, , this Court took the view that it is open to the department to invoke the aid of S.
19A of the Act and seek determination as to the applicability of the Act. However, that view came to be modified by a Division Bench of this
Court in East India Industries v. Regional Provident Fund Commissioner, 1964 I L.L.J.706, stating such an invocation could be done both by the
employer as well as the department. Then again, a reading of the decision reported in Union of India (UOI) and Another Vs. Ogale Glass Works,
and particularly paragraphs 20 to 23 will clearly go to show that it is the Central Government, which is required to determine this aspect. In so far
as this procedure has not been followed and a finding has been rendered that the application is premature before the determination of the liability
under S. 7A, it is clearly illegal and is, therefore, liable to be set aside. This in short, is the argument of Mr. P. Chindambaram, learned counsel for
the petitioner.
Miss Radha Srinivasan, learned counsel for the department, vehemently contends that the interpretation placed by the various decisions of this
Court as well as the other Courts on S. 19A of the Act, cannot at all be supported. The jurisdiction of the Central Government is only to give
directions in the event of any difficulty arising in giving effect to the provisions of the Act. That does not mean the Central Government is obliged to
give a finding as to the applicability of the Act. Therefore, those decisions require re-examination.
The second submission is, that in this case the matter has been merely remitted to the Regional Provident Fund Commissioner for determination
of the liability. If the liability is so determined, there will be no occasion for a decision by the Central Government. In this view, the impugned order
could be supported.
Whatever may be the vehemence of the argument of the learned counsel for the respondents, I am not persuaded to hold a different view than
what has been taken by a series of decisions of this Court. The scope and the amplitude of S. 19A of the Act had come to be settled by those
decisions holding that it is entirely the jurisdiction of the Central Government to decide as to the applicability of the Act in a particular case or
whether it is an establishment falling within the definition of an ""establishment"" under S. 1(3)(b) barring the number of persons employed in an
establishment, etc. In fact, their Lordships of the Supreme Court in Union of India (UOI) and Another Vs. Ogale Glass Works, , after referring to
the important sections of the Act have held thus :
From a review of the sections, it will be seen that the Act it essentially a measure for the welfare of the employees; and if the Act applies and a
Scheme has been framed for an establishment, the employer is bound to made the contribution as provided for under S. 6. There is a statutory
liability on an employer to pay the contribution at the rate mentioned in S. 6. Stringent provisions have been made for non-compliance with the
requirement of the statute and very drastic powers have been given to the authorities to recover the contribution due from an employer. Though
there is a hierarchy of officials, nevertheless, it is only the Central Government that has been given power under S. 19A to give a direction not
inconsistent with the provisions of the Act, if any doubt arises regarding one or other matters referred to in cls. (i) to (v); and that power is to be
exercised when any difficulty or doubt arises in giving effect to the provisions of the Act. While the contention of the respondent is that the letter
dated 19th August, 1959 read with letter dated 21st September, 1959 constitutes a direction given by the Central Government under S. 19A,
according to the appellants no such direction has been given because the Central Government had no occasion to consider the matters mentioned
under clause (ii) of S. 19A.
If, therefore, notwithstanding the presence of the hierarchy of the officials, it is the Central Government that has been given the power under S.
19A, that decision must be rendered by the Central Government and the Central Government alone. This has also been the view taken by this
Court uniformly, right from 1955, as seen from the decision reported in Annamalai Mudaliar and Bros. Vs. Regional Provident Fund
Commissioner, Madras and Others, , which decision was slightly modified by a Division Bench of this Court in East India Industries v. Regional
Provident Fund Commissioner, 1964 I L.L.J.706, which modification does not affect the question on hand. As a matter of fact, I have myself
taken a similar view, following the earlier cases, in W.P. No. 788 of 1974. Therefore, it is too late in the day for the learned counsel for the
department to contend that theses decisions require reconsideration. It is an elementary principle of jurisprudence that even a wrong decision
followed for a long number of years, would constitute good law. By this, I do not mean to say that these decisions are in any way wrong. Even
conceding them to have laid down wrong law, there is no warrant for reconsideration or review of the decisions. It is impossible to swim against
the current which has been followed which has been flowing so fiercely for a long number of years, as seen from many decisions of this Court,
which decisions settle the legal position as to the jurisdiction of the Central Government, under S. 19A.
Looked at from this point of view, I am unable to uphold the second contention urged on behalf of the department that because the Central
Government requires certain particulars a remit order has been made under S. 7A. The purpose of S. 7A is to determine the quantum of liability.
When the petitioner is contending that the Act itself is not applicable. It there is no scope whatsoever for the determination of the quantum under S.
7A of the Act.
Then again, to say that the petition under S. 19A is premature without enquiry under S. 7A would amount to adbicati in of jurisdiction or refusal
to exercise jurisdiction. Therefore, I uphold the contention of Mr. P. Chidambaram, that the impugned order is prima facie illegal.
Consequently, the writ petitions are allowed. The impugned orders are quashed and the Central Government is directed to reconsider the same
in the light of the observation made above. No costs.