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USHA PRAVIN GANDHI COLLEGE OF MANAGEMENT. LAW PROJECT F.Y.

BMS DIV:- B TOPIC: EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT 1952.
Made by: Shalini Pandey-66 Krupa Parmar-69

INTRODUCTION
The Supreme Court has stated in Andhra University v. R.P.F.C. 1985 (51) FLR 605 (SC) that in construing the provisions of the Employees Provident Funds and Miscellaneous Provisions Act 1952, it has to be borne in mind that it is a beneficent piece of social welfare legislation aimed at promoting and securing the well-being of the employees and the court will not adopt a narrow interpretation which will have the effect of defeating the very object and purpose the Act. The preamble to the Act also states that this is an Act to provide for the institution of: (i) Provident Funds (ii) Pension Fund and (iii) Deposit Linked Insurance Fund for employees in factories and other establishments. It is with this background that one must interpret the various provisions of the Act and the Scheme related to it.

Applicability
The Employees Provident Funds and Miscellaneous Provisions Act 1952 applies to the whole of India except the State of Jammu and Kashmir (Section 2). This Act applies (Section 3) to: (i) every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed, and (ii) any establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification in the official gazette specify. The Central Government through the Employees Provident Fund Scheme 1952 {Section 3 (b)} has specified the establishments covered by the Act.

Applicability to NGOs

Considering the operations of charitable institutions these include the following (though they should be read with the relevant notification issued): (i) Educational, scientific research and training institutions. (ii) Establishments known as hospitals. (iii) Societies, clubs or associations which render services to their members without charging any fee over and above the subscription fee or membership fee. (iv) Establishments rendering expert services. (v) Financial establishments (other than banks) engaged in the activities of borrowing, lending, advancing of money and dealing with other monetary transactions with a view to earn interest. (vi) Establishments engaged in poultry farming. (vii) Establishments engaged in cattle feed industry. (viii) Agricultural farms, fruits, orchards, botanical gardens and zoological gardens.

DEFINITIONS
Employee
An employee sec. 2(f), means any employee 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 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 an establishment (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act 1961, or under the standing orders of the establishment.

An apprentice means a person who according to the certified standing orders applicable to a factory or establishment is an apprentice or who is declared to be an apprentice by the authority specified by the appropriate government. Accordingly, personal or domestic servants are not employees under the Act. Contractor s Employees: It has been held by the court in Enfield India v RPFC 2000 (85) FLR 519 (Mad) a person doing work of the principal employer, even though employed by a contractor is also an employee covered by the definition. Excluded Employee has been defined in para 2(f) to mean an employee: (i) who having been a member of the fund, withdrew the full amount of his accumulations on retirement or emigration or (ii) whose pay at the time he is otherwise entitled to become a member of the fund exceeds Rs. 6,500.00 p.m.

Employment
The concept of employment essentially involves three ingredients: (1)Employer (2) Employee and (3) Contract of employment The employment is the contract of service between the employer and the employee whereunder the employees agrees to serve the employer subject to his control and supervision. If there is no relation as employer and employee then it is not open to anyone claim benefit under the statute. Even if a person is not wholly employed, if he is principally employed in connection with the functioning of the establishment he will be a person employed within the meaning of the Act.

EXEMPTIONS
The provisions of the Employees Provident Funds and Miscellaneous Provisions Act 1952 do not apply to the following institutions (sec 16): (i) any establishment registered under the Co-operative Societies Act 1912 or under any other law for the time being in force in any State relating to cooperative societies, employing less than 50 persons and working without the aid of power. (ii) Any establishment belonging to or under the control of the Central or State Government and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme framed by such government. (iii) Any other establishment set up under any Central, Provincial or State Act and whose employees are entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme framed under that Act. (iv) The P.F. Scheme is not applicable to tea factories in the State of Assam {para 3(a)(iii)}.

Trainees:
It has been decided by the courts that trainees are not employees and are not covered by the EPF Act. The court has held that stipend paid is not wages. It must be noted that trainees were recruited under a particular Training Scheme and there was no guarantee of employment after completion of the training period and that they were not entitled to other benefits, which were available to other permanent employees. These aspects have been decided in Sri Rama Vilas Service Ltd. V RPFC 2000 I-LLJ-709(Mad) and Gandhi Vinita Ashram v PFC 1996 (1) CLR 1140 (P&H).

EXEMPTED ESTABLISHMENT
The Central Government may, by notification in the Official Gazette and subject to such conditions, exempt prospectively or retrospectively, from operation of all or any of the provisions of the EPF Scheme: (i) any establishment, the rules relating to its provident fund are not less favorable that of section 6 of the EPF Act or (ii) any establishment if its employees are in enjoyment of benefits in the nature of P.F. , pension or gratuity, which are not less favorable to employees covered by the Act or the Scheme. Where an establishment is exempted from any of the provisions of the Act, then such institution must have its own trust and: (i) have a Board of Trustees for the trust (ii) maintain detailed accounts (iii) submit such returns to the Regional P.F. Commissioner. (iv) invest monies in accordance with the directions of the Central Government issued from time to time. (v) transfer the account of any employee, where necessary (vi) perform such other duties as may be specified.

Employees Required to Join the Fund


The following employees are required to join the fund (Para 26 of EPF Scheme): (i) Every employee employed in or in connection with the work of the factory or other establishment to which the EPF Scheme applies except an excluded employee i.e. drawing a salary exceeding Rs. 6,500.00 p.m. {Para 26(1)}.

(ii) Every employee is required to join the fund from the date of joining the factory or establishment {Para 26(2)}. (iii) Every excluded employee on his ceasing to be excluded employee i.e. makes an application jointly with the employer.

REGISTRATION
If an organisation finds that the Employees' Provident Fund and Miscellaneous Provisions Act 1952 is applicable to it,then it can fill-in the attached proforma for registration. The duly filled-in proforma alongwith one or more of the documents mentioned in the Performa can be submitted to the respective provident fund offices for getting the registration.

CONTRIBUTIONS
The contribution envisaged under sec 6 read with notification dated 9th April 1997 and para 29 of the EPF Scheme, specifies that the rate of contribution under the E.P.F. Act as 12%. The employer has to deposit 12% of the basic wages, dearness allowance and retaining allowance (if any), on his part and an equivalent amount on behalf of the employee, which is to be recovered from the employee salary (para 32 of EPF Scheme). For this section dearness allowance shall be deemed to include the cash value of any food concession allowed to the employee. The retaining allowance means an allowance payable for the time being to an employee for retaining his services, when the establishment is not working. Basic Wage {sec 2(b)} means emoluments which are earned by an employee while on duty or on leave or on holidays with wages. It includes cash value of food concession, dearness allowance and any presents made by the employer. Encashment of leave does not fall under dearness allowance or retaining allowance or basic wages and is not to be considered in computing the amount to

be deposited under the EPF Act. This aspect has been upheld by the court in Hindustan Lever Employees Union v RPFC 1995 (71) FLR 46 (Bom). The Supreme Court, in M.P. Shikshak Congress v RPFC (1999) 1 SCC 396 decided that the EPF Act was applicable to the teachers and employees of the aided school in Madhya Pradesh. Further the inclusion of dearness allowance (D.A.) for computing salary was upheld in the case of Gyan Bharti v RPFC (1996) 2 CLR 734 (Cal). Upper Limit: There is no upper limit for contribution by an employee towards the E.P.F. Inspection Charges: The employer has to contribute 0.18% of the basic wages, D.A., retaining allowance and cash value of food concession towards inspection charges, (Para 30 (3) of the EPF Scheme). This amount cannot be recovered from the employees. Duties of Contractors: Every contractor shall within 7 days of the close of the month, submit to the principal employer a statement showing the recoveries of contributions for employees employed by or through him and such other information to the principal employer as is required to be filed with the Regional PF Commissioner, (para 36B of the EPF Scheme). Time Frame for Deposits: Para 38 of the EPF Scheme specifies that the contributions and administrative charges have to be deposited within 15 days of the close of the month by separate drafts / cheques on account of contributions and administrative charges. The cheque should be on a local branch and deposited with the Reserve Bank or the State Bank of India. Attachment: The contributions made towards provident fund cannot be attached by any degree or order of any court, nor can it be assigned or charged (Sec. 10).

EMPLOYEES PENSION SCHEME


1. The Employees Pension Scheme was introduced w.e.f. 16th November 1995. 2. Contributions: (i) The contribution envisaged under sec 6 is 8.33% of the basic wages, dearness allowance and retaining allowance (if any) from the employer s contribution. {Sec.6A (2)(a)}. (ii) Ceiling: The contribution of 8.33% has a ceiling of Rs. 541.00 p.m. w.e.f. 1st June 2001. This implies that there is a ceiling on the salary, D.A., and retaining allowance of Rs. 6,500.00 in computing the contribution towards the pension scheme. {Para 3(2) of the E.P. Scheme}. (iii) Central Government Contribution: It shall contribute 1.16% of the pay of the members of the Employees Pension Scheme to the Fund {Para 3(2) of the Employees Pension Scheme}. 3. Retention of Membership: An employee shall cease to be a member of the pension fund on attaining the age of 58 years or from the date of vesting of admissible benefits under the scheme, whichever is earlier. 4.Commutation: A member after completing 3 years of membership of the pension scheme can opt for commuting 1/3 of his pension so as to receive 100 times the monthly pension as commuted value {Para 12A). 5. Monthly Pension: This is based on a formula = (Pensionable Salary x Pensionable Service) / 70. (i) Pensionable Salary = average monthly salary over 12 months immediately preceding the date of exit from the scheme. (ii) Pensionable Service = service in years rendered by the member for which contributions have been received. Normally this would be limited to Rs. 6,500.00 p.m. unless certain enhanced contributions are made by the employer.

Employees Deposit Linked Insurance Scheme:


This is a scheme to provide life insurance benefits to employees. The employer shall pay 0.5% of the salary comprising of basic wages, dearness allowance and retaining allowance (if any), subject to a maximum salary of Rs. 6,500.00. In addition he has to pay 0.01% as administrative charges. In the case of an exempted establishment the inspection charge is 0.005%. The employee does not contribute to the Employees Deposit Linked Insurance Scheme. Attachment: The amount due under EDLI cannot be attached by any decree or order of any court, nor can it be assigned or charged.

Penalties
For claiming of damages for default in making payment of any contribution. The details are given below:

Sl. No. 1 2 3 4

Period of default Less than 2 months 2 months or above but less than 4 months 4 months and above but less than 6 months 6 months and above

Rate of Damages(% of arreras p.a) 17% 22% 27% 37%

The Central Board has the power to reduce the damages upto 50%, depending on the merit of the case (para 32B). Section 14 of the E.P.F. Act also prescribes for penalties, which are:

Sl. No. 1

Details of Violation For avoiding any payment knowingly makes any false statement or representation An employer who contravenes sec. 6 (re. contributions) or sec 17(3)(a) for payment of inspection charges re. payment of Administration Charges

Penalty Shall be punishable with imprisonment upto 1 year or fine of Rs. 5,000.00 or both. Shall be punishable with imprisonment upto 3 years but:(a) will not be less than 1 year and fine of Rs. 10,000.00 if it relates to payment of employees contribution, which has been deducted by the employer.(b) will not be less than 6 months and fine of Rs. 5,000.00, in any other case. Shall be punishable with imprisonment upto 1 year but will not be less than 6 months and fine of upto Rs. 5,000.00. Shall be punishable with imprisonment upto 1 year or with fine of upto Rs. 4,000.00 or both. Be punishable with imprisonment upto 6 months but not less than 1 month and also fine upto Rs. 5,000.00.

An employer who contravenes sec 6C Re. EDLI or sec 17(3A)(a) re. inspection charges Failure to comply with any provision of the Act or Schemes Contravenes any provision or condition for which exemption u/s 17 was given and no other penalty is prescribed

Benefits to Employees
1. The employees are entitled to certain benefits by being members under the E.P.F. Act, which can be seen to be the following: (i) Income Tax deduction u/s 88 subject to certain conditions. (ii) Full refund of P.F. with interest on retirement, resignation, retrenchment or death. (iii) Partial withdrawal for the purposes of:

(a) Housing (b) Marriage / Higher Education (c) Temporary Unemployment (d) Medical Treatment (e) Natural Calamity (f)Purchasing equipments for physically handicapped. (iv) Partial withdrawal of 90% of the amounts standing to the credit of the member before one year of retirement. (v) Under EDLI, an amount equal to the average balance in PF of deceased member subject to a maximum of Rs. 60,000.00. (vi) Monthly pension under the Employees Pension Scheme 1995, on superannuation, retirement, permanent / total disablement, for widow / widower, for children, for orphan. 2. An important aspect is that there is a regular saving for the employee and a certain social security.

CASE STUDIES
Case study 1
Budge Budge Company Limited & Anr. vs Unknown on 1 December, 2011
Author: Debasish Kargupta 1 01.12.2011. W.P. No. 20274 (W) of 2011 Budge Budge Company Limited & Anr. Versus Union of India & Ors. Mr. Shyamal Sarkar, Mrs. Vijaya Bhatia, Mr. Balai Paul ...For the Petitioners. Mrs. Aparna Banerjee ...For the P.F. Authority. This writ application is directed against a Notification published in the Gazette of India dated October 29, 2011 cancelling the exemptio n granted to the establishment of the petitioner No.1. By virtue of a Notification dated October 17, 1959, the respondent No.2 granted exemption to the establishment of the petitioner No.1 from the operation of the provisions of Employees' Provident Fund

Scheme, 1952. The above Notification was issued in exercise of powers conferred upon the respondent No.2 under Section 17 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. Let affidavit in opposition be filed within three weeks, reply thereto, if any, be filed within one week after reopening of this Court after X Mas Vacation. Liberty is given to the parties to mention the matter before appropriate Bench after exchanging affidavits. 2 Upon prima facie consideration of the scope of applicability of the Employees' Provident Fund Scheme, 1952 during the existence of exemption of the establishment under reference from operation of the Scheme, I find that the balance of convenience and/or inconvenience i s in favour of passing an interim order. The respondents are restrained from taking any coercive measure to the establishment of the petitioner on the basis of the impugned order until further orders. Urgent photostat certified copy of this order be supplied to the parties, if applied for, subject to compliance with all necessary formalities. srm ( Debasish Kar Gupta, J. )

Case study 2
M/S Sheela Chitra Mandir vs The Union Of India & Anr on 14 October, 2011
IN THE HIGH COURT OF JUDICATURE AT PATNA -------Letters Patent Appeal No.487 of 2011 -------Appeal against the judgment and order dated 10-1-2011 passed by a Bench of this Court in C.W.J.C. No. 16943 of 2010. ---------M/S Sheela Chitra Mandir, Dumraon at Buxar, District- Buxar through its proprietor Sri Shyam Bihari Singh................................... Appellant Versus 1. The Union Of India through the Regional Provident Fund Commissioner, Bihar at Patna, office at R-Block ( Serpentine Road), Road No.6, Patna-800001 2. The Assistant Provident Fund Commissioner (compliance), Bihar, Patna, Office at R- Block (Serpentine Road), Road No.6, Patna800001..Respts. ----------For the Appellant :- Mr. Dhanendra Chaubey, Advocate For Respondents :- Mr. R.S. Pradhan, Sr. Advocate ------------3 14-10-2011 Heard the parties. The learned single Judge by the order under appeal has declined to interfere with the order of appellate authority under the Employees' Provident Funds and Miscellaneous Provisions Act,1952 (hereinaft6er referred to as `the Act'). The appellate Tribunal, New Delhi in A.T.A. No. 64(3) 2003 passed an order of dismissal for default on 23-1-2010 on account of non-

appearance of counsel for the appellant. The application or appeal for 2 restoration under Rule 15 was also dismissed as it was filed beyond the permissible period of 30 days. The plea of the appellant before the writ court was that he could not attend the appeal or instructed his lawyer to-do-so because of illness. Only when he received the order of dismissal for default, he could file the application or appeal under Rule 15 within 30 days from the date of communication of the order. The learned writ court held that Rule 15 described a limitation of 30 days for filing an application or appeal for restoration from the date of the order of dismissal for default and not from the date of communication of the order. The writ court has further held that it will not be proper to restore the appeal when the same was filed beyond the period of limitation prescribed for substantive appeal. Learned counsel for the appellant has drawn our attention to an order of this Court which is annexure-1 to the writ petition. The said order shows that writ petition preferred by the appellant bearing C.W.J.C. No. 12127 of 3 2002 was disposed of summarily with a direction that if he filed an appeal before the authority within three weeks then the appellate court shall dispose of the appeal on merit without being prejudiced by the limitation. The learned writ court has failed to appreciate the effect of the order dated 23/1/2003 ( annexure-1). The limitation in the substantive appeal could not have been raised as an issue by the respondent. On that account the order under appeal is found to be erroneous and fit to be set aside.We are aware that the application or appeal for restoration under Rule 15 was filed beyond the period of limitation. That will not come in the way of the appellate authority because the earlier order of this Court contained in annexure-1 to the writ petition contained a direction to the appellate court to dispose of the appeal on merits.

In that view of the matter the appeal should not have been disposed of in default because Rules 15 and 16 permit the appellate court either to dismiss the appeal for default or to decide ex parte on merits. In view of earlier order of this Court, the learned Tribunal ought to have 4 decided the appeal even ex-parte on merits. In that view of the mater, this appeal is allowed. The order under appeal is set aside. The Appellate Tribunal is directed to restore the appeal and decide the same on merits, after giving an opportunity of hearing to the appellant who must produce a copy of this order before the Appellate Tribunal within four weeks for availing its benefit. Otherwise, the Tribunal may decide the appeal on merits, even ex-parte. ( Shiva Kirti Singh, J.) ( Shivaji Pandey,J) Naresh

Case study 3
Tata Cummins Ltd vs Regional Provident Fund on 11 October, 2011
IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(C) No. 5852 of 2011 Tata Cummins Ltd. ...... Petitioner Versus Regional Provident Fund Commissioner, East Singhbhum & ors. ...... Respondents

-------CORAM: HON'BLE MR. JUSTICE D.N.PATEL -------For the petitioner: Mr. V.P.Singh, Sr.Advocate -------th Order No. 2: Dated 11 October, 2011 Per D.N.Patel, J. 1. Notice upon the respondents to be served by direct/personal service. 2. It appears that previously also W.P.(C) No. 5273 of 2003 and W.P.(C) No. 6509 of 2005 were heard together and the following orders were passed: "1. Rule. 2. Counsel for respondents waives notice of Rule. 3. Interim orders earlier granted in both these writ petitions shall remain operative during the pendency and final hearing of these writ petitions." 3. The earlier petitions were also preferred because the applications for getting exemption under Section 17(1) of the Employee's Provident Funds and Miscellaneous Provisions Act, 1952 were preferred before the Provident Fund Commissioner, who refused to grant exemption and the said orders are under challenge before this Court, in which the aforesaid order has been passed. 4. Thus, the writ petitions were admitted and the order was passed not to take any coercive action against the writ petitioners. This has not been appreciated by the Presiding Officer, Employees' Provident Fund Appellate Tribunal, New Delhi and the order has been passed on 17th

August, 2011 in A.T.A. No. 920(3) of 2005. Paragraph no.8 of the aforesaid order reads as under: "8. The record reveals that the appellant filed a WPC No. 5293/2003 and 6509/2005, where the Hon'ble High Court ordered not to take any coercive steps but the proceeding of tribunal was not stayed by the Hon'ble Court. No other reason has been cited for the delay." 5. I, therefore, stay the operation, implementation and execution of an order, passed by the Presiding Officer, Employees' Provident Fund 2. Appellate Tribunal, New Delhi dated 17th August, 2011 in A.T.A. No. 920(3) of 2005, which is at Annexure 11 to the memo of petition, till the next date of hearing. 6. Learned counsel for the petitioner has also tendered photo copy of a letter of the Regional Provident Fund Commissioner, Jamshedpur dated 26th September, 2011, issued under Section 8(F) of the Employee's Provident Funds and Miscellaneous Provisions Act, 1952, which is kept on record. From perusal of the said letter it appears that an order has been issued to the petitioner to make payment of Rs.2,13,08,695/-. This order is also stayed till the next date of hearing. 7. Notice is made returnable on 8th November, 2011. ( D.N. Patel, J. ) A.K.Verma/

BIBLIOGRAPHY
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