Modern Transportation Consultation Services Pvt. Ltd. & Anr. vs Central Provident Fund Commissioner Employees Provident Fund Organisation & Ors.

3. Paragraph 26 of the Scheme of 1952 specifies the classes of employees entitled to, and required to, join the Fund as also the co-related aspects. The expression “Fund”, as occurring in Paragraph 26 refers to the Fund created under the Scheme of 1952. In the scheme and structure of the Act of 1952, it is but clear that for the specified establishments or class of establishments, the Central Government was to frame a Scheme, to be called “the Employees’ Provident Fund Scheme”; and soon after framing of such Scheme, a Fund was to be established, which was to vest in, and administered by, the Board constituted under Section 5A. The expression “Fund” is defined in the Act of 1952 to mean the provident fund established under a Scheme; and the expression “Scheme” is defined to mean the Employees Provident Fund Scheme framed under Section 5. Indisputably, the Scheme of 1952 is the one framed by the Central Government in exercise of the powers conferred by Section 5. [Paras 9.2.2 and 11] [80-D; 85-C-E]

4. By virtue of sub-section (1) of Section 17, an establishment could be exempted from the operation of all or any of the provisions of any Scheme if: (a) in regard to the establishment to which the Act applies, the appropriate Government is of opinion that the rules of its provident fund, with respect to the rates of contributions, are not less favourable for the employees than those specified in Section 6 and the employees are in enjoyment of other provident fund benefits which, on the whole, are not less favourable than the benefits available under the Act or under the Scheme in relation to any other establishment of similar character; and (b) in regard to any other establishment, the appropriate Government is of opinion that benefits in the nature of provident fund, pension or gratuity, as available to the employees of such establishment are, on the whole, not less favourable than the benefits provided under the Act or any Scheme in any other establishment of similar character. [Para 12] [85-F-H; 86-A]

5. When an exemption is granted to an establishment under clause (a) of sub-section (1) of Section 17 of the Act of 1952, several duties are cast upon the employer as specified in subsection (1-A) thereof, with penal provisions in the event of default. The employees are expected to be covered by the Scheme framed under Section 5 of the Act of 1952 with the exception being that in case of availability of equivalent or more favourable benefits in an establishment, the appropriate Government could grant exemption. As per sub-section (2) of Section 17, even the Scheme may make a provision for exemption but the basic requirement being again that the persons or the class of persons to be exempted are entitled to such benefits which are, on the whole, not less favourable than the benefits provided under the Act and the Scheme thereunder i.e., the Scheme of 1952. All the requirements of Section 17 make the position undoubtedly clear that the provisions are intended to ensure optimum benefits for the employees and even the exemption is granted only on the satisfaction of appropriate Government about existence of equivalent or more favourable provident fund Scheme for the employees concerned. [Para 12.1] [86-B-E]

6. The provisions of the Scheme are generally made applicable, subject to the provisions of Sections 16 and 17 of the Act, to all the factories and other establishments to which the Act applies or is applied under sub-sections (3) and (4) of Section

1 or under Section 3 of the Act. The provisions of the Scheme of 1952 have been extended to various establishments from time to time under clause (b) of sub-paragraph (3) of Paragraph 1 thereof. As per Paragraph 26 of the Scheme of 1952, every employee employed in or in connection with the work of the factory or other establishment to which this Scheme applies, is entitled to, and is obliged to, become a member of the Fund from the date the Scheme would come into force for such factory or establishment, except the “excluded employees”. Significantly, even an “excluded employee”, on ceasing to be so i.e., on ceasing to be an “excluded employee”, is entitled to, and is required to, become a member of the Fund from the date of such cessation. [Para 13] [86-F; 87-A-C]

7. In the framework of the Scheme of 1952, exclusion is provided under clause (i) of Paragraph 2(f) thereof to an employee who had been a member of the Fund and had withdrawn full amount of his accumulations in the Fund under clause (a) or (c) of Paragraph 69(1). Clause (a) of the Paragraph 69(1) of the Scheme of 1952 refers to a member who would withdraw the full amount standing to his credit in the Fund on retirement from service after attaining the age of 55 years. A comprehensive look at various clauses of paragraph 69(1) makes it clear that reference therein is to a member of the Fund who withdraws full amount standing to his credit for different eventualities like regular retirement; retirement for disablement or incapacity; migration from the country; termination of service; accepting a voluntary retirement scheme; closure of the factory; transfer from a covered factory or establishment to another factory or establishment not covered under the Act etc. [Para 13.1] [87-C-D, E-F]

8. In the setup and structure of the Act of 1952, specific distinction is maintained between the Fund, which is created by the Central Government under Section 5(1) of the Act and any other provident fund, which is created by an employer. Significantly, clause (f) of Paragraph 2 of the Scheme of 1952 refers to “the Fund” and not to “any Fund”; and Paragraphs 26 and 69 also refer to “the Fund” and not to “any Fund”. The determiner “the”, as occurring in Paragraph 2(f) as also Paragraph 69 before the expression “Fund” makes it clear that the reference therein is only to the Fund which is created under the Scheme of 1952 and it is not a general reference to any Fund. The requirement of joining the Fund under Paragraph 26 is also of joining that Fund which is created under the Scheme of 1952. In other words, obviously and undoubtedly, the Fund referred to in Paragraphs 2(f), 26 and 69 of the Scheme of 1952 is that Fund, which is created under the Scheme of 1952 and the reference is not to any other Fund. Thus, to be covered under the expression “excluded employee” by virtue of clause (i) of paragraph 2(f) read with clause

(a) of paragraph 69(1), the employee must be such who was a member of the Fund established under the Scheme of 1952 and who had withdrawn full amount of his accumulations in the said Fund on retirement from service after attaining the age of 55 years. [Para 14.1] [88-B-E]

9. Therefore, the retired Railway employees, who had withdrawn their accumulations in General Provident Fund or any other Fund of which they were members, could not have been treated as “excluded employees” for the purpose of the Scheme of 1952 for the reason that such a withdrawal had not been from the Fund established under the Scheme of 1952. In fact, there was no occasion for them to make any withdrawal from the Fund established under the Scheme of 1952 because they were never the members of the said Fund. In other words, the employees in question were not answering to the requirements of clause (i) of paragraph 2(f) read with clause (a) of paragraph 69(1) of the Scheme of 1952 and hence, were not the “excluded employees”. [Para 14.2] [88-F-H; 89-A]

10. The provisions of the Act and the stipulations of the Scheme of 1952 are mandatory in character and the application thereof could not have been averted by the appellants or the said employees except on certain eventualities as mentioned in Section 17 of the Act as also Paragraph 26 of the Scheme of 1952. Such eventualities are indeed non-existent in the present matter. So far the aspect relating to age is concerned, the operation and effect of the Act and the Scheme of 1952 are not restricted with reference to any age limit of the employee. Such a suggestion relating to the age of the employees had been entirely baseless and has rightly been disapproved. [Para 15] [89-C-D]

11. So far as the plea of the appellants that they had applied for exemption and no decision was taken on their representation is concerned, it is noticed that the appellant had not made any such submission that they had any better and beneficial scheme for their employees. In any case, there is no concept of any holidaying in payment of contribution by the employer by merely moving an application for exemption; and when there was no order of exemption under Section 17 by the competent authority, the appellant-company was under the liability to make payment of its contribution. [Para 15.1] [89-E-F]

12. The observations by the Single Judge of High Court that clause (i) of Paragraph 2(f) of the Scheme of 1952 has to be applied in relation to the withdrawal from any Provident Fund and else, an employee may keep on successively deriving benefits, remain rather unwarranted because the principle underlying the enactment and the Scheme of 1952 is to provide financial security to the employees. The concept of exclusion from the Scheme of 1952 is limited to the class/es of employees mentioned in Paragraph 2(f) only; and the area of operation of this exclusion clause cannot be expanded by way of an assumption about the alleged extra advantage likely to be driven home by an employee. In fact, even the assumption of the Single Judge does not appear apt in the framework of the Act and the Scheme of 1952. Whatever an employee gets by virtue of the Act of 1952 is basically the accumulation in his provident fund account, where he and his employer do contribute. The order passed by the Single Judge, being based on entirely irrelevant considerations, has rightly been disapproved by the Division Bench of High Court. [Para 16] [89-G-H; 90-A-D]

13. The framework and setup of the Scheme of 1952, the concept remains plain and clear that if a person is member of the Fund created thereunder i.e., under the Scheme of 1952 and withdraws all his accumulations therein, he may not be obliged to be a member of the same Fund under the Scheme of 1952 over again and could be treated as an “excluded employees”. However, such is not the relaxation granted in relation to an employee who was earlier a member of any other Fund but later on joins such an establishment where he would be entitled to membership of the Fund created under the Scheme of 1952. This framework of the provisions and stipulations appears to be best serving the interest of employees, while providing them with continued financial security. [Para 17] [90-E-G]

N.K. Jain and Ors. v. C.K. Shah and Ors. (1991) 2 SCC

495 : [1991] 1 SCR 938 – referred to.