THE OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUND OFFICE & ANR. versus M/S GODAVARI GARMENTS LIMITED on 24 July 2019

1. The present Civil Appeal has been filed to challenge the OrderDdated 27.04.2012 passed in W.P. No. 1615 of 1993 by the Bombay HighCourt, Aurangabad Bench.

2. The background facts in which the present Civil Appeal hasbeen filed are briefly stated as under:

2.1. The Respondent Company is a subsidiary of the MarathwadaEDevelopment Corporation, which is an undertaking of theGovernment of Maharashtra. It was covered under theprovisions of the Employees’ Provident Fund andMiscellaneous Provisions Act, 1952 (hereinafter referred toas “the EPF Act”) with effect from 01.01.1979.

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2.2. The main objective of the Respondent Company, as per itsMemorandum of Association, was to encourage, promote,develop, set-up or cause to be set-up a readymade garmentsindustry in the Marathwada Region, with a view to providegainful employment to people possessing skills in stitching,Gtailoring, and allied activities, especially to women from theeconomically weaker sections of the Society.

2.3. The Respondent Company engaged women workers whowere provided with cut fabric, thread, buttons, etc. to bemade into garments at their own homes. The sewing H

machines used by the women workers were owned by them,and not provided by the Respondent Company.

2.4. On 12.03.1991, Appellant No. 1 – Officer In-Charge, Sub-Regional Provident Fund Office, issued a Show CauseNotice to the Respondent Company calling upon it to paythe Provident Fund contributions for the women workers.The Balance Sheet of the Respondent Company for the year1988 – 89, revealed large debits towards salary and wagesfor direct and indirect workers, but the RespondentCompany made a false statement that it had only 41employees.

2.5. On 30.11.1992, Appellant No. 1 issued summons to theRespondent Company for personal hearing under Section7-A of the EPF Act.

2.6. The representative of the Respondent Company appearedbefore Appellant No. 1, and contended that the womenworkers who were fabricating garments for the RespondentCompany, were not their employees, and hence not coveredby Section 2(f) of the EPF Act. Therefore, even thoughwages were paid to those women workers, the RespondentCompany was not liable to pay Provident Fund contributionin respect of them.

2.7. The Provident Fund Officer – Appellant No. 1 vide Orderdated 19.04.1993 held that the women workers engaged forstitching garments were covered by the definition of“employee” under Section 2(f) of the EPF Act. An amountof Rs. 15,97,087/- was assessed towards Provident Funddues of the Respondent Company for the period fromNovember, 1979 to February, 1991. The RespondentCompany was directed to pay the said amount within 7 days.

2.8. The Respondent Company challenged the aforesaid Orderby filing W.P. No. 1615 of 1993 before the Bombay HighCourt.

The Bombay High Court, Aurangabad bench vide Final Judgment and Order dated 27.04.2012 allowed the WritPetition filed by the Respondent Company, and set aside the A

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Order dated 19.04.1993 passed by the Appellant No. 1. Itwas held that the Respondent Company had no direct orindirect control over the women workers. The conversion ofcloth into garment could be done by any person on behalf ofthe women workers. Hence, the Respondent Company didnot exercise any supervisory control over the womenworkers.

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2.9. Aggrieved by the aforesaid Judgment, the present CivilAppeal has been filed by the Provident Fund Office.

3. We have heard the learned Counsel for the parties, andCperused the pleadings and written submissions filed by the parties.

4. Mr. R.R. Rajesh, learned Counsel appearing on behalf of theAppellants, submitted that the women workers employed by theRespondent Company fall within the definition of “employee” underSection 2(f) of the EPF Act.

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Reliance was placed on this Court’s decision in M/s P.M. Patel& Sons and Ors. v. Union of India and Ors.[1]to contend that thewomen workers employed by the Respondent Company were coveredby the definition of “employee” under Section 2(f) of the EPF Act. Hence,the Respondent Company is liable to pay Provident Fund contribution inrespect of those women workers.

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5. Mr. Anoop Kandari, learned Counsel appearing on behalf ofthe Respondent Company, submitted that there was noemployer-employee relationship between the Respondent Company andthe women workers. The women workers were not employees underSection 2(f) of the EPF Act. They were independent contractors.

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It was further submitted that the sewing machines used by thewomen workers were owned by them, and not provided by theRespondent Company. The women workers worked from their homes,and not at the production centers of the Respondent Company. Hence,the work performed by them, could be done by their relatives, or anyGother person on their behalf. Furthermore, the women workers were notbound to report to the production centers regularly, nor were theyrequired to work at the production centers. The Respondent Companyexercised no supervisory control over the women workers.

1(1986) 1 SCC 32.

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6. The short issue which arises for consideration is whether thewomen workers employed by the Respondent Company are covered bythe definition of “employee” under Section 2(f) of the EPF Act or not.

Section 2(f) of the EPF Act is set-out hereinbelow for readyreference:

“(f) “employee” means any person who is employed for wagesin any kind of work, manual or otherwise, in or inconnection with the work of an establishment, and who gets,his wages directly or indirectly from the employer, andincludes any person,—

(i) employed by or through a contractor in or in connectionwith the work of the establishment;

(ii) engaged as an apprentice, not being an apprenticeengaged under the Apprentices Act, 1961 (52 of 1961), orunder the standing orders of the establishment;”

6.1. The definition of “employee” under Section 2(f) of the EPFAct is an inclusive definition, and is widely worded to includeany person engaged either directly or indirectly in connectionwith the work of an establishment.

6.2. In the present case, the women workers employed by theRespondent Company were provided all the raw materials, suchas the fabric, thread, buttons, etc. from the Respondent –Employer. With this material, the women workers wererequired to stitch the garments as per the specifications givenby the Respondent Company. The women workers could stitchthe garments at their homes, and provide them to theRespondent Company. The Respondent Company had theabsolute right to reject the finished product i.e. the garments,in case of any defects.

6.3. The mere fact that the women workers stitched thegarments at home, would make no difference. It is theadmitted position that the women workers were paid wages A

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Adirectly by the Respondent Company on a per-piece basis forevery garment stitched.

6.4. The issue in the present case is squarely covered by thedecision of this Court in Silver Jubilee Tailoring House andOrs. v. Chief Inspector of Shops and Establishments andBOrs.[2] The appellants therein were engaged in the business ofproducing garments. They employed workers who wereprovided with the cloth, and were instructed by the appellantshow to stitch it. The workers were paid on piece-rate basis. Ifa worker failed to stitch a garment as per the instructions, theappellants rejected the work, and asked the worker to re-stitchCthe garment. This Court held that such workers fell within thedefinition of “person employed” under Section 2(14) of theAndhra Pradesh (Telangana Area) Shops and EstablishmentsAct, 1956. It was held that:

“35. Quite apart from all these circumstances, as theDemployer has the right to reject the end product if it doesnot conform to the instruction of the employer and directthe worker to restitch it, the element of control andsupervision as formulated in the decisions of this Court isalso present.”

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6.5. On the issue where payment is made by piece-rate to theworkers, would they be covered by the definition of “employee”,this Court in Shining Tailors v. Industrial Tribunal II, U.P.,Lucknow and Ors.,[3] held that:

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“5. We have gone through the record and especially theevidence recorded by the Tribunal. The Tribunal hascommitted a glaring error apparent on record thatwhenever payment is made by piece rate, there is norelationship of master and the servant and that suchGrelationship can only be as between principal andprincipal and therefore, the respondents wereindependent contractors. Frankly, we must say that the H

2(1974) 3 SCC 498.

3(1983) 4 SCC 464.

OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUNDOFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]

Tribunal has not clearly grasped the meaning of what isthe piece rate, If every piece rated workmen is anindependent contractor, lakhs and lakhs of workmen invarious industries where payment is correlated toproduction would be carved out of the expression‘workmen’ as defined in the Industrial Disputes Act. Inthe past the test to determine the relationship of employerand the workmen was the test of control and not the methodof payment. Piece rate payment meaning thereby paymentcorrelated to production is a well-recognised mode ofpayment to industrial workmen. In fact, wherever possiblethat method of payment has to be encouraged so that thereis utmost sincerity, efficiency and single minded devotionto increase production which would be beneficial both tothe employer, the workmen and the nation at large. Butthe test employed in the past was one of determining thedegree of control that the employer wielded over theworkmen. However, in the identical situation in SilverJubilee Tailoring House and Ors. v. Chief Inspector ofShops and Establishments and Anr. (1973) IILLJ 495 SCMethew, J. speaking for the Court observed that thecontrol idea was more suited to the agricultural societyprior to Industrial Revolution and during the last two de-cades the emphasis in the field is shifted from and nolonger rests exclusively or strongly upon the question ofcontrol. It was further observed that a search for aformula in the nature of a single test will not serve theuseful purpose, and all factors that have been referred toin the cases on topics, should be considered to tell acontract of service. Approaching the matter from thisangle, the Court observed that the employer’s right toreject the end product if it does not conform to theinstructions of the employer speaks for the element ofcontrol and supervision. So also the right of removal ofthe workman or not to give the work has the element ofcontrol and supervision. If these aspects are considereddecisive, they are amply satisfied in the facts of this case.

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AThe Tribunal ignored the well laid test in law andcompletely misdirected itself by showing that piece rateitself indicates a relationship of independent contractorand error apparent on the record disclosing a total lackof knowledge of the method of payment in variousoccupations in different industries. The right of rejectionBcoupled with the right to refuse work would certainlyestablish master servant relationship and both these testsare amply satisfied in the facts of this case. Viewed fromthis angle, the respondents were the workmen of theemployer and the preliminary objection therefore, raisedCon behalf of the appellant-employer was untenable andought to have been overruled and we hereby overrule it.”

6.6. In M/s P.M. Patel & Sons and Ors. v. Union of India andOrs.,[4] the appellants therein were engaged in the manufactureDand sale of bidis. The appellants engaged contractors, and thecontractors engaged workers who rolled the bidis at their ownhomes after obtaining the raw materials either directly fromthe appellants, or through the contractors. The appellantscontended that those workers were not covered by theEdefinition of “employee” under Section 2(f) of the EPF Act.This Court rejected the contentions raised by the appellantstherein, and held that:

“8. … Clause (f) of Section 2 of that Act defines an“employee” to mean “any person who is employed forFwages in any kind of work, manual or otherwise, in or inconnection with the work of an establishment, and whogets his wages directly or indirectly from the employer,and includes any person employed by or through acontractor in or in connection with the work of theestablishment.” It will be noticed that the terms of theGdefinition are wide. They include not only personsemployed directly by the employer but also personsemployed through a contractor. Moreover, they includenot only persons employed in the factory but also 4(1986) 1 SCC 32.H

persons employed in connection with the work of thefactory. It seems to us that a home worker, by virtue of thefact that he rolls beedis, is involved in an activityconnected with the work of the factory.We are unable toaccept the narrow construction sought by the petitionersthat the words “in connection with” in the definition of“employee” must be confined to work performed in thefactory itself as a part of the total process of themanufacture.

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10. In the context of the conditions and the circumstancesset out earlier in which the home workers of a singlemanufacturer go about their work, including thereceiving of raw material, rolling the beedis at home anddelivering them to the manufacturer subject to the rightof rejection there is sufficient evidence of the requisitedegree of control and supervision for establishing therelationship of master and servant between themanufacturer and the home worker. It must be rememberedthat the work of rolling beedis is not of a sophisticatednature, requiring control and supervision at the time whenthe work is done. It is a simple operation which, aspractice has shown, has been performed satisfactorily bythousands of illiterate workers. It is a task which can beperformed by young and old, men and women, with equalfacility and it does not require a high order of skill. In thecircumstances, the right of rejection can constitute initself an effective degree of supervision and control.Wemay point out that there is evidence to show that therejection takes place in the presence of the home worker.That factor, however, plays a merely supportive role indetermining the existence of the relationship of themaster and servant. The petitioners point out that there isno element of personal service in beedi rolling and that itis open to a home worker to get the work done by one orthe other member of his family at home. The element of A

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Apersonal service, it seems to us, is of little significancewhen the test of control and supervision lies in the rightof rejection.”

6.7. The aforesaid judgments make it abundantly clear that theBwomen workers employed by the Respondent Company arecovered by the definition of “employee” under Section 2(f) ofthe EPF Act.

6.8. The EPF Act is a beneficial social welfare legislation whichwas enacted by the Legislature for the benefit of theCworkmen.[5] This Court in The Daily Partap v. The RegionalProvident Fund Commissioner, Punjab, Haryana, HimachalPradesh and Union Territory, Chandigarh,[6] held that:

“9. … It has to be kept in view that the Act in question, isa beneficial social welfare legislation meant for theDprotection of weaker sections of society, namely,workmen who had to eke out their livelihood from themeagre wages they receive after toiling hard for thesame.”

Hence, the provisions under the EPF Act have to be interpretedEin a manner which is beneficial to the workmen.

6.9. In the present case, the women workers were certainlyemployed for wages in connection with the work of theRespondent Company. The definition of “employee” underSection 2(f) is an inclusive definition, and includes workersFwho are engaged either directly or indirectly in connectionwith the work of the establishment, and are paid wages.

In the present case, the women workers were directly engagedby the Management in connection with the work of the RespondentCompany, which was set up as a ready-made garments industry inMarathwada. The women workers were paid wages on per-piece basisGfor the services rendered. Merely because the women workers werepermitted to do the work off site, would not take away their status as employees of the Respondent Company.5 Regional Provident Fund Commissioner v. The Hooghly Mills CompanyLtd. and Ors. , 2012 (1) SCALE 422.H6(1998) 8 SCC 90.

OFFICER IN CHARGE, SUB-REGIONAL PROVIDENT FUNDOFFICE v. M/S GODAVARI GARMENTS LTD.[INDU MALHOTRA,J.]

7. The Respondent Company placed reliance on this Court’sdecision in C.E.S.C. Limited and Ors. v. Subhash Chandra Bose andOrs.,[7]wherein it washeld that:

“14. … In the textual sense ‘supervision’ of the principalemployer or his agent is on ‘work’ at the places envisagedand the word ‘work’ can neither he construed so broadly tobe the final act of acceptance or rejection of work, nor sonarrowly so as to be supervision at all limes and at each andevery step of the work. A harmonious construction alonewould help carry out the purpose of the Act, which wouldmean moderating the two extremes. When the employee is putto work under the eye and gaze of the principal employer, orhis agent, where he can be watched secretly, accidentally, oroccasionally, while the work is in progress, so as toscrutinise the quality thereof and to detect faults therein, asalso put to timely remedial measures by directions given,finally leading to the satisfactory completion and acceptanceof the work, that would in our view be supervision for thepurposes of Section 2(9) of the Act.”

The decision in C.E.S.C. Limited (supra) however, is notapplicable to the facts of the present case. In that case, this Courtinterpreted the meaning of the term “supervision” as used in thedefinition of “employee” Section 2(9) of the Employees’ StateInsurance Act, 1948. However, the term “supervision” is nowhere usedin the definition of “employee” under Section 2(f) of the EPF Act. Thedecision in P.M. Patel(supra) could not be used to interpret the word“supervision” under the Employees’ State Insurance Act, 1948because the said word has not been used in Section 2(f) of the EPF Act.

8. In view of the aforesaid discussion, the judgment passed by theBombay High Court vide the Impugned Order dated 27.04.2012, beingcontrary to settled law, is set aside.

The Order dated 19.04.1993 passed by the Appellant No. 1 isrestored. The Respondent Company is directed to deposit the amountassessed by Appellant No. 1 towards Provident Fund dues of the womenworkers within 1 month from the date of this Judgment.

7(1992) 1 SCC 441.

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AThe Civil Appeal is allowed in the aforesaid terms. All pendingApplications, if any, are accordingly disposed of.

Ordered accordingly.

BNidhi Jain

Appeal allowed.

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