REGIONAL PROVIDENT FUND COMMISSIONER Vs. HARIHAR POLYFIBRES

JUDGEMENT

(1.) THE short facts are as follows: - 33 employees' working in M/s. Harihar polylibres, kumarapatnam were contributing to birla broTHErs provident fund. This contribution was prior to 1-1-1975. It was at that period THE unit came under THE Provisions of THE employees' provident funds miscellaneous Provisions Act, 1952 (hereinafter referred to as 'THE act'). The schemes framed earlier required contribution at THE rate of 10%. After THE establishment was notified under THE act by order dated 1-1-1975, all THE employees who were earlier contributing to birla broTHErs provident fund were taken to THE statutory provident fund. Accordingly THEir contributions which were required at THE rale of 10% to birla broTHErs provident fund came to be reduced to THE statutory minimum of 8% from 1-1-1975 unilaterally. Therefore THE question arose wheTHEr THE employers vi/.. M/s. Harihar polyfibres were within THE powers to reduce THE existing higher rate of contribution applicable to THE statutory minimum of 8% unilaterally? If that is so, wheTHEr such a deduction in THE existing benefits in THE nature of higher rate of contribution would not offend Section 12 of THE act. This matter came up for consideration before THE regional provident fund commissioner, karnalaka who in deciding THE matter under Section 7-a of THE act posed 2 questions for dctcrminalion:- "1. WheTHEr THE management have infringed THE Provisions contained in sec- lion 12 of THE act by reducing THE rate of contribution from 10% to 8% soon after THE establishment was brought under THE act and THE scheme.

(2.) WHETHER the liability could be waived if the employees choose lo forego the benefits by written declaration." in interpreting Section 12 of the act reference was made to the ruling of the Bombay high court in consolidated Crop Protection Private Limited v Hemachandra Rao, 1977(1) LLJ 114. The commissioner held that the views expressed by the Bombay high court would be apposite and the reduction from 10% lo 8% was impermissible in law. On the second aspect of the matter he was of the view that it was nol open to the employees, to give up the statutory benefits. In the result, he raised a demand from the year 1975-76 to 1981 -82 for a sum of Rs. 1,40,483/-. Aggrieved by this order the employer took up the matter in W.P. No. 4553 of 1984. The learned single judge by his judgment d;itcd 25-9-1989 came to the conclusion that on the interpretation of Section 12, that even a bare reading of this provision would disclose what was forbidden under this Section was reduction of wages or the total quantum of benefits in the nature of old age pension, gratuity or provident fund. What is prohibited was the reduction by reason of the employer's liability for payment of contribution to the fund. This question did not arise before the Bombay high court. Further 17 employees prayed that they could be covered by the act besides all the 33 employees' came under the excluded employees' scheme. In such an event to insist upon particular rale is nol al all justified. Thus he concluded that the demand made was wholly illegal. On this line of reasoning he sel aside the order and allowed the writ petition. It is under these circumstances the regional provident fund commissioner has preferred this appeal. Mr. Shylendrakumar, learned central government standing counsel submitted lhal the interpretation placed by the learned judge on Section 12 is nol correct. The Section throws an obligation on the employer to pay the contribution as per the original terms and the same cannot be avoided merely because the unit comes under the act. The words 'by reason' are very relevant lo the issue. Therefore thc original liability continued unabated notwithstanding the unit being covered by the act in question. It was this aspect of the matter which came lo be considered in the ruling of the Bombay high court reported in 1977(1) LLJ 114, which could be substantiated with reference lo the observation contained in para 68 of AIR 1981 SC 212. Therefore the judgment of the learned single judge requires interference. In opposition to this Mr. Gururajan, learned counsel appearing for the respondent would submit that Section 12 if at all be applicable could be applied only to a case where originally the unit was covered by the act and for some reason or the other it ceases to be covered and not to a case of I his character where for the first time it comes to be covered by the act. Secondly, as was pointed out by the learned single judge 33 employees' belong to the excluded category and 17 of them have given in writing their willingness lo be covered by the act. The commissioner again super-imposed himself and insislcd on the observance of the benefits under the old scheme. As was rightly held by ihc learned judge, the Bombay high court decision is of no help, likely AIR 1981 SC 212. In order to appreciate the respective contentions ii is necessary on our part lo extract Section 12 of the act:-