Whether bonus paid to employees of contractors performing regular/essential work be termed as basic wages as defined under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 for the purpose of determination of Provident Fund?

IN THE HIGH COURT OF DELHI AT NEW DELHI

W.P.(C) 4034/2000

REGIONAL P.F. COMMISSIONER

Petitioner

Versus

SIEL FOODS AND FERTILIZER INDUSTRIES

Respondent

And

+ W.P.(C) 4035/2000

REGIONAL P.F. COMMISSIONER

 Petitioner

Versus

SIEL FOODS AND FERTILIZER INDUSTRIES & ANR.

Advocates for

Petitioner: Mr.RajeshManchanda

Respondent: Mr.SandeepPrabhakar with Mr.Vikas Mehta

BEFORE CORAM:

HON'BLE MR. JUSTICE V.KAMESWAR RAO

Judgment reserved on July 07, 2014

Judgment delivered on July 14, 2014

1. Since these two writ petitions involves challenge to a common order dated January 07, 2000 passed by the Employees’ Provident Fund Appellate Tribunal (Tribunal, in short) in two appeals i.e. ATA 4/(7) 1999 and ATA/4(10) 1998 between the parties herein, with the consent of the learned counsel for the parties, are being disposed of by this common order. The parties shall be referred as petitioner and respondent No. 1, as per their status in W.P.(C) No. 4035/2000.

2. Vide the impugned order, the aforesaid appeals filed by the respondent No. 1 herein have been allowed and the orders dated December 02/06, 1994 and July 17, 1998 have been set aside. The brief facts, as culled out from the record are, the petitioner alleged that a team of Enforcement Officers visited the respondent No. 1-establishment and found that the respondent No. 1-establishment failed to extend Provident Fund benefits to transport contractors’ workers; failed to pay Provident Fund contributions on special allowance and also failed to pay arrears of Provident Fund dues on salaries upto to the limit of Rs. 3500/- with respect to 19 employees w.e.f. November 01, 1990. On October 15, 1991, summons were issued for determination of Provident Fund dues payable by the respondent No. 1-establishment. On December 02, 1994, the competent authority under Section 7A of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (Act, in short) held that the respondent No. 1-establishment was liable to pay dues with respect to the transport contractors’ employees for the period effective from November 01, 1990 till that date and further, was directed to produce records for determination of dues.

3. The respondent No. 1-establishment filed writ petition being W.P.(C.) No. 559/1995 before this Court, challenging the order dated December 02/06, 1994. On July 17, 1998, the Tribunal ultimately passed an order under Section 7A of the Act, determining the liability of the respondent No. 1 to be of Rs. 13,97,742/- payable to the petitioner within a period of 15 days. The Writ Petition (C) No. 559/1995 was dismissed, giving the respondent No. 1 liberty to file appropriate proceedings before the Tribunal within two weeks. It is noted that two appeals came to be filed against order dated July 17, 1998. The number being ATA/4/(7) 1999 & ATA/4(10) 1999. On completion of pleadings, the appeals against the order dated July 17, 1998 were heard together and which culminated in the impugned order.

4. It is the submission of Mr. Rajesh Manchanda, learned counsel appearing for the petitioner that the Tribunal has erred in allowing the appeals inasmuch as in terms of the definition of the ‘employees’ under Section 2 (f) of the Act, the liability of the contractors’ employees is on the respondent No. 1 herein. The employees through contractors were performing regular/essential work of the respondent No. 1 and the work is a recurring and regular feature. It was also his submission that any bonus paid to an employee or a worker shall be basic wages. According to him, incentive bonus being paid to its employees by the respondent No. 1, would be termed as basic wages, on which, the Provident Fund dues need to be paid. He would rely upon the following judgments in support of his case:

1. Orient Paper Mills V. Regional Provident Fund Commissioner and Anr., (2006) I LLJ 1136 MP.

2. M.M.T.C. Ltd., New Delhi V. Regional Provident Fund Commr., New Delhi, 193 (2012) DLT 229, (2013) I LLJ 192 Del.

3. P.M. Patel and Sons and Ors. V. Union of India (UOI) and Ors., AIR 1987 SC 447

5. On the other hand, Mr.SandeepPrabhakar, learned counsel appearing for the respondent No. 1 would support the judgment of the Tribunal and states that the transport workers are the workers of the transporters and are not employed by the respondent No. 1 directly or indirectly. According to him, the respondent No. 1 has entered into contracts with transporters for transportation of the material on assignment basis. The involvement of the transporters vis-a-vis the respondent No. 1 is only for transporting the material. He would state that such workers are engaged for transportation of goods/materials by other Establishments or transporters also. In other words, the transporters are engaged in the work of various other Establishments and they are not confined only to the respondent No.1-establishment. The workers engaged on transport assignment come and go along with the trucks after delivery or lifting of the material as the case may be and thereafter, the same workers are engaged for transportation of goods and materials of other establishments. Such workers may or may not come back to the respondent-Establishment at all in connection with the transportation of their goods/materials. He would state that such persons are not covered within the definition of employee under Section 2(f) of the Act. He would also state that in support of their case, the respondent No. 1 had produced various transporters before the authority, who in their deposition, have categorically stated, both in their examination-in-chief as well as in their cross examination that they work for other establishments also.

6. Insofar as the second issue whether the dues should be paid on the productivity/incentive link bonus is concerned, it is his case that the respondent No. 1 was having Productivity Improvement Programme (PIP) scheme. Under the scheme, the respondent No. 1 was giving incentive bonus to its employees and never paid Provident Fund contributions on that amount. In the year 1989, the respondent No. 1 introduced a revised PIP scheme, which was relating to standard norms of efficiency and prevention of wastage etc. He would further submit that PIP scheme which provided for standard wages to each of the employees than normal standards of work beyond which the employees are entitled for incentive bonus, then, it provides for normal wastage process of manufacturing exceeding which certain amount was to be deducted from the amount payable as bonus to individual employees. There is also a provision to pay extra bonus who achieved above the normal standards. He would argue that incentive bonus is not paid to all the employees by all the establishments. That being the position, according to him, the definition of ‘basic wages’ under the Act itself excludes bonus. Mr. SandeepPrabhakar would rely upon the following judgments in support of his contentions:

To read the full judgment, please find the attached file:

Attached file:

http://lobis.nic.in/dhc/VKR/judgement/14-07-2014/VKR14072014CW40342000.pdf