Contractual employees are entitled to the benefit of PF under the PF Trust Regulations or the EPF Act: SC
[ by Kavita Krishnan ]The Supreme Court held that the Provident Fund (PF) Trust Regulations would undoubtedly cover all contractual employees who have been engaged by the Company, and draw their wages/salary directly or indirectly from the Company.M/s. Pawan Hans Limited (Appellant) incorporated with the primary objective of providing helicopter support services to the oil sector is a...
The Supreme Court held that the Provident Fund (PF) Trust Regulations would undoubtedly cover all contractual employees who have been engaged by the Company, and draw their wages/salary directly or indirectly from the Company.
M/s. Pawan Hans Limited (Appellant) incorporated with the primary objective of providing helicopter support services to the oil sector is a Government of India registered company. The Government holds 51% in the Appellant Company and the rest 49% is being held by Oil and Natural Gas Company Ltd. (ONGC).
The Appellant Company runs the Pawan Hans Employees Provident Fund Trust (“PF Trust”) for giving provident fund benefits to all the employees of the Company. However, the benefit of contributory PF was not being provided to contractual employees of the Company. The Company having framed its own PF Trust Regulations, claimed exemption from the applicability of the Employees’ Provident Funds Act, 1952 (EPF Act) and EPF Scheme under Section 16 of the EPF Act. The Company however restricted the application of the PF Trust Regulations to only the ‘regular’ employees.
The High Court allowed the Writ Petition and directed the Respondent Company to enroll all eligible contractual employees under the EPF Scheme, and deposit their contribution with the Regional Provident Fund Commissioner till they are in employment of the Company.
Pawan Hans Limited appealed to the Supreme Court.
The issue for consideration before the Supreme Court was whether the employees who were on contractual basis are entitled to the benefit of Provident Fund under the PF Trust Regulations or under the EPF Act.
The High Court committed a grave error in giving retrospective application to the provisions of the EPF Act, i.e., from the date of the members joining the Respondent-Trade Union, given that several contractual employees had superannuated, passed away, resigned, or ceased to be in the employment of the Company. The extension of benefits under the EPF Act to contractual employees irrespective of their status of employment with the Company was wholly illegal, arbitrary, and liable to be set aside.
The Supreme Court relied on Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School and recommended a twin-test for an establishment to seek exemption under Section 16(1)(b) the EPF Act. The twin conditions are –
(1) The establishment must be either “belonging to” or “under the control of” the Central or the State Government. The phrase “belonging to” would signify “ownership” of the Government, whereas the phrase “under the control of” would imply superintendence, management or authority to direct, restrict or regulate.
(2) The employees of such an establishment should be entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits.
The Court held that the Company did not satisfy the second test as the members of the Respondent-Union and other similarly situated contractual workers had not received the benefits of contributory provident fund under the PF Trust Regulations framed by the Company, or under any Scheme or any rule framed by the Central Government or the State Government. Consequentially, the exemption under Section 16 of EPF Act would not be applicable to the Appellant-Company.
It was submitted that the contractual employees received wages directly from the Company, and were eligible to be included under the PF Trust Regulations framed by the Company. The Court ruled that since the members of the Union had been in continuous employment with the Company for long periods of time and had been receiving wages/salary directly from the Company without the involvement of any contractor since the date of their engagement, the employment cannot be termed to be ‘contractual’ in nature.
The definition of an ‘employee’ is an inclusive definition, and is widely worded to include “any person” engaged either directly or indirectly in connection with the work of an establishment, and is paid wages.
A Bench of Justices Uday Umesh Lalit and Indu Malhotra presided over the case.