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Analysis of Central Board of Trustees (EPFO) Vs.  M/s Era Infra Engineering Limited and Anr

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case law insider

Shivangi Mathur

Published on: June 25, 2022 at 16:34 IST

Introduction

The Delhi High Court in the case of Central Board of Trustees (EPFO) v. M/s Era Infra Engineering Limited and Anr[1], adjudicated upon the powers of the Provident Fund Commissioner while discharging his powers under “Section 7A” of the Employees’ Provident Fund and Miscellaneous Act 1952 (EPF & MP Act 1952). Era Infra Engineering Limited is an establishment covered by the EPF & MP Act 1952.

About M/s Era Infra Engineering Limited and Anr

Era Infra Engineering Limited is a company headquartered in Noida and has its registered office in New Delhi, thus the case was heard by the Delhi High Court. It is a fully integrated Development Company.

It became a public company in 1992 and is engaged in the execution of construction contracts involving engineering, procurement and construction projects across a range of sectors, such as roads and highways, power, railways, metro, aviation, industrial, institutional and related segments. The Company is under the Corporate Insolvency Resolution Process with effect from May 2018.

What is Section 7A of the EPF & MP Act 1952?

The EPF & MP Act 1952 provides for the institution of provident funds, pensions funds and deposit-linked insurance funds for employees in factories and other establishments.

Section 7A of this Act provides for the determination of money due from the employers.

  • “Subsection 1” of this Section defines the competent authorities who can through an order decide disputes regarding the applicability of this Act and the determination of the amount from any employer under any provision of this Act.
  • “Subsection 2” of this Section states that for the purpose of an Enquiry under this Act, the Officer will be vested with the powers same as those of Civil Courts under the Code of Civil Procedure 1908 when trying a suit concerned with:
    1. enforcing the attendance of any person or examining him on oath;
    2. requiring the discovery and production of documents;
    3. receiving evidence on affidavit;
    4. issuing commissions for the examination of witnesses;
  • “Subsection 3” of this Section states that no order can be made under Section 7A(1) unless the concerned employer has been given a reasonable opportunity to represent his case.
  • “Subsection 4” of this Section states that when an order is passed ex parte against an employer, he has a period of 3 months from the date of communication of such order to apply to the officer for setting aside the order if he can satisfy the offer that the show cause notice was not duly served or that he due to some reasonable cause was not able to appear when the inquiry was made.

Provided the officer is satisfied, he can issue an order setting aside his earlier order and can appoint a date for proceeding with the inquiry.

  • “Subsection 5” of this Section states that no order passed under this section shall be set aside on any application under sub-section (4) unless notice has been served on the opposite party.

What are the facts of the Case?

  • During the inspection of Respondent No. 1 i.e., Era Infra Engineering Limited it was found that some contracted workers of the regional offices of the Provident Fund Department were not receiving the benefit as stipulated under the provisions of the EPF & MP Act 1952.
  • A notice under section 7A of the EPF & MP Act 1952 was issued to the Respondent directing it to before the Adjudicating Authority which in this case was the Regional Provident Fund Commissioner (herein after referred to RPFC)
  • The Respondent replies to the notice and the inspection report, denying the allegation that had been made against it.
  • The deposition report as filed by the enquiry officer stated the liabilities of the amount paid as labour component to other contractors covered independently also arises as the Respondent which was deemed to be the principal employer that failed to seek compliance from the sub-contractors in respect of all eligible contractual employees.
  • The RPFC did not issue any notice to the contractors to ascertain the true facts and held that the establishment is liable to pay the Provident Fund to the employees who were employed or connected with its work and got their wages directly or indirectly amounting up to Rs. 108,67,37,263
  • During the course of proceedings, Respondent No. 1 went through the Corporate Insolvency Resolution Process and the Resolution Professional handling it was included as Respondent No. 2.
  • The order of the RPFC was challenged before the Employees’ Provident Fund Appellate Tribunal, which set aside the order of the Adjudicating Authority. Subsequently, the Employees’ Provident Fund Organisation appealed against the decision of the Tribunal before the Delhi High Court.

What were the issues?

The issues that arose in this case were:

  • Whether the Respondent is liable to pay the Contractors & Sub-contractors?
  • Whether the Contractors and Sub-contractors need to be impleaded and heard by the RPFC while exercising its power under Section 7A of the EPF & MP Act?

What were the contentions by the Respondent

  • For the first issue, it contended that looking at the nature of the Contract between Era Infrastructure and the contractors & sub-contractors, the respondent has no control over the work of the contracting workers and that they are not their employees for the purpose of the EPF & MP Act

What were the contentions by the Petitioner

  • For the first issue, they relied upon the following cases:
    • M/s. Sandeep dwellers Private Limited. V. Union of India[2]
    • Builders Association of India v. Union of India[3]
    • Officer-in-Charge, Sub-Regional Provident Fund Office & Anr. v. Godavari Garments Limited[4]
    • SK Nasiruddin Beedi Merchant Ltd. v. Central Provident Fund Commissioner and Another[5]
    • P.M. Patel & Sons v. Union of India and[6]
  • The petitioner contended that merely because, the beneficiaries cannot be identified because of the lack of cooperation of respondent no. 1, this cannot be the reason for permitting respondent no. 1 to retain the money which it ought to have deposited with the EPFO.
  • The respondent no. 1 had a duty to maintain records to facilitate the identification of the beneficiary employees.

What Judgement was given?

For the first issue, the Court relied on the Judgement given in Regional Provident Fund Commissioner v. The Hooghly Mills Company Limited and Others[7] and reaffirmed that EPF & MP Act is a social welfare legislation, and in case of any doubt it should be read as a whole, in the light of its purpose and the remedy it seeks to achieve.

The Court held that since the contractors and sub-contractors have worked for the respondent indirectly, and are in connection with the work of the respondent, they are covered by the provisions of the EPF & MP Act.

For the second issue the Court relied on the case of Food Corporation of India v. Provident Fund Commissioner[8] and held that it is the duty of the Commissioner to collect evidence by impleading parties and that under Section 7A of the Act, the Commissioner is authorised to enforce the attendance in person and examine any person.

The Court held that to determine the contribution that is payable under the EPF & MP Act, it is imperative that the identity of the employee be established. The Commissioner has been conferred with powers to decide not abstract questions of law but to determine concrete differences in the payment of contributions and other dues by identifying the employees. The Commissioner should have collected all the evidence before arriving at a conclusion.

The Court noted that the Commissioner should adhere to the Principles of Natural Justice while exercising his powers under Section 7A and that he should issue notices to the contractors and also identify the beneficiaries.

The Delhi High Court set aside the orders given by the Adjudicating Authority and the Appellate Tribunal and remanded the matter back to the Adjudicating Authority to be decided afresh after summoning contractors and sub-contractors.

Conclusion

Through this judgement, the Delhi High Court has held that for any imposing liability on any company under the EPF & MP Act 1952, it is incumbent upon the Commissioner to ensure that all information has been collected and summons are issued to third parties who may have relevant records.

The powers granted under Section 7A cover actions of the Commissioner which are utilized to ascertain dues and in the absence of such exercise of powers, any liability that may be fastened can be set aside.

The Court also held that any worker of a company, even if he is engaged indirectly, so long as it is in connection with the work of the company will be covered under the provisions of the EPF & MP Act, 1952, as the provisions of this Act should be resolved in favour of the class of persons for whose benefit it is enacted.

Endnotes

  1. WP (C) 4083/ 2015
  2. 2007 (1) LLJ 518
  3. WP(C) 3588/2002
  4. (2019) 8 SCC 149
  5. 2001 (2) SCC 612
  6. 1987 AIR 447
  7. 2012 (2) SCC 489
  8. 1990 (1) SCC 68