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Whether the provident fund contributions under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, (hereinafter referred as the ‘Act , 1952’ ), are liable to be remitted to the Fund on not less than the minimum wages, prescribed under the Minimum Wages Act, 1948, (hereinafter referred as the Act of 1948)?


The Act of 1948, as per its preamble, is, “An Act to provide for fixing minimum rates of wages in certain employments.” The said Act empowers the appropriate Government under section 3 to fix minimum rates of wages payable to employees in an employment specified in Part I or Part II of the Schedule and in an employment added to either Part by notification under section 27 and review at such intervals, as it may think fit, such intervals not exceeding five years, the minimum rates of wages so fixed and revise the minimum rates, if necessary. The definition of ‘wages’ is contained in section 2(h) of the Act of 1948 and is in the following words:-

‘wages’ under section 2(h) to mean:-


“all remuneration, capable of being expressed in terms of money, which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment and includes house rent allowance, but does not include –

  • the value of;
  • any house  accommodation,  supply   of  light,   water, medical attendance, or
  • any other amenity or any service excluded by general or special order of the appropriate Government;
  • any contribution paid by the employer to any Pension Fund or Provident Fund or under any scheme of social insurance;
  • any travelling  allowance  or  the   value  of  any  travelling concession;
  • any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
  • any gratuity payable on ”

The legislature subsequently enacted the Act of 1952, which as per its preamble, is, “An Act to provide for the institution of provident funds, pension fund and deposit-linked insurance fund for employees in factories and other establishments.” The Act does not contain any definition of wages, but provides the definition of ‘basic wages’ under section 2(b) of the Act, 1952, which is as follows:-

“Basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include –

  • the cash value of any food concession;
  • any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in cost of living), house rent allowance, overtime allowance, bonus,     commission or any other similar allowance payable   to the employee in respect of his employment or of work done in such employment;
  • any presents made by the

The section 6 of the Act of 1952 provides for payment of provident fund contribution by the employer, both employer’s and employee’s share as the requisite percentage of basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees, whether employed by him directly or by or through a contractor.

The entire Act of 1952 and the Employees’ Provident Funds Scheme, 1952 framed there under , there is no mention whatsoever of minimum rates of wages, fixed under the Act of 1948 or of the definition of ‘wages’ contained in section 2(h) of the Act of 1948.

The provisions of the Act of 1952 make it clear that it is a self-contained and complete code in itself, regarding the subject matter covered under the Act of 1952 and even an employee, covered under the Act of 1952, has to contribute his share of the provident fund contribution to the Fund.

The it is a well settled principle of interpretation of statutes that if an Act itself defines a term/expression, which is clear and unambiguous, then for the purpose of interpretation of the such term/expression, resort cannot be legally had to any external source, including another Act or any provisions contained therein.

As such, the Act of 1952 having specifically defined the term/expression ‘basic wages’ under section 2(b), which also has certain exclusion clauses and section 6 requiring the employer to pay provident fund contribution only on basic wages, dearness allowance and retaining allowance, if any, any Authority, making a determination of moneys due from an employer under section 7-A, can only look into the definition of ‘basic wages’, as provided under section 2(b) and make determination of provident fund contribution, due from an employer, on the emoluments earned by   an

employee falling within the definition of ‘basic wages’ as well as on dearness allowance and retaining allowance, if any.

The definition of ‘basic wages’, contained in section 2(b) of the Act of 1952, is clear, unambiguous and capable of one meaning only, therefore, under the guise of the Act of 1952, being a social beneficial one, no other view, which is inconsistent/ contrary to the clear definition of ‘basic wages’, can be taken by the Authority, which is only a creature of the Act of 1952 and hence, has to faithfully implement the provisions of the Act of 1952 as they are, without seeking to enlarge the scope of definition of ‘basic wages’, on the basis of its own liberal views.

The definition of ‘basic wages’ under section 2(b) of the Act of 1952 has been considered by the Hon’ble Supreme Court in its various judgments, including the judgment in the case of Bridge and Roof Company (India) Ltd. Vs. Union of India, (1963) 3 SCR 978 as also in the case of Manipal Academy of Higher Education Vs. Provident Fund Commissioner, (2008) 5 SCC 428, wherein while holding that leave encashment is not a component of basic wages for calculation of provident fund contribution, payable to the provident fund, it has been categorically held in para 13 that “Though the statute in question is a beneficial one, the concept of beneficial legislation becomes relevant only when two views are possible.

None of the judgments of the Hon’ble Supreme Court has been held that the provident fund contribution, ignoring the definition of ‘basic wages’, contained in section 2(b) of the Act of 1952, has to be paid by an employer to the Fund on not less than the minimum wages, fixed by the appropriate Government under the Act of 1948.

The Act of 1948 is not in pari materia with the Act of 1952 and both the Acts have different objects, scope and ambit. Therefore also, the Act of

1948 cannot be taken into consideration for the purpose of enforcement of the Act of 1952.

Even otherwise, a bare perusal of the definition of ‘wages’, contained under section 2(h) of the Act of 1948, clearly reveals that house rent allowance is specifically included in the definition and other similar allowances are not specifically excluded, whereas, as per the definition of ‘basic wages’, contained under section 2(b) of the Act of 1952, house rent allowance and other similar allowances are specifically excluded. Therefore, it is obvious and apparent that both the definitions are separate and the definition of wages, under the Act of 1948, is broader, then the definition of ‘basic wages’, under the Act of 1952.

That assuming a case of an employee, who is being paid only minimum wages, as prescribed under the Act of 1948, including some amounts as house rent allowance and other similar allowances, for the purpose of payment of provident fund contribution regarding such an employee under the Act of 1952, obviously the amounts paid as house rent allowance and other similar allowances would have to be excluded and his provident fund contribution would be on less than the minimum wages, prescribed under the Act of 1948. As such, it cannot be validly claimed that in the case of such an employee, despite the specific exclusion clause in the definition of ‘basic wages’ under section 2(b), the amounts paid to him as house rent allowance and other similar allowances should be included for the purpose of provident fund contribution, which also shows that provident fund contribution can be on less than the minimum wages under the Act of 1948.

The Act of 1948, providing the definition of ‘wages’ under section 2(h), had been enacted prior to the Act of 1952 and as such, there is a presumption that the legislature, while enacting the subsequent Act, was aware of the definition of ‘wages’, contained in the Act of 1948, but even

then, keeping in view the objective of the Act of 1952, it consciously provided a more restrictive definition of ‘basic wages’ under section 2(b) of the Act of 1952. The will of the legislature, as evident from the clear wording of section 2(b), is binding on the Authorities created under the Act of 1952 and they are bound to respect the same and for the such reason it cannot be validly claimed by them that despite restrictive definition of ‘basic wages’ under section 2(b) read with section 6 of the Act of 1952, the provident fund contribution has to be paid in any case on not less than the minimum wages, fixed under the Act of 1948.

The Act of 1948 is not applicable to all establishments and as such, in the establishments, to which the Act of 1948 is not applicable, the employer is not required to pay to its employees the minimum wages, fixed by the appropriate Government under the Act of 1948 with regard to other covered establishments, as held by the Hon’ble Supreme Court, in the case of Lingegowd Detective & Security Chamber (P) Ltd. Vs. Mysore Kirloskar Ltd. and others, (2006) 5 SCC 180. For such reason also, it cannot be validly claimed that all factories/establishments, to which the Act of 1952 is applicable, must necessarily pay to the Fund provident fund contribution at a rate not less than the minimum wages, prescribed by the appropriate Government under the Act of 1948.

The Employees’ Provident Fund Appellate Tribunal, New Delhi, ( in short the ‘EPFAT’) in an appeal, ATA 223(16)2006, filed by M/s. G4S Security Services (India) Ltd. against the 7-A order of the Assistant Provident Fund Commissioner, Gurgaon, had passed its order dated 15.6.2009, holding to the effect that the minimum wages, prescribed under the Act of 1948, has no relevance for provident fund contribution under the Act of 1952 and that keeping in view the definition of ‘basic wages’ under section 2(b), the employer had rightly not been paying provident fund contribution on house rent allowance, conveyance and washing allowance. The Assistant Provident Fund Commissioner, Gurgaon challenged the such order by

filing a writ petition before the High Court of Punjab and Haryana at Chandigarh and a Ld. Single Judge, vide order dated 1.2.2011, reported in 2011 LLR 316, rejected the writ petition, clearly holding to the effect that the definition of ‘wages’ in the Act of 1948 is different from the definition of ‘basic wages’, contained under section 2(b) of the Act of 1952 and as per the laws of interpretation of statute nothing more is to be read into language of statute and the words are to be read and interpreted as they exist to acknowledge the legislative intent, therefore, there is little hesitation to hold that the contention of the petitioner that it is the minimum wages under the Act of 1948, which is to be taken into consideration for determining the provident fund contribution under the Act of 1952, is misplaced and the employer was held to have rightly excluded certain allowances, such as house rent allowance, washing and conveyance allowance while determining its liability towards the Fund.

The Employees’ Provident Fund Department, not being satisfied with the judgment of the Ld. Single Judge, filed a Letters Patent Appeal, which has also been dismissed by a Division bench of the Hon’ble High Court vide its judgment dated 20.7.2011,( reported as Assistant Provident Fund Commissioner Vs. M/s G4S Security Services ( India) Ltd, & another , 2011 LLR 943 )

In view of, inter alia, the facts and circumstances mentioned above, the provident fund contribution, payable by an employer to the Fund under the Act of 1952, has no relation whatsoever with the minimum wages, fixed under the Act of 1948 and the provident fund contribution has to be paid to the Fund only on basic wages, as defined under section 2(b) of the Act of 1952 as well as dearness allowance and retaining allowance, if any, in terms of section 6 of the Act of 1952.

The Employees’ Provident Fund Appellate Tribunal, Delhi ( in short the ‘EPFAT’ ) in many appeals had taken a view that minimum wages is not

defined under the Act, 1952 and pronounced in several appeal matter that

…. “The perusal of the section makes it clear that the Authority has the power to resolve the dispute regarding the payment of dues but it has no power to hold whether minimum wages amount to basic wage or not or whether the payment was made as per Minimum Wages Act or not. In this case in hand the authority has assessed the dues on the basis of Minimum Wages Act so the same is not legal.”

 

The following final order(s) in respect of the Minimum Wages dispute were recently pronounced by the Tribunal in favour of establishment and against the Employees’ Provident Fund Organization :-

  1. Benchmark Infocom   (P)      Vs.   RPFC-Indore   ,   ATA 364(8)2009
  2. Hotel Shree Maya Vs. RPFC , Indore , ATA 536(8)2009
  3. E-Ruchi Marketing(P) Ltd. Vs. RPFC, Indore , ATA 278(8)2010
  4. Bhagurath Coach   &   Metal   Fabrication      Vs.   RPFC

,ATA493(8)2009

  1. Pakija Textile (P) Ltd. Vs. RPFC , ATA 130(8)10

So, in view of the clear judgment of the Punjab and Haryana High Court in the matter of Assistant Provident Fund Commissioner, Gurgaon against M/s. G4S Security Services (India) Ltd., 2011 LLR 316 P&H HC which is upheld by the Division Bench, L.P.A. No. 1139/2011 (O&M) on 20th July’2011 as reported in 2011 LLR 943 ( Assistant Provident Fund Commissioner Vs. M/s G4S Security Services ( India) Ltd.). In fact , the Division bench upheld the decision of the single judge and pronounced through a reasoned order categorically holding that there was no compulsion to hold that the definition of ‘basic wages’ should be equated to the definition of ‘minimum wages’ under the Minimum Wages Act, 1948. Not only this, the Employees’ Provident Fund Appellate Tribunal, New Delhi repeatedly has been taking view that the 7A

authority cannot decided the dispute in respect of minimum wages saying that …. “The perusal of the section makes it clear that the Authority has the power to resolve the dispute regarding the payment of dues but it has no power to hold whether minimum wages amount to basic wage or not or whether the payment was made as per Minimum Wages Act or not. In this case in hand the authority has assessed the dues on the basis of Minimum Wages Act so the same is not legal.”

 

Recently the Hon’ble Delhi High Court in the matter of Group 4 Securitas Guarding Ltd. Vs. Employees’ Provident Fund Appellate Tribunal and others, WP (C) 4408 of 2000, decided on 20.09.2011 that the similar question also arose before the Punjab and Haryana High Court in a case relating to the petitioner M/s. G4S Security Services (India) Ltd. reported as Asstt. Provident Fund Commissioner, Gurgaon Vs. M/s. G4S Security Services (India) Ltd. and Another 2011 LLR 316 wherein it was held that exclusion clause in Section 2(b) is fairly large and the exclusions made while determining the basic wages cannot be said to be unjustified unless they are totally at variants and in complete deviation of the concept of the allowances sought to be under the exclusion clause. The Court held that the respondents have rightly excluded certain allowances such as house rent, washing and conveyance allowances while determining their liability towards the fund. This decision of the Single Judge was maintained by the Division Bench in its decision delivered in LPA No. 1139 of 2011 (O&M) dated 20.07.2011.

The Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner, being quasi- judicial authority, under the Act, 1952, issue any 7A notice or pass any 7A order, either based on earlier judgment of the Group 4 Securities Guarding Ltd. Vs. RPFC and others, 2004 LLR

540 or Gujarat Cypromet Ltd. vs. Asstt. P.F. Commissioner 2005 Lab.I.C. 422. Both the judgments are distinguishable. The aforesaid

judgment of Group 4 Securities Guarding Ltd. (2005 Lab.IC), had reached Supreme Court, Special Leave to appeal (Civil) No. 12318 of 2004. The Supreme Court clearly pronounced that “we are not inclined to interfere with the order of remand passed by the High Court. The special Leave Petition is dismissed. The observations made by the Division Bench in its order should not be taken as conclusive but as tentative only and the authorities would be at liberty to decide the matter in accordance with law on its merits without being influenced by them”. Accordingly, the Supreme Court clearly had held that this judgment will not have binding effect as the Hon’ble Supreme court held that ….. The observations made by the Division Bench in its order should not be taken as conclusive but as tentative only”. If the APFC/RPFC gives reference of Group 4 Securities Guarding Ltd. (supra) in the 7A order, the same can be challenged before the Employees’ Provident Fund Appellate Tribunal, New Delhi by filing an appeal under section 7-I of the Act, 1952.

So, in view of the clear judgment of the Punjab and Haryana High Court in the matter of Assistant Provident Fund Commissioner, Gurgaon against M/s. G4S Security Services (India) Ltd., 2011 LLR 316 P&H HC which is upheld by the Division Bench, L.P.A. No. 1139/2011 (O&M) on 20th July’2011, 2011 LLR 943 as well as recently Hon’ble Delhi High Court in the matter of Group 4 Securitas Guarding Ltd. Vs. Employees’ Provident Fund Appellate Tribunal and others , WP (C) 4408 of 2000 , decided on 20.09.2011 , the Regional Provident Fund Commissioner or Assistant Provident Fund Commissioner has no power under the Act,1952 to decide the dispute of minimum wages or direct the establishment or employer to remit the Provident Fund on minimum wages prescribed by the State Government time to time. Thus, the PF contribution shall be deducted on the “basic wages” as defined under section 2(b) read along with section 6 of the Act,1952.

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