TaxTMI 
TaxTMI 
TaxTMI 
The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘Act’ for short) is applicable to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed and to any establishment employing twenty or more persons or class of such establishments which the Central Government may, by Notification in the Official Gazette, specify in this behalf. The Central Government may, after giving not less than two months’ notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than twenty as may be specified in the notification.
Sec. 1(4) of the Act provides that where it appears to the Central Provident Fund Commissioner, whether on an application made to him in this behalf or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment, he may, by notification in the Official Gazette, apply the provisions of this Act to that establishment on and from the date of such agreement or from any subsequent date specified in such agreement. Thus Section 1(4) provides for voluntary option to make applicable to the Act. Sec. 1(5) of the Act provides that an establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.
In ‘Q1283, Kidathirukkai Primary Agriculture C0-operative Bank, rep by its Secretary, Ramanathapuram District V. Regional Provident Fund Commissioner, EPF organization, Madurai District and others’ – 2012-II-LLJ-669 (Mad) the petitioner is a co-operative society registered under the Tamil Nadu Co-operative Societies Act, 1983. On 24.02.1994 the petitioner employed six employees including Secretary. A joint application was submitted before EPF authorities for voluntary coverage under Section 1(4) of the Act. The request was accepted by the EPF authorities and the petitioner was allotted code covering the petitioner’s establishment with effect from 01.03.1993.
The petitioner defaulted in remittance of EPF contribution. Proceedings were initiated against the petitioner by the EPF authorities for the recovery of contribution under Section 7A of the Act. Since the petitioner did not comply with the orders of EPF authorities steps were taken to attach the property of the petitioner.
The petitioner, aggrieved against this order filed a writ petition before the High Court. The Single Judge of Madras High Court dismissed the writ petition. On Writ appeal the petitioner succeeded and the orders passed by the EPF authorities imposing damages, interest etc., were set aside. The High Court remitted the case for fresh consideration in accordance with the law.
Pending the remanding proceedings, the petitioner applied along with its employees on 06.03.2006 for withdrawal from the coverage under the Act and also to drop the proceedings initiated under the Act against the petitioner. The said request was not accepted by the EPF authorities and proceeded to pass order under Sec. 7Q of the Act and Sec. 14-B of the Act imposing damages for delay in deposit of the contribution and also the executory order under Section 8-F of the Act. This order was challenged before the High Court, Madras by the petitioner. The petitioner submitted the following before the High Court:
- The petitioner is not covered under the Act by the operation of law;
- By way of voluntary coverage under Section 1(4) of the Act, it is at the option of the petitioner to withdraw from the coverage;
- Any request to withdraw from the coverage is binding on the department.
The petitioner relied on the Madras High Court in ‘Sampath Kumaran and Co., V. Regional Provident Fund Commissioner in which the High Court held that an establishment having only four employees voluntarily got itself covered under the Act by an application under Section 1(4), subsequently when the employer was reconstituted as a partnership, the employer along with the employees sought release from the liability under the Act. The High Court held that notwithstanding the constitution of the employer from a proprietary one to a partnership one, since a majority of the employees together with the employer wish to withdraw from the liability under the Act the Authorities are bound to release them. Under Section 21 of the General Clauses Act, if a person or a body of persons can do an act for their benefit, but contemporaneously burdened with obligations, they would be in order at any time thereafter to seek for relief of such obligations created by their voluntary act of commission by once again expressing in unequivocal terms their desire not to be burdened by any more with such liabilities or obligations
The Department contended the following before the High Court:
- There is no provision under the Act permitting the withdrawal from the coverage;
- The Act is a beneficial piece of legislation for the benefit of the employees the employer cannot be permitted to withdraw from its coverage.
The High Court held that the petition is squarely covered by decision of Madras High Court in ‘Sampath Kumaran and Co V. Regional Provident Fund Commissioner’ (supra) and the Department is bound to accept the request; the proceedings initiated after such request for withdrawal are totally without jurisdiction. The High Court set aside the order and directed the Department to accept the request of the petitioner.