2015 (7) TMI 786 - HC - Indian Laws

Court sets aside order, absolves company of liability under PF Act. Contractor deemed independent employer. Finality of previous orders.

M/s Brakes India Ltd. Versus The Employees Provident Fund Organisation vellore

The court allowed the writ petition, setting aside the impugned order and concluding that the petitioner company could not be held liable for the ... Proceedings under section 14B of the PF Act - Independent employer - Held that:- A. Govindaraj is a licenced Contractor and he employed about 15 to 20 contract workmen inside the petitioner factory for doing certain civil work. - Earlier, the petitioner Company was not made a party and in their absence, proceedings were initiated against the Contractor and the petitioner Company came to know about the proceedings only when the Contractor contacted for an advance after having suffered to an order under Sec.7-A. The petitioner Company received a Notice under Section 8-F dated 23.2.2005, calling upon the petitioner to withhold any amount that may be payable to the said Contractor and pay over the same to the respondent. - Contractor was allotted with EPF allotment number vide No.TN/VLR/38789/SDC/2013 in the year 2003 itself. As per the ratio laid down in the judgment of this Court [2011 (9) TMI 944 - Madras High Court], the Contractor viz., Mr.A. Govindaraj should be treated as an independent employer. - proceedings initiated by the respondents against the petitioner Company under Sec.14 B of the Act cannot stand and it is liable to be set aside. - Decided in favour of appellant. Issues Involved:1. Liability of the Principal Employer under Section 14B of the PF Act.2. Validity of proceedings initiated against the Principal Employer after the contractor was allotted a separate PF Code.3. Impact of previous court orders on current proceedings.4. Responsibility of the Principal Employer for contributions/damages under the EPF Scheme.Issue-wise Detailed Analysis:1. Liability of the Principal Employer under Section 14B of the PF Act:The petitioner company contended that since the contractor had been allotted a separate PF Code number, the petitioner was not liable for any amount owed by the contractor. The respondent argued that under Section 2(f) of the Act, any person employed directly or through a contractor falls within the meaning of 'employee,' making both the Principal Employer and the Contractor jointly and severally responsible for non-compliance with the Scheme provisions. The court noted that the petitioner company was not made a party to the earlier proceedings against the contractor and only became aware of them when the contractor requested an advance after suffering an order under Section 7-A. The court found that the petitioner company could not be held liable under Section 14B as the contractor was an independent employer with a separate PF Code.2. Validity of proceedings initiated against the Principal Employer after the contractor was allotted a separate PF Code:The petitioner argued that the contractor, having been allotted a separate PF Code, should be treated as an independent employer, and the petitioner should not be liable for any default by the contractor. The court referred to previous judgments, including the case of 'The Madurai District Central Co-operative Bank Ltd vs Employees' Provident Fund Organisation,' which held that contractors with an independent PF Code are to be treated as independent employers. The court concluded that the contractor, having been allotted a separate PF Code, should be treated as an independent employer, and the petitioner company could not be held liable for the contractor's defaults.3. Impact of previous court orders on current proceedings:The petitioner pointed out that in earlier writ petitions (WP Nos.7776 and 7777 of 2005), the court had set aside the impugned order and given liberty to the respondent to initiate recovery proceedings against the legal heirs of the contractor. The respondent did not challenge this order. The court held that since the earlier order was not appealed, it had become final, and the current proceedings against the petitioner company could not stand. The court emphasized that it was not sitting on an appeal over the previous orders or reviewing them, but merely following the ratio laid down in those judgments.4. Responsibility of the Principal Employer for contributions/damages under the EPF Scheme:The respondent argued that under paragraph 30 of Clause (2) of the EPF Scheme, the principal employer is responsible for paying contributions for employees employed directly or through a contractor. However, the court found that since the contractor was an independent employer with a separate PF Code, the petitioner company could not be held liable for the contractor's defaults. The court set aside the impugned order dated 26.12.2013, holding that the proceedings initiated by the respondents against the petitioner company under Section 14B of the Act were not maintainable.Conclusion:The court allowed the writ petition, setting aside the impugned order dated 26.12.2013, and concluded that the petitioner company could not be held liable for the contractor's defaults under Section 14B of the PF Act. The court emphasized that the contractor, having a separate PF Code, should be treated as an independent employer, and the petitioner company could not be considered the principal employer for the purposes of the contractor's defaults. The court also noted that the earlier court order, which was not appealed by the respondent, had become final, and the current proceedings against the petitioner company could not stand.