Jagdish Narain Patel v. Rajasthan Housing Board — 1999 DIGILAW 456 (RAJ)

Honble PATIL, CJ.–These two sets of appeals are filed aggrieved by common order dated 29.5.1997 passed by the learned Single Judge in S.B. Civil Writ Petition No. 688/1996 and batch of writ petitions. One set of appeals are filed by the Contractors and the other by the Regional Provident Fund Commissioner to the extent they are aggrieved by the common order under these appeals. The Rajasthan Housing Board has also filed cross objections in these appeals. We dispose of these appeals by this common judgment. For convenience, we will refer to the parties as the Housing Board, the Provident Fund Commissioner and the Contractors. We shall state the facts in brief leading to the filing of these appeals as it is unnecessary to narrate them in details, in view of the fact that the learned Single Judge in the common order under appeals had narrated them in sufficient details. (2). The Contractors of the Housing Board filed the writ petitions for issue of writ, order or direction to quash the order dated 21.12.1995 (Annex.5) issued by the Housing Board, to restrain the Housing Board from making deductions of provident fund contribution from their running bills, the Housing Board be prohibited from imposing such deductions upon them, not to withhold their bills and to grant any other relief that was considered appropriate in the circumstances of the case. Under the said Annexure 5, the Contractors were informed that 10% deduction of the employees contribution and the same amount of contribution from the Contractors was to be deducted from the running bills of the Contractors with effect from 1.5.1995. In the writ petitions, the Contractors stated that they had contracts with the Housing Board for construction of residential houses in different schemes. For the purpose of construction of residential house, they engaged various labourers like masons, carpenters, plumbers etc. on daily wages or conntract basis, but there were no permanent Labourers with them. They used to engage Labourers as per the requirement for a day or for a few days or even on contract basis for various types of works or jobs required to be taken up during construction. They received a letter from the Housing Board whereby some information was asked from them regarding the Labourers engaged by them. The Contractors replied that they did not engage any permanent Labourers and the number of the casual Labourers did not exceed 20. They received a letter from the Housing Board whereby some information was asked from them regarding the Labourers engaged by them. The Contractors replied that they did not engage any permanent Labourers and the number of the casual Labourers did not exceed 20. It was the further case of the Contractors that they and other similarly place persons had approached the Central Government under section 19-A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (hereinafter referred to as `the Act) for removal of the difficulties as to whether the workers employed at the work site of the establishment engaged in the building construction industry are employees as per the definition given in Section 2 of the Act; the Central Government gave a finding in favour of the Contractors; the Housing Board did not pay any attention to the submissions made in this regard by the Contractors, but issued a letter stating that in the absence of information regarding employees, 6% deductions from the bills of the Contractors shall be made for the months of October, 1993. The Contractors challenged the said order issued in October, 1993 by filing writ petitions before this Court. During the pendency of the said writ petitions, the Housing Board issued a latter stating that it will not make any deduction on account of provident fund from the bills of the contractors and that the sum already deducted will be refunded to them. In view of the same, the writ petitions were disposed of by this Court as having become infructuous. However, when the Housing Board again issued the impugned order dated 21.12.1995 (Annex.5) stating that 10% deduction of the employees contribution and the same amount of contribution from the Contractors would be deducted from the running bills of the Contractors with effect from 1.5.1995, the present writ petitions came to be filed. It was the case of the Contractors that looking to the manner in which the Labourers were engaged by them, they cannot be treated as employees within the meaning of the Act and the Employees Provident Fund Scheme, 1952 (for short `the Scheme). It was the case of the Contractors that looking to the manner in which the Labourers were engaged by them, they cannot be treated as employees within the meaning of the Act and the Employees Provident Fund Scheme, 1952 (for short `the Scheme). On earlier occasion, the Housing Board had issued a letter that it will not make any deduction on account of provident fund from the running bills of the Contractors, in view of the order dated 8.2.1994 (Annex.3) passed by the Legal Advisor on behalf of the Central Government in File No.S 35011/9 (5) PFC, under Section 19-A of the Act. In the said order dated 8.2.1994, it was stated that the provisions of the Act and the Scheme did not apply to the casual and absolutely temporary employees and some kind of permanency or semipermanency of the employees was contemplated for the purposes of applicability of the Act as well as the Scheme. It is in this background, the Housing Board made the submissions before this Court in the earlier writ petitions and the writ petitions were disposed of as having become infructuons. Later, the matter was taken up for review under Section 19-A of the Act aggrieved by the aforementioned decision dated 8.2.1994. A decision on the review petition was given on 23.12.1994 that the order passed by the Legal Advisor on 8.2.1994 required to be cancelled as void ab initio and that the Employees Provident Fund Officers shall enforce the provisions of the Act applying it to the building and construction activities, as per Section 2 (f) and the Notification dated 23.9.1980 which was published in the Gazette of India on 11.10.1980. It is only after passing the order dated 23.12.1994, Annex.5 dated 21.12.1995 was issue by the Housing Board. The Contractors were parties to the review petition. The Notification dated 23.9.1980 was published in the Gazette of India exercising powers under Clause (b) of sub-section (3) of Section 1 of the Act specifying every establishment engaged in building and construction industry and in each of which 20 or more persons are employed to be a class of establishment to which the provisions of the Act shall apply with effect form 31.10.80. The Housing Board and the Provident Fund Commissioner resisted the writ petitions filed by the Contractors. The Housing Board and the Provident Fund Commissioner resisted the writ petitions filed by the Contractors. The learned Single Judge by the common order under appeals allowed the writ petitions and quashed the impugned order dated 21.12.1995 (Annex.5) on the ground that the unilateral decision of the Housing Board deducting of payment from the running bills of the Contractors was not sustainable in law unless there was a determination or adjudication under section 7A of the Act. However, the learned Single Judge held that in view of Clause 38(h) of the contract entered into between the Housing Board and the Contractors, it was within the right of the Housing Board to keep in deposit 5% of the gross deposit towards the provident fund account, if necessary particulars are not furnished by the Contractors of engagement of temporary or permanent Labourers with their establishments; in the eventuality of such deduction being made by the Housing Board, it would be open to the Contractors to approach the Provident Fund Commissioner under section 7A of the Act and obtain a decision whether the Act and the Scheme shall apply to the nature of the employment provided by them in their establishments. The Contractors aggrieved by this part of the common order have filed the appeals. The Provident Fund Commissioner has filed the other set of appeals praying that the common order of the learned Single Judge quashing Annex.5 issued by the Housing Board may be set aside and the said order Annex.5 may be restored. The further prayer made in the appeals is for declaration that the Contractors working for the principal employer, the Housing Board, were not entitled to invoke the provisions of the Act before the Provident Fund Commissioner. (3). The further prayer made in the appeals is for declaration that the Contractors working for the principal employer, the Housing Board, were not entitled to invoke the provisions of the Act before the Provident Fund Commissioner. (3). The learned counsel for the Contractors urged that (1) on earlier occasion, the writ petitions filed in 1993 by the Contractors were disposed of as having become infructuous on the submission made on behalf of the Housing Board that it would not deduct the provident fund contribution from the running bills of the Contractors on the same set of facts and, as such, it was not open to the housing Board to issue Annex.-5; (2) having regard to the nature of work of the Labourers the period of work and that they were not employees within the meaning of Section 2(f) of the Act, such Labourers were not covered by the provisions of the Act or the Scheme, as such, the Housing Board had not right to deduct the provident fund contribution from the running bills of the Contractors; (3) in respect of some contracts, the Housing Board itself took up the responsibility of paying provident fund contribution and it cannot have a different treatment in respect of different contracts, which according to him, is a clear case of discrimination; (4) the Clause 38(h) of the contract entered into between the Contractors and the Housing Board cannot be enforced, as the Labourers in respect of whom the provident fund contributions were sought to be deducted, were not at all covered by the Act and the Scheme. (4). On the other hand, the learned Senior Counsel for the Housing Board argued in support and in justification of the impugned order to the extent that the Housing Board was allowed to effect deduction towards the provident fund contribution in the running bills of the Contractors. (4). On the other hand, the learned Senior Counsel for the Housing Board argued in support and in justification of the impugned order to the extent that the Housing Board was allowed to effect deduction towards the provident fund contribution in the running bills of the Contractors. He submitted that in view of the Clear terms contained in Clause 38(h) of the contract, the Housing Board was entitled to deduct from the running bills of the Contractors, the amount as agreed only to safeguard the interest of the Labourers; the amount so deducted is held by the Housing Board as a Trustee; the amount would be passed on to the Provident Fund Commissioner, in case it was determined that the Labourers engaged by the Con- tractors were covered by the provisions of the Act and the Scheme; if not, the amount so held would be refunded; the Contractors were bound by the contracts entered by them with the Housing Board; in regard to the concluded contracts, the Contractors could not maintain the writ petitions at all; it was not shown as to how the pure and simple concluded contracts could not be enforced by the Housing Board and it was not shown by the Contractors that the said contracts were void or unenforceable. (5). The learned counsel for the Provident Fund Commissioner while supporting the order of the learned Single Judge that the Housing Board was entitled to make deduction towards the provident fund contribution from the running bills of the Contractors based on the terms of the contracts, submitted that the order Annex.5 should not have been quashed. He added that the Provident Fund Commissioner can adjudicate under section 7A of the Act as to the applicability of the Act of the quantum of contribution or the period of contribution only at the instance of the principal employer, in this case, the Housing Board; the Contractors do not have any right to get the adjudication under section 7A of the Act before the Provident Fund Commissioner and that such Contractors cannot invoke the provisions of Section 7A of the Act. (6). We have carefully considered the submissions made by the learned cou- nsel for the parties. (7). (6). We have carefully considered the submissions made by the learned cou- nsel for the parties. (7). The facts which are not in dispute are that the Notification dated 23.9.1980 published in the Gazette of India on 11.10.1980 in exercise of the powers conferred under Clause (b) of sub- section (3) of Section 1 of the Act specifies every establishment engaged in building and construction industry and in each of which 20 or more persons are employed to be a class of establishment to which the provisions of the act shall apply with effect from 31.10.1980; on 8.2.1994, the Legal Advisor of the Central Government exercising delegated powers under section 19-A of the Act passed the order to the effect that the casual and absolutely temporary employees were not covered by the Act as well as the Scheme, unless the nature of their em- ployees were not covered by the Act as well as the Scheme, unless the nature of their employment was permanent or semipermanent; this order dated 8.2.1994 was cancelled on review under section 19-A of the Act and it was held by the order dated 23.12.1994 that the provisions of the Act and the Scheme shall apply to the building and construction industry; the impugned order dated 21,12,1995 (Annex.5) was is- sued after the order dated 23.12.1994 was passed; the Contractors did enter into the contracts with the housing Board and Clause 38(h) of the contract reads: ``All the contractors working in Rajasthan housing Board shall fully liable for the payment of all dues for his establishment under the Section 7-A of the Employees P.F.Act, 1952 (as amended from time to time). All the P.F. benefit as per the Act, shall be provided by the contractor to his establishment engaged on temporary or permanently. He shall be responsible to keep all records and shall furnish to Regional P.F. Commissioner or to its nominated representative and to Engineer-in-charge being principal employee. In case contractor fails to submit the requisite information for deposit of the P.F. of his employees as per provision, the 5% of the gross payment towards the P.F. account shall be kept as misc. deposit till the contractor produce the clearance certificate from the department of P.F. Commissioner. (8). In case contractor fails to submit the requisite information for deposit of the P.F. of his employees as per provision, the 5% of the gross payment towards the P.F. account shall be kept as misc. deposit till the contractor produce the clearance certificate from the department of P.F. Commissioner. (8). The first contention advanced on behalf of the Contractors that it was not open to the Housing Board to issue the impugned order Annex.5 for deducting the provident fund contribution from the running bills of the Contractors having made submission on earlier occasion before the Court and having written such letters to the Contractors that it would not deduct the amount towards the provident fund contribution from the running bills of the Contractors, cannot be accepted. As already stated above while narrating the facts, the Housing Board understood the position earlier as per the order dated 8.2.1994 that the provisions of the Act and the Scheme did not apply to the Labourers engaged by the Contractors in the construction work, but the said order dated 8.2.1994 was subsequently cancelled by the competent authority on review, to which the Contractors were parties. By the order dated 23.12.1994, it was made clear that the provisions of the Act and the Scheme shall apply to the Labourers engaged in the building and construction indutry, as per the Notification dated 23.9.1980 published in the Gazette of India on 11.10.1980. This order dated 23.12.1994 is not challenged by the Contractors, although they were parties to it through their Union. It is only after passing the order dated 23.12.1994, Annex.5 dated 21.12.1995 was issued by the Housing Board. We do not think that the Housing Board is estopped from taking note of the position of law explained by the competent authority under section 19-A of the Act by the order dated 23.12.1994. However, the order dated 21.12.1995 Annex.5 could not have been issued by the Housing Board unilaterally, as held by the learned Single Judge. (9). The second contention of the learned counsel for the Contractors that the provisions of the Act and the Scheme do not apply to the Labourers engaged by the Contractors in the building and construction activity, cannot be accepted, in the light of the Notification dated 23.9.1980 published in the Gazette of India on 11.10.1980 read with order dated 23.12.1994. (9). The second contention of the learned counsel for the Contractors that the provisions of the Act and the Scheme do not apply to the Labourers engaged by the Contractors in the building and construction activity, cannot be accepted, in the light of the Notification dated 23.9.1980 published in the Gazette of India on 11.10.1980 read with order dated 23.12.1994. If there were disputed questions of fact as to the total number of labourers, who worked/ working under the Contractors were more than 20 or less, the nature of their work, the period for which they worked and as to the quantum of provident fund contribution such questions were to be determined by the Provident Fund Commissioner under section 7A of the Act. In this regard, the learned Single Judge has dealt with the matter in sufficient details. We agree with the same. (10). The third contention made by the learned counsel for the Contractors that the Housing Board has taken upon itself as to the payment of provident fund contribution in respect of some Contractors relating to some work and it has discriminated in the case of other Contractors like the writ Petitioners, has no substance. It is not shown with specific details that in case of which contracts such a treatment was given by the Housing Board; it was not shown that inspite of the term like Clause 38(h) contained in the contract entered into between the Contrac- tors and the Housing Board, still the Housing Board waived deduction of provident fund contribution from the running bills of the Contractors and took upon itself the payment of provident fund contribution. Even otherwise, if the Housing Board has committed mistakes in other cases, it cannot be asked to perpetuate such mistakes and the Contractors cannot take advantage of such mistakes. In such cases, the plea of discrimination does not help the Contractors. (11). In regard to the fourth contention of the learned counsel for the Contractors, we have to state that the Contractors with their eyes wide open entered into the Contracts with the Housing Board undertaking to construct residential buildings on terms and conditions; it is not disputed that the contract entered into between the Contractors and the Housing Board contains Clause 38(h) extracted above. As per the sad Clause 38(h), the Housing Board was clearly entitled to keep 5% of the gross payment towards the provident fund account as misc. deposit. This clause was intended to safeguard the interest of the labourers and such a safeguard was in the interest of the Labourers consistent with the provisions of the Act and the Scheme as a welfare measure. It is not shown as to how the Contractors can escape from this Clause 38(h) of the contract. The learned counsel for the Contractors was not in a position to say as to how the said Clause of the contract was either void or unenforceable. So long such clause was in the contract, the Contractors were bound by the said Clause. Hence, we have no hesitation to reject this four the con- tention also. (12). The argument of the learned counsel for the Provident Fund Commissioner that the order of the Housing Board dated 21.12.1995 (Annex.5) should be restored and the Contractors have no right to invoke the provisions of Section 7-A of the Act, cannot be accepted for the very reasons recorded by the learned Single Judge in the order under appeals. (13). The learned Single Judge has taken care to safeguard the interest of the Contractors by stating that it would be open to the Contractors to approach the Provident Fund Commissioner under section 7-A of the Act and obtain a decision whether the Act and the Scheme framed thereunder shall apply to the nature of the employment provided by them in their establishments. Till such time, the amount if deducted by the Housing Board to ensure provident fund contribution so as to give benefit to the Labourers, ultimately if they are entitled to, as rightly submitted by the learned senior counsel for the Housing Board, shall be kept in misc. deposit, pursuant to Clause 38(h) of the contract. (14). Though the housing Board, as per the term of the contract, was entitled to deduct the amount under clause 38(h) of the Contract to keep it in misc. deposit, pursuant to Clause 38(h) of the contract. (14). Though the housing Board, as per the term of the contract, was entitled to deduct the amount under clause 38(h) of the Contract to keep it in misc. deposit, in our view, it is just and equitable that the amount so deducted by the Housing Board Should be kept in a Nationalised Bank in the Fixed Deposit initially for a period of one year so that the interest that may be earned shall be beneficial to the workmen and the Contractors, as the case may be, depending on the adjudication under section 7-A of the Act in relation to the provident fund contribution. This direction we are giving so that it will be in the interest of the parties concerned, na- mely, the Contractors or the workmen. If the liability regarding the provident fund contribution or otherwise is not made within a period of one year, the Housing Board shall keep the money in the Fixed Deposit for a further term of one year and continue to do so. We make it clear that in the event the adjudication under Section 7-A of the Act takes place earlier, it is open to the concerned parties to seek for withdrawal for the amount even before the date of maturity or wait for the period of maturity. (15). In the result, for the reasons stated, in our view, these appeals are devoid of any merit. They are liable to be dismissed and accordingly, they are dismissed with no order as to costs. (16). In view of the dismissal of the appeals, the cross objections filed by the Housing Board are also rejected.