Jiyajeerao
Cotton Mills Ltd. Vs. Dev Kumar Holani & Ors [1998] INSC 352 (22 July 1998)
G.T.
Nanavati, S.P. Kurdukar Nanavati.J.
ACT:
HEAD NOTE:
Leave
granted.
Heard
learned counsel for the parties.
Jiyajeerao
Cotton Mills Ltd., respondent no.10 is an establishment covered by the
Employees Provident founds and Miscellaneous Provisions Act, 1952 (hereinafter
referred to as the Act). It constituted 'Jiyajee Cotton Mills Employees
Provident Fund Institution', the appellant herein, and framed its Rules and
Regulations in 1952. Respondent No. 10 applied to the Government of India, that
being the appropriate Government at the relevant time, for grant of exemption
under Section 17(1)(a) of the Act. The Government of being satisfied that the
employees were in enjoyment of Provident Fund benefits which were on the whole
not less favourable than the benefits provided under the Act and the Scheme
granted exemption w.e.f. 1.11.1952, by a Notification dated 1.1.63 published on
12.1.63. Respondents Nos. 1 to 9 who were the employees of the appellant and
members of the Provident Fund were discharged from service and paid their
provident fund amounts. The Central Government by its letter dated 29.1.83
forwarded to the appropriate Governments, revised conditions for granting exemption
under Section 17(1). One of the revised conditions was that any amendment to
the Employees Provident Fund Scheme which was more beneficial to the employees
than the existing rules of the establishment shall become applicable to them
automatically.
In
view of this revised condition the said respondents claimed the difference
between the interest which was given to them at the rate declared by the Board
to Trustees and the rate of interest declared by the Central Government for the
years 1984-85 to 1988-89. As the appellant did not accept their demand they
filed a claim petition before the Central Provident funds commissioner who
referred that petition before the Central Provident Fund Commissioner who
referred that petition to the Regional Provident Fund Commissioner. As their
claim was not dealt with by the Regional Provident Fund commissioner for some
time, they filed Writ Petition M.P. No. 901 of 1989 in the High Court of Madhya
Pradesh. The High Court by its order dated 26.7.89 directed the Regional
Provident fund Commissioner to dispose of the said respondent's claim within
six months.
The
matter was thereafter heard by the Regional Provident Fund commissioner who
held - with respect to the revised conditions of exemption that "It is
worthwhile, to mention that the said revised conditions of exemption that
"It is worthwhile, to mention that the said revised conditions of
exemption as notified by the Govt. of India cannot be given effect in respect
of particular exempted establishment until and unless the same is notified in
the Official Gazette by the appropriate Govt.
After
referring to Rule 16(f) and Rule 18(i) of the exempted Provident fund Scheme of
the appellant and Respondent No. 10, the Regional Provident Fund Commissioner
held that the appellant being an exempted establishment the account of each of
the employees was to be credited with interest at the rate decided by the Board
of Trustees and as the exempted scheme was not amended by the State Government
they were not entitled to the enhanced rate of interest. He also held that even
with lesser rate of interest the exempted scheme as a whole was not less favourable
than the Statutory Scheme. He, therefore, dismissed the claim petition of the
respondents.
The
employees challenged this order by preferring a writ petition under Article 227
of the Constitution of India to the High Court of Madhya Pradesh. The High
Court was of the view that the approach of the Commissioner was perverse and
the respondents were unnecessarily made to run from pillar to post for payment
of their legal dues. It referred to para 60 of the Statutory Scheme and held
that interest was required to be credited to the account of each member at such
rate as was determined by the Central Government. It further held that in view
of this clear provision made in the Scheme, not paying interest at the higher
rate amounted to contravention of the Act and the Scheme. The High Court was
also of the view that the moment the Central Government declared higher rate of
interest, the rule in the exempted scheme enabling the appellant to pay
interest at a lesser rate made it less favourable to the employees. It also
held that in view of the revised conditions for grant of exemption, the
appellant was duty bound to comply with that term regarding payment of interest
at enhanced rate as and when it was notified by the Central Government. It
accordingly allowed the petition and directed the appellant and respondent
no.10 to pay the difference as claimed by the employees.
The
appellant is challenging the said order passed by the High Court on the ground
that it is illegal. It was submitted by the learned counsel for the appellant
that the establishment of respondent no.10 was an exempted establishment and as
it has framed its own Provident Funds Scheme with rules and regulation, the
provisions of the Statutory Scheme are not applicable to it. He also submitted
that the scheme framed by it being not less favourable than the statutory
scheme, the High Court was not justified in directing payment of interest at
the higher rate declared by the Central Government. He also submitted that the
revised terms and conditions for grant of exemption recommended by the Central
Government did not become automatically applicable to the appellant and they
could have been made applicable only after an amendment was made by the State
Government in the appellant's exempted scheme to that effect and was notified
in the official gazette.
The
undisputed facts are that the establishment of JC Mills limited was granted
exemption under Section 17(1)(a) as the Provident Funds Scheme made by it was
found not less favourable than the statutory scheme. The appellant had framed
its own rules and regulations and under the exempted scheme the Board of
Trustees was empowered to declare the rate of interest every year for crediting
the same to the Provident Funds account of each member. It is also not in
dispute that the Government of India revised the terms and conditions for grant
of exemption under Section 17(1)(a) and circulated the same to all the State
Governments and Union Territory Administrations by its letter dated 29.8.83.
According
to the revised condition No.4 any amendment made in the Statutory Scheme which
was more beneficial to the employees than the existing rules of the establishment,
was to become applicable to the exempted establishment automatically. It was on
the basis of this revised condition that the High Court held that the appellant
was duty bound to comply with the said term and grant interest at an enhanced rate
notified by the Central Government, payment of interest at lesser rate made the
exempted scheme less favourable to the employees.
As the
establishment of respondent no.10 was granted exemption under Section 17(1)(a)
the statutory Provident Funds Scheme did not apply to it. The High Court was,
therefore, clearly wrong in applying para 60 of the statutory Scheme to the
appellant and in holding that not paying interest at the rate in terms of para
60 amounted to contravention of the provisions of the Act and the Scheme.
The
High Court also misread the letter dated 29.8.83 issued by the Govt. of India
and misconstrued Cordition No.4 contained in the model notification sent along
with that letter. Before we refer to the said letter it may be stated that the
High Court also failed to consider that after 24.11.64 the State Government was
the appropriate Government in respect of the establishment of respondent no.10
for the purpose of Section 17. By the said letter dated 29.8.83 the Government
of India informed all the State Governments and the Union Territory
Administrations that the sub-committee of Central Board of Trustees had
reviewed the working of the exempted establishments and has recommenced
tightening of the existing terms and conditions for grant of exemption under
Section 17(1)(a) so as the ensure better compliance.
it was
also stated therein that "A set of revised terms and conditions of
exemption have accordingly been revised. A copy of the model notification
incorporating the revised terms and conditions is enclosed. The State
Government of Andhra Pradesh etc. are requested to apply the revised terms and
conditions to all fresh cases of exemption under Section 17(1)(a)." Along
with the said letter a copy of the model notification was also sent. What the
High Court failed to notice was that the revised terms and conditions were to
be made applicable to fresh cases of exemption. The Central Government had not
made any statutory amendment nor given statutory directions but had only
requested all State Governments and Union Territory Administrations to grant
exemption under Section 17(1)(a) subject to the conditions specified in the
schedule to the model notification. The revised terms and conditions did not
and could not have become applicable automatically, and in order to make them
applicable they were required to be incorporated by the appropriate Government
in the notification granting exemption under Section 17(1)(a). As regards the
exempted establishments it was rightly pointed out by the Regional Provident
Fund commissioner that unless the appropriate Government issued a notification
amending the exempted scheme and published the same in the Official Gazette,
condition no.4 did not apply to them. Admittedly, to such notification amending
the exempted scheme framed by the appellant and respondent no.10 was issued by
the State Government. Therefore, the appellant and respondent no.10 were not
legally bound to credit the account of each of the respondent-employees with
higher rate of interest for the years 1984-85 to 1988-89, only because for
those years the Central Government had declared interest at higher rates.
The
High Court really misconstrued the correct legal position and unjustifiably criticised
the Regional Provident Fund commissioner by observing that his approach was
perverse. The view taken by the Regional Provident Fund Commissioner was quite
correct and the High Court was wrong in taking a different view.
We,
therefore, allow this appeal, set aside the order passed by the High Court and
restore the order passed by the Regional Provident Fund commissioner. In view
of the facts and circumstances of the case there shall be no order as to costs.
Back