Karma Global are professionals who have rich experience in their field of over 18 years since its inception in 2004, and the experts in Karma Global have a deeper understanding of the field that they are in, and provide quick and easy solutions to all the challenges faced by its clients of over 10 years. Based on the queries of the clients, it offers expertise and provides expert opinion, analysis and recommendations to a specific type of clients relating to the industry that they come from, who may be an individual, an organisation or a group of people or a small and medium enterprise, or to institutions, Government bodies, Agencies, Associations, etc. to help them improve their business performance or activities that they are into so as to leave aside the complexities of laws to Karma Global for them to handle on their behalf.
JUDGEMENT OF CALCUTTA HIGH COURT -The Regional Provident Fund Commissioner West Bengal & Ors vs Rupa & Anr on the role of independent contractors.
KEY POINTS OF THE JUDGEMENT
The law is this. Under Section 2 (f) (i) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, (the Act) read with Sections 1(3) (a) and (b), 2 (e) and 6 thereof, an employer, who gets his work done through contract labour, is liable to pay the provident fund dues of the employees of his contractor.
There is no dispute that the writ petitioners got their work done by entering into contracts with various contractors, which in the particular trade in which the writ petitioner is engaged, are known as “job workers”.
On 3rd April 1998 and 6th April 1998, summons was issued to them by the Provident Fund Authority under Section 7A of the said Act, to show- cause why they should not pay the Provident Fund dues of their contractors.
The writ petitioner argued, through Mr Sarkar, learned senior Advocate that their contractors were independent and were not subject to their supervision or control.
Amongst other points, they argued that the work entrusted to the job workers was not done exclusively for them by those persons or organisations. They worked for many employers. Therefore, how could the writ petitioner be responsible for the Provident Fund dues of the employees of a contractor who had multiple employers?
In fact, this point never arose in the decisions cited before me and appears to be very novel. Secondly, it was submitted that even if it is assumed that an employer is liable for the provident fund dues of the contractor, in that event, the employer cannot be liable for the entire provident fund liability. The work a contractor was doing for a particular employer in proportion to the entire work he was doing on job work for all his employers had to be determined. A particular employer can be liable in wages in respect of that proportion of the work done by the employees of the contractor. Furthermore, the exact number of employees of the contractor had to be ascertained.
The impugned order dated 10th February 1999 was a preliminary determination as to whether the writ petitioner was liable. The Assistant Provident Fund Commissioner came to the finding that the writ petitioner was liable for the Provident Fund dues of the employees engaged through the contractors.
This order is challenged on the above grounds.
The case of the writ petitioner is this. They are traders. They are marketing hosiery goods. Their trade activity is carried out in this way. They buy yarn from spinning mills. This yarn is sent to the knitters directly by the spinning mills. These knitters weave the fabric. The woven cloth is sent to processors for bleaching, dyeing etc. Thereafter it is sent to the cutters for cutting the cloth. Thereafter, it goes to another set of artisans called “makers” who stitch, do the finishing work and pack the goods. The writ petitioner says that each stage of the work is done by independent contractors. They have no administrative control over them. It is a contract of service. These contractors have their employees whom they control. Now, the writ petitioner’s version is that each of these independent contractors also works for other employers. In other words, none of the contractors do work for the writ petitioner, exclusively (see paragraph 4 of the petition).
Therefore, the writ petitioner does not have any idea about the number of persons and the identity of these persons employed by each independent contractor. Secondly, the writ petitioner does not know what proportion of the total work of the contractor constitutes the job work assigned to them by the writ petitioner.
Mr Sarkar submits that the writ petitioner employer is not liable for the provident fund dues of independent contractors. Mr Sarkar contends in the alternative that assuming that the job workers were work contractors under the supervision of the writ petitioner unless a contractor does work exclusively for an employer, the employer does not have any obligation to make provident fund contribution to the provident fund authority. Moreover, the employees have to be properly identified.
On the other hand, Mr. Gupta appearing for the Provident Fund Authority submits that since the work of the writ petitioner was being subcontracted to work contractors under their control, they were liable for the dues of the employees of the sub-contractor. He took me through the impugned order in detail.
What the Judge says …………!
I find on perusal of the impugned order that the representative of the Provident Fund Authority took time from the adjudicator to ascertain whether the contractors were working exclusively for the writ petitioner or whether they were working for other employers as well. However, there is no finding at all in the order as to whether this enquiry was made or the outcome of this enquiry. The impugned order merely records the submission of the departmental representative that according to him the writ petitioner’s contractors worked exclusively for them, without any evidence in support thereof. It also records that according to the departmental representative, the writ petitioner was covered by the said Act.
The final outcome of the Judge
In my opinion, first of all, the Provident Fund Authority should have considered whether the job workers of the writ petitioner were independent contractors. Secondly, if the answer to the above question was negative, it was imperative for them to ascertain the number and the identity of the workers employed by the contractor or contractors. Secondly, the amount of work that each worker of this contractor did for the writ petitioner had to be determined. Thereafter, the proportion of the monthly or daily wage of each worker which was payable for the work of the writ petitioner had to be ascertained. Only then the Provident Fund liability of the writ petitioner could have been fixed.
In the impugned order, no facts or evidence are referred to or analysed. Only the argument of the representative of the Provident Fund Authority is recounted. This kind of exercise was erroneous and bad in law. The impugned order dated 10th February, 1999 under Section 7A of the said Act together with the order dated 13th September, 1999 is set aside. Nearly 20 years have elapsed since this adjudication was made. I do not think that any information will now be available. Nevertheless, the Provident Fund Authorities may take steps in accordance with the law following the ratio of this judgement and the judgements referred to therein.
Both the writ applications are accordingly allowed. Urgent certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
Proprietary blog of Karma Global
This blog has been collated and compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, besides adaptation, illustration, derivation, transformation, collection as well as auto-generation from various sources, for its monthly newsletter Issue 13 of July 2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – Kush@karmamgmt.com / yashika@karmamgmt.com