Companies, covered under the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (“EPF Act”), which are trying to make themselves rich by not depositing the mandatory Provident Fund (“PF”) contributions required under the EPF Act with the Provident Fund Office of the Government and, in turn, depriving their employees of their right over the PF after retirement now need to keep looking over their shoulder before thinking of doing something similar again, courtesy the Supreme Court.

 

In a recent judgement a Division Bench of the Supreme Court of India, comprising of Justice A.M. Sapre and Justice Indu Malhotra, has dealt a heavy blow to a company covered under the EPF Act for not depositing the mandatory PF with the PF Office and deny its employees their rightfully earned PF. The company in question, M/s Godavari Garments Limited, a subsidiary of the Marathwada Development Corporation and covered under the provisions of the EPF Act since 1979, had engaged women workers and provided them with raw materials to be made into garments at their homes. The reason the company came up with for not depositing the PF contributions with the PF Office and not paying PF to these workers, even though they were being paid wages, was that these workers were not their ‘employees’ in terms of Section 2(f) of the EPF Act because they were working from their homes resulting in the company not having any direct, indirect or supervisory control over them.

 

The Division Bench, while setting aside the judgement of the Aurangabad Bench of the Bombay High Court that held such companies were not liable to pay the Provident Fund to such workers and deposit the mandatory PF contributions with the PF Office, has rightly observed that “merely because the women workers were permitted to do the work off site, would not take away their status as employees” of the company. In also directed the company to deposit the amount assessed by the Officer-in-Charge, Sub-Regional PF Office towards mandatory PF contribution within 1 (One) month from the date of the judgement.

 

This judgement of the Supreme Court is a stern reminder to the companies, which are trying to hoodwink the officers of the government working diligently towards the welfare of the society that such companies won’t be spared if they dare to act and try to be on the wrong side of the law.

(By Sudhir Mishra- Advocate, Supreme Court & Founder Member of Trust Legal)

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