Ronita Biswas | National Law University, Orissa | 18th February 2020
Mahanagar Telephone Nigam Ltd. v. Union of India (LPA No. 111/2015 )
Matter
The Appellant was a Govt. company constituted for imparting telephone and relates services in various cities. Its rules of provident fund with respect to the rates of contribution were not less favourable than those specified in s. 6 of the PF Act and its employees were also enjoying other PF benefits which on the whole were not less favourable to the benefits provided under the Act/Scheme in relation to any other establishment of similar character. Hence, the Appellant made an application for exemption under s.17 (1) (a) of the PF Act. The Respondent no.4 had granted relaxation under para 79 of the PF scheme.
The Appellant contended that the exemption was not granted while the relaxation did not put restrictions as set out in para 25 of appendix ‘A’ of para 27AA of the PF scheme. The said para was itself inserted through an amendment. The Appellant instituted an MTNL Employees Provident Fund Trust which on the date of filing of the WP had approximately 13,000 employees. The Trust had since then run efficiently and had never defaulted in submitting its contribution.
The Respondent no. 5 had issued a show cause notice to the petitioner stating that it was in violation of para 25 of appendix ‘A’ of para 27AA of the PF scheme as it had suffered losses in the FYs 2009-2010, 2010-2011 and 2011-2012. The Appellant responded that it had suffered accounting losses only because it had to make an upfront payment of Rs. 11,000 crore to the GOI for 3G and BWA Spectrum. The Appellant however, did not fail to meet his compliances under the PF Act.
Consequently, Respondent no. 4 rejected the representations of the Appellant and withdrew the said relaxation. Further, the Appellant was directed to transfer PF accumulations in respect of all employees to the Regional Provident Fund Commissioner, Delhi.
After the withdrawal of the relaxation, two Unions representing the petitioners’ employees pointed out that the Appellant had never defaulted in its contribution. Respondent no.6 thereafter issued a show-cause notice dated 07.05.2013 under s.14/14A of the PF Act, as to why prosecution should not be initiated against the Appellant, post rejection of the request for restoration. It was this withdrawal of relaxation and the show cause notices which were challenged by the Appellant by filing a writ petition before the Single Judge.
In the said petition, the Appellant had sought quashing and setting aside of the show cause notice issued. A further declaration was sought that Condition No.25 of appendix ‘A’ to para 27 AA of the Employees’ Provident Fund Scheme, 1952 (hereinafter referred to as “PF Scheme”) was ultra vires the Employees‟ Provident Funds & Miscellaneous Provisions Act, 1952 (hereinafter referred to as the “PF Act”).
Appeal before SC/HC
The Single Judge held that the Condition 25 was contravened and, thus, the withdrawal of relaxation was legal. The Appellant was maintaining its PF Trust by virtue of relaxation under para 79 of the Scheme, but the Appellant had reported losses for three consecutive financial years and this was a clear contravention of Condition No.25. The Court held that the revised conditions governing the grant of exemption stipulated in appendix ‘A’ would apply during the period of relaxation. Since the Appellant was covered under the Act, it was bound to comply with the provisions of the Act and the schemes framed thereunder.
Appellant’s contention
The Appellant had argued that the Scheme made under the Act was a subordinate legislation and any amendments made to its provisions cannot apply retrospectively. The Condition No. 25 of Appendix ‘A’ to para 27 AA of the Scheme was contrary and repugnant to the provision of the PF Act which is the principal enactment.
Respondent’s contention
The Respondent argued that revised conditions governing the grant of exemption under s. 17 and those stipulated in appendix ‘A’ would apply even during the relaxation period. The Appellant has no option but to comply with the statutory provisions of the PF Act and the schemes framed thereunder.
Held
The Court held that withdrawal of the relaxation did not suffer from any illegality. Moreover, Condition No.25 was in tune with the purpose behind s.17 of the Act. Hence, if the establishment was running into losses then it cannot grant to its employees better benefits then available under the Act. The PF Act being social welfare legislation was enacted with the objective of making provisions for the future of the industrial workers after their retirement as well as for their dependents. Hence, any beneficial amendment to the Scheme would only be intra vires the principle Act. The Court refused to interfere in the judgment of the Single Judge.
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