Labour Law Reporter

2023 LLR 551
JHARKHAND HIGH COURT
Hon'ble Mrs. Anubha Rawat Choudhary, J.
W.P. (C) No. 5664/2010, Dt/– 24-1-2023

EMPLOYEES' PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952 – Section 7A – Coverage – Justification of – Official of EPFO inspected relevant records of petitioner on 2.05.2008 – That report shows that strength during 7/07 is 16 and on 5/08 is 12 – Workers perform work relating to editorial and accounts – While extending coverage reference is to inspection dated 26.05.2008 showing 21 persons on 20.07.2007 – Petitioner was allocated Code directing the petitioner to make required compliance from 07/07 to 05/08 on or before 15.06.2008 – Petitioner challenged impugned order in writ petition – Held, objection was raised by petitioner that there was no inspection on 26.05.2008 – Numerous communications questioning inspection dated 26.05.2008 and reiterating inspection(names not disclosed) – Report dated 22.05.2008 was showing employees less than 20 – Petitioner produced documents but EPF Authority did not consider the same – EPFO Inspector reported that there were altogether 16 employees besides one person for printing, 2 persons for packaging and 3 photographers – Considering total 21 employees impugned coverage order was passed – Petitioner has contended that un-named persons were free lancers and not employees of the petitioner – EPF Authority failed to point out (i) any averment in counter-affidavit that inspection was done on 26.05.2008, (ii) names and details of persons said to be engaged over and above 16 persons – EPF Authority has not dealt with the objections of petitioner -Impugned order is non speaking one not sustainable in law – Accordingly, impugned order as well as order passed under section 7A of the Act are set-aside – Matter is remitted back to EPF Authority for fresh consideration and passing a reasoned order giving due opportunity of hearing to petitioner in accordance with law giving details of all employees – Petitioner shall appear before EPF Authority on 15.03.2023 with a detailed representation and a copy of the writ records and a copy of this order. Paras 10 to 15

While conducting proceedings under section 7A regarding coverage of a new firm under the Act, the EPF Authority have to collect report of Investigating Officer having full details of employees to be covered indicating their names, father's name and such other particulars with supporting documents.

Any order allocating Code and directing an establishment to remit EPF contributions by complying with the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 without indicating names of at least 20 employees with full details, by the Investigating Officer, eligible for the Scheme under the Act, is liable to be quashed.

Before, covering an establishment under the Act, the employer is to be given due opportunity of hearing.

Anubha Rawat Choudhary, J.–1. Learned counsel for the parties are present.

3. Learned counsel for the petitioner submits that a letter dated 14.05.2008 was issued to the petitioner asking the petitioner to be ready for perusal of all documents including attendance register for last one year, wage register/salary register etc., balance sheet, profit and loss account, cash book and any other document by the officers of the Respondent authority on 22.05.2008. The learned counsel submits that on 22.05.2008 it was specifically recorded in the inspection report that the strength during 7/07 is 16 and in 5/08 is 12. These workers perform work relating to editorial and accounts. He submits that the proceeding dated 22.05.2008 is an inspection report upon physical visit and it has been recorded in the inspection report dated 22.05.2008 that it was submitted by the representative of the petitioner present there that the petitioner is not engaging 20 or more workmen and therefore, the Employees Provident Fund Act is not applicable on the establishment and it was stated that in future if it reaches 20, he will knock the department and will file the enquiring proforma.

4. The learned counsel for the petitioner further submits that thereafter the petitioner was surprised to receive Annexure-3 dated 04.06.2008 extending coverage to the petitioner by stating that inspection was conducted on 26.05.2008 and 21 number of persons were found employed on 20.07.2007. The petitioner was allocated the code and was directed to file its required compliance for the period from 07/07 to 05/08 on or before 15.06.2008.

5. The learned counsel submits that against the said order of coverage dated 04.06.2008, the petitioner raised objection by saying that there has been no inspection on 26.05.2008 and that the inspection report dated 22.05.2008 clearly mentions that on 07/07 altogether 16 people were found on roll and on 05/08 just 12 employees were there. Learned counsel submits that there are numerous communications questioning the alleged inspection dated 26.05.2008 (as no inspection was conducted on 26.05.2008) and reiterating that the inspection dated 22.05.2008 clearly indicated that the number of employees were less than 20. He submits that the respondent had issued certain communications including letter dated 22.08.2008 asking the petitioner to produce the documents, but the respondents did not respond to the plea raised by the petitioner vide letter dated 15.06.2008 objecting to the letter of coverage dated 14.06.2008 based on alleged inspection dated 26.05.2008.

6. Learned counsel further submits that ultimately the petitioner participated in the proceedings and an order under section 7A of the aforesaid Act has been drawn wherein it has been clearly recorded that the petitioner had disputed the applicability of the Act. The learned counsel has further submitted that from perusal of Annexure-14, it appears that a report was prepared by one Ashok Kumar who was said to have verified the records and submitted a report dated 17.06.2010 (Annexure-12). He submits that as per the said report, it has been confirmed that as per the attendance register as on 20.07.2007, there were altogether 16 employees and further it has been added therein that one person was engaged for printing in Chamakata Aaina and two persons were engaged for packaging purpose. The learned counsel submits that there is no basis for such finding in the report of Shri Ashok Kumar and even the name of such three persons have not been mentioned either in the report nor in the impugned order. The learned counsel has further submitted that as per the order passed under section 7A and based on the aforesaid report submitted by Ashok Kumar, over and above aforesaid unnamed three persons, further three persons have been added taking the total to above 21 persons. Those further 3 persons have been added by treating certain photographers as employees of the petitioner. The learned counsel submits that the petitioner disputes the existence of any such persons as employee of the petitioner, so far as the petitioner is concerned. The learned counsel for the petitioner has also submitted that those photographers had also stated before the authority that they are not the employees of the petitioner, rather they work independently on payment for multiple organization and are freelancers but this fact has also not been considered by the respondent authority while passing the impugned order.

7. The learned counsel submits that in view of the fact that the very coverage of the petitioner is said to have been based on inspection dated 26.05.2008 and the fact that there has been no inspection on 26.05.2008, which is not in dispute from the side of the respondents, the impugned order giving coverage to the petitioner based on alleged inspection dated 26.05.2008 cannot be sustained in the eyes of law. He has also submitted that a detailed reply was furnished by the petitioner by way of response to the report of Ashok Kumar as contained in Annexure-13, which has also not been considered while passing the impugned order.

8. Learned counsel for the respondents, on the other hand, has opposed the prayer of the petitioner and has submitted that the orders have been passed on the basis of materials on record and therefore, the impugned order extending coverage to the petitioner as well as the order passed under section 7A of the aforesaid Act of 1952 does not call for any interference.

9. However, during the course of argument, the learned counsel for the respondents has not been able to point out any averment in the counter-affidavit regarding inspection done on 26.05.2008 nor the counsel for the respondents has been able to satisfy this court on the names and details of the person who were said to be engaged over and above 16 persons (one person in printing Chamakata Aaina and two persons in packaging purpose). However, the learned counsel for the respondents has submitted that the impugned orders do not call for any interference.

10. After hearing the learned counsel for the parties and considering the facts and circumstances of this case, this Court finds that admittedly as per the inspection report dated 22.05.2008 (Annexure-2), it has been recorded that the petitioner was engaging 16 employees during 07/07 and 12 employees in 05/08. Thereafter, the impugned letter of coverage dated 04.06.2008 was issued by referring to the inspection conducted on 26.05.2008. The petitioner protested against the same and clearly stated that there has been no inspection on 26.05.2008 and it had also referred to the inspection dated 22.05.2008. Such protest was made vide letter dated 15.06.2008 (Annexure-4). However, the respondents did not deal with the objection of the petitioner in connection with Annexure-3 and the petitioner was asked to participate in the proceedings vide summons dated 05.02.2009. Consequently, the petitioner participated in the proceedings and ultimately, an order under section 7A of the aforesaid Act of 1952 was passed.

11. This Court finds that during the 7A proceedings also, the petitioner had protested on the point of applicability of the Act. In the midst of the proceedings, one Ashok Kumar of the respondent department was asked to verify all the records and he submitted a report dated 17.06.2010. As per the report it was again recorded that as per the attendance register, on 20.07.2007 the number of employees was 16 and apart from the above, one person was engaged for printing in Chamakata Aaina and two persons were engaged for packaging purpose and two persons were engaged as retainers and the authority added all the five persons to total number 16, which became 21. However, the names and details of additional five persons which have been mentioned over and above 16 persons in the attendance register, have not been mentioned in the report of Ashok Kumar. Apart from the aforesaid five persons, Ashok Kumar also stated the name of additional five persons said to be retainers and out of them he recorded that three were being paid regularly. Thus raised the total number of employees in the organization of the petitioner to 24 [16 + 5 ( unnamed ) + 3 ( retainers said to be regularly paid out of total 5 retainers )] Thus, even in the report of Sri Ashok Kumar dated 17.06.2010 (Annexure-12), the name of five persons have not been mentioned. The petitioner had filed objection to the inspection report, the learned authority has mentioned about the objection filed by the petitioner but has not made any discussion with regards to the objection and has straight away recorded the following findings:–

12. This court finds that the impugned order is non speaking on many aspects of the matter, i.e., there is no discussion about the merits of the objection raised by the petitioner to the report submitted by Ashok Kumar ; the names of the five persons, i.e., one person was engaged for printing in Chamakata Aaina and two persons were engaged for packaging purpose and two persons were engaged as retainers were neither mentioned in the report of Ashok Kumar nor mentioned in the final order, and what was the basis of issuance of letter of coverage dated 04.06.2008 showing 21 employees. From the perusal of Annexure-14, it further appears that certain photographers etc. were further found to be working with the petitioner and out of them, three persons were added and total number of employees was shown to be 24. It is the case of the petitioner that those three persons had also appeared and filed certain affidavits that they are freelancers and they did not work for the petitioner, but this aspect of the matter has also not been considered while passing the order under section 7A. Further from the records available before this court, there is no material to show as to how and on what basis the coverage letter dated 04.06.2008 was issued stating the total number of employees as 21 on the basis of inspection report dated 26.05.2008, although no inspection was conducted on 26.05.2008, report of Ashok Kumar was also not available on 04.06.2008 and admittedly as per inspection report dated 22.05.2008, the employees were 16 only.

13. In view of the aforesaid facts and circumstances, this Court is of the considered view that the order dated 04.06.2008 extending coverage to the petitioner allegedly based on inspection report dated 26.05.2008, suffers from illegality, inasmuch as, admittedly there has been no inspection on 26.05.2008. The number of employees as has been recorded in order dated 04.06.2008 is 21 although immediately preceding 26.05.2008, an inspection was carried out on 22.05.2008 wherein the number of employees was found to be less than 20 as on 20.07.2007. It appears that one Ashok Kumar of the respondents had examined the records and had prepared a report dated 17.06.2010 which was the basis for passing the impugned order under section 7A of the aforesaid Act. The inspection report as well as the impugned order does not disclose the name and other details of other five persons who have been added over and above the 16 persons whose name has been found in the attendance register.

14. Accordingly, the impugned order dated 04.06.2008 (Annexure3) as well as the order passed under section 7A dated 15.09.2010 (Annexure-14) cannot be sustained in the eyes of law and they are setaside. The matter is remitted back to the respondent no. 2 for fresh consideration and further verification of the records after giving due opportunity of hearing to the petitioner and proceed accordingly. The authority will have to clearly establish on the basis of materials on record that there were 21 persons with details of such persons/payment made to such persons on the date of coverage, i.e., 04.06.2008 and then pass appropriate order under section 7A of the aforesaid act of 1952. The authority is also required to consider the objection (Annexure-13) filed by the petitioner to the report furnished by Ashok Kumar dated 17.06.2010 (Annexure-12) by speaking order.

15. The petitioner shall appear before the respondent no. 2 on 15.03.2023 along with a detailed representation, a copy of the writ records and a copy of this order. Upon their appearance, the respondent no. 2 shall proceed with the matter and pass fresh reasoned order after giving an opportunity of hearing to the petitioner in connection with coverage and also under section 7A of the Act of 1952 taking into consideration the aforesaid observations. The entire exercise be completed within a period of six months from the date of appearance of the petitioner. The reasoned order be communicated to the petitioner through speed post as well as through e-mail at the address and e-mail-ID to be provided by the petitioner in its representation itself.

16. This writ petition is disposed of with the aforesaid observations and directions.