The Benares State Bank Ltd. vs Union Of India (Uoi) And Ors. on 24 November 2003

Delhi High Court
The Benares State Bank Ltd. vs Union Of India (Uoi) And Ors. on 24 November, 2003
Equivalent citations: 109(2004)DLT227, 2004(72)DRJ57, (2004)ILLJ1118DEL
Author: Mukul Mudgal
Bench: Mukul Mudgal
JUDGMENT

Mukul Mudgal, J.

1. This writ petition filed by the Benares State Bank Limited initially challenged the vires of Notification dated 25th February, 2000, which made the arbitrary classification between banks and banks other than nationalized banks qua applicability of Employees Provident Fund and Miscellaneous Provisions Act, 1952(hereinafter referred to as the `EPF Act’).

2. The following prayers have been made in the writ petition:-

“(a) to quash the notification dated 25.2.00 (Annexure-H), issued by the Respondent No. 1, and,
(b) to direct Respondents to issue decoverage certificate to the Petitioner, and,
(c) to grant any further relief including the cost of this petition as this Hon’ble Court may deem appropriate.”
3. The relevant facts are as under:-

(a) The petitioner is a private bank which operated from Varanasi, U.P. It was covered by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act). It thereafter opened a branch in Bombay on 15th May, 1971 and claimed ‘decoverage’ under the Act on the basis of a notification issued on 18th December, 1965 which covered only those establishments which had branches in one State. At the relevant time the petitioner was a private sector Bank and had a branch in the State of Uttar Pradesh only. A writ petition was filed in the Allahabad High Court by the petitioner after the opening of a branch in Bombay and the following order was passed by Hon’ble High Court of Allahabad :
“I have heard learned counsel for the parties.
Shri J.N. Tewari, learned counsel for the respondents stated that the Government of India by D.O.No. -s-35021/3/88/89-II Feb.21, 1989 and the Central Provident Fund Commissioner vide his letter No. 7(117)80-E-1/485/89 dated 28th February, 1989 have taken a decision that the Bank which had opened its Branches in more than one places shall not be covered by the I.P.F. Act, if representation is made to the Central Government. In view of this the petition is rendered infructuous. The petition is dismissed as infructuous.”
(b) Pursuant to the aforesaid statement recorded on behalf of Employees Provident Fund Commissioner, a representation was made by the petitioner Bank to the Secretary, Ministry of Labour on 26th October, 1993 and various reminders were issued. Reliance has also been placed by the petitioner on letter issued by the office of the Central Provident Fund Commissioner to Regional Provident Fund Commissioners dated 28th March, 1989. The relevant contents of the said letter read as follows:

“All Regional Provident Fund Commissioners and Officer-in-charge, Sub-Regional offices Sub: -Applicability of the EPF & M.P. Act, 1952 to the Banks after opening its branch outside the State or Union Territory- Clarification regarding.
Sir, The case regarding applicability of the E.P.F. & M.P. Act, 1952 to Banks consequent to opening of branches outside the State was referred to the Govt.of India, Ministry of Labour, New Delhi for clarification. It has been decided by the Govt. of India, Ministry of Labour, New Delhi that a Bank which was initially covered as a bank having branches in one State or Union Territory only should be decovered after its opens a branch outside the State or Union Territory, unless the banks wants to continue the coverage under the Act on voluntary basis. Copy of Govt. of India, Ministry of Labour, New Delhi letter No. S-35021/3/88-SS-II dated 21/2/89 is enclosed. You are, therefore, requested to take necessary action in the light of the above decision.”
(c) It is the non-granting of the prayer in petitioner’s application for exemption which led to the principal challenge in this writ petition. The letter of 28th March, 1989 issued by the Regional Provident Fund Commissioner is based upon a letter dated 21st February, 1989 addressed by Mr. A.K. Bhattarai, the then Under Secretary, Ministry of Labour, which makes interesting reading and reads as under:-

“Kindly refer to the correspondence resting with D.O. letter No. 2(85)/86-L.C./1718 dated the 1st August, 1988 from Shri D.P. Sharma, Law Officer, regarding filing of Counter-Affidavit in Civil Appeal No. 920(NL) of 86 in the Supreme Court relating to Kanur Vysya Bank Limited, and your earlier reference No. 7(117)80-E.I./1197 dated the 17.4.85 regarding applicability of the EPF Act to banks consequent on opening of branches outside the State.
2. It is felt that having accepted the judgment of the Bombay High Court holding that after a bank opens its office in another State, it goes out of the purview of the EPF Act, it may not be appropriate to take a different stand in relation to similarly placed banks in other States. It has, therefore, been decided that a bank, which was initially covered as a bank having branch in one State of UT, only should be accorded after its opens branch outside the State or UT, unless the bank wants to continue the coverage under the Act on voluntary basis. In this way, the Civil Appeal filed by the Kanur Vysya Bank in the Supreme Court will become infructuous. You may issue suitable instructions to the RPFCs accordingly.”
(d) Thus, the Ministry by its letter dated 21st February, 1989 has adopted this stand in view of the judgment of the Bombay High Court in The United Western Bank Ltd. v. Central Provident Fund Commissioner and others, 1984 Labour Industrial Cases 1504. Thus the judgment of Bombay High Court which initially covered the State of Maharashtra only, now by virtue of letter dated 21st February, 1989 will have an all India impact. The relevant paragraphs of the judgment of the Bombay High Court reads as follows:

“1. The facts in this petition are few and there is also no dispute about the same. The point that falls for determination is also a narrow one and that is relating to the interpretation of a notification issued by the Central Government on 18th December, 1965 under Section 1(3)(b) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the “Provident Funds Act”). The petitioner is a limited company carrying on the business of banking. It is a scheduled bank having its registered and head office at Satara, a district place in the State of Maharashtra. However, in the year 1972 the petitioner established certain branches outside the State of Maharashtra. The question is as to whether under the express provisions contained in the notification dated 18th August (Dec.?) 1965 (hereinafter referred to as the “1965 notification”) , the petitioner bank continued to be governed by the provisions of the Provident Funds Act. In order to appreciate this controversy, one has naturally to turn to the notification itself issued by the Central Government.
2. The Provident Funds Act extends to the whole of India except the State of Jammu and Kashmir. Sub-section (3) of Section 1 of the Provident Funds Act provides that subject to the provisions contained in Section 16, the Provident Funds Act applies to every establishment which is a factory engaged in any industry specified in Schedule I and in which 20 or more persons are employed. Admittedly the petitioner is not a factory engaged in any industry in Schedule I. Moreover, without anything further being done by any authority under the Provident Funds Act, by virtue of the provisions contained in Section 1(3)(a), the Provident Funds Act applies to every establishment which is a factory engaged in any industry specified in Schedule I.
3. However, clause (b) of Section 1(3) refers to any other establishment, that is, an establishment which is not a factory in any industry specified in Schedule I, which may be governed by the provisions of the Provident Funds Act if the Central Government by a notification in the Official Gazette specifies that it shall be so governed. To reproduce the words of the statute itself, the Act applies “to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gazette, specify in this behalf.” Pursuant to the powers given by the provisions of Section 1(3)(b), the Central Government issued the notification, which is the subject-matter of interpretation before us, on 18th December, 1965. It is necessary to reproduce the entire notification which is as follows:-
“G.S. R. 2. In exercise of the powers conferred by Clause (b) of sub-section (3) of Section 1 of the Employees Provident Funds Act, 1952 (19 of 1952), and subject to the provisions contained in Section 16 thereof, the Central Government hereby specifies every bank doing business in one State or Union Territory and having no departments or branches outside that State or Union Territory and employing twenty or more persons as a class of establishments to which the said Act shall apply with effect from the 31st January, 1966.”
…………..

10. Mr. Dharap , the learned Advocate appearing for respondent No. 3, which is the Union of Workmen employed by the petitioner Bank, has referred to Mohamedalli v. Union of India, and in particular has invited our attention to the following observations contained in paragraph 6 of the judgment:-

“It cannot be asserted that the powers entrusted to the Central Government to bring within the purview of the Act such establishment or class of establishments as the Government may by notification in the Official Gazette specify is uncontrolled and uncanalised. The whole Act is directed to institute provident funds for the benefit of employees in factories and other establishments, as the preamble indicates. The institution of provident fund for employees is too well-established to admit of any doubt about its utility as a measure of social justice. The underlying idea behind the provisions of the Act is to bring all kinds of employees within its fold as and when the Central Government might think fit, after reviewing the circumstances of each class of establishments.”
Mr. Dharap canvasses the view that while interpreting the provisions of the Act or of any other notification issued pursuant to the provisions of the Act, these observations of the Supreme Court should be borne in mind and the provisions of the notification should be liberally construed so as to see that the maximum number of employees is governed by the provisions of this Act.

11. We are unable to accept this wide interpretation which Mr. Dharap has placed upon the judgment of the Supreme Court in Mohmedalli’s case. To us it is clear that the Act is made applicable by the provisions of Section 1(3)(a) to a particular class of establishments. It can be made applicable by virtue of the provisions of Section 1(3)(b) to other class of establishments by a notification validity issued by the Central Government. If the Central Government chooses to issue a notification applying the provisions of the Act to a class of establishments subject to certain conditions, the continued satisfaction of those conditions is the sine qua non for the continuance of the applicability of the Act itself. On the facts of this case, we have noticed that one of the conditions subject to which the Act was made applicable to the petitioner’s establishment has ceased to exist. If this is so, the necessary consequence is that the applicability of the Act by virtue of the notification must cease.”

(e) The Bombay High Court did not refer to Section (lii) of the Employees’ Provident Fund Scheme. The interpretation of the Bombay High Court is based on the notification dated 18th December, 1965 issued under Section 1(3)(b) of the Act. In the present case reliance has been placed upon Rule 1(2)(lii) of the Scheme which no doubt is based upon the 1965 notification. The relevant provision of the Employees’ Provident Funds Scheme, 1952 i.e. Rule 1(3)(b) reads as follows:

“(b) Provisions of this Scheme shall ….
(iii) as respects banks doing business in one State or Union territory and having no departments or branches outside that State or Union territory covered by the notification of the Government of India in the Department of Social Security, No. G.S.R. 2, dated the 18th December, 1965, come into force on the 31st January, 1966;”
(f) The above provision merely provides for applicability of the Scheme in respect of the bank which does not have branches outside the State. It does not necessarily follow that the bank which has a branch outside the State, would automatically go outside the purview of the Provident Fund Act which appears to be the effect of the judgment of the Bombay High Court. It is submitted by the respondent No. 1’s counsel that this interpretation would amount to giving a carte blanche to private banks to avoid the applicability of the Act merely by opening another branch in another State. The position of law adopted in this writ petition has been summarized in the counter affidavit filed in this Court by the Union of India worded in paragraph 13, as under:

“13. It is submitted that the Petitioner cannot rely upon the GOI letter dated 21.2.89 or the letter of respondent No. 2 dated 28.3.89 to seek a decoverage certificate.
Even assuming that an administrative decision was taken by the Govt. to issue a de-coverage letter to Banks opening a Branch in more than one state, the decision being contrary to the letter and the spirit of the EPF act, it cannot be enforced. It is a well settled principle of law that an administrative or police decision which is contrary to the statute, is not binding in law.”
4. The learned counsel for the petitioner Bank has only pressed prayer (b) as extracted above in paragraph 3 of this judgment as the petitioner Bank has since merged with the Bank of Baroda which is a nationalized bank. Principal reliance has been placed by the learned counsel for the petitioner on the Division Bench judgment of the Bombay High Court in The United Western Bank Ltd. ‘s case (supra) as extracted above and the decision taken by the Union of India by its letter dated 21st February, 1989 issued by the then Under Secretary, Ministry of Labour, Government of India and the Letter dated 28th March, 1989, issued by the Central Provident Fund Commissioner. The learned counsel for the petitioner has submitted that in view of the notification relied upon by him, the necessary condition for the applicability of the notification was the bank having branches in more than one state and the doctrine of promissory estoppel and legitimate expectation came into play and indeed got reinforced. Reliance has been placed on Notification dated 25th February, 2000 by the learned counsel for the petitioner which substitutes the words `banks doing business in one State or Union Territory and having no departments or branches outside that State or Union Territory’ with the orders `banks other than the nationalized banks established under any Central or State Act’. Reliance has also been placed on what is termed as the assurance given to the Allahabad High Court.

5. On 25th September, 2003, the parties were directed to file written submissions within a week. While the respondent No. 1 has filed the written submissions within a week, the learned counsel for the petitioner filed them only on 6th October, 2003 and has in fact raised several pleas which were not urged at the time of the arguments. The learned counsel for the petitioner, Shri Bishwajeet Bhattacharya had relied upon the Bombay High Court judgment in The United Western Bank Ltd. ‘s case (supra) and in particular para 8 thereof and the provisions of Section 1(5) and Section 6(2) of the EPF Act. Indeed in the original writ petition the challenge was entirely based upon classification of a private sector bank vis-a-vis the nationalized bank. Accordingly, the decision of this case is confined to the issues raised either in the writ petition or urged before this Court during the hearing.

6. In reply, Mr. Raju Ramachandran, the learned Additional Solicitor General has submitted that the letter dated 21st February, 1989 of the Government of India and the Letter dated 28th March, 1989 issued by the Central Provident Fund Commissioner which have been relied upon by the learned counsel for the petitioner have neither statutory nor legal basis and are merely administrative decisions which according to him are contrary to law. He has further submitted that as held in Sharma Transport v. Government of Andhra Pradesh , the principle of promissory estoppel cannot be invoked in the face of a statutory mandate. Mr. Ramachandran has particularly emphasized that the concept of “decoverage” is totally unknown to the Act and Section 1(3)(a) of the EPF Act clearly indicates that by its application to industries having 20 or more persons, larger the establishment the greater the need for coverage. He submitted that Section 1(5) of the EPF Act indicates that once an establishment is governed by the Act even if the number of persons employed fell below 20, it will continue to be governed by the Act. The opening of a branch increases the number of employees and in such a context, the decoverage cannot be sought for and/or granted. He has submitted that if the petitioner’s submission is upheld all that a bank has to do is to open a branch outside the State so as to avoid the operation of the EPF Act.

7. Mr. Ramachandran has relied on the following decisions in support of his plea:

(a) Industrial Supplies (P) Ltd. v. Union of India to contend that a construction which defeats the object of a legislation and leads to manifest absurdity should not be adopted.
(b) Kunal Singh v. Union of India to contend that in construing a social welfare legislation the view advancing the object of the Act and serving its objects must be preferred to one which obstructs the object and frustrates the said purpose.
(c) International Ore & Fertilizers (India) (P) Ltd. v. ESI Corporation , where it has been held by the Hon’ble Supreme Court that while construing a welfare legislation a liberal construction should be placed so as to achieve the purpose of the legislation rather than frustrating or stultifying it.
(d) Regional Provident Funds Commissioner v. Shibu Metal Works , where it was held that when material provisions of the Act are construed and two views are reasonably possible, then the Court should prefer the view helping the achievement of the object of the Act.
(e) Andhra University v. Regional Provident Fund Commissioner where the Hon’ble Supreme Court eschewed a narrow interpretation defeating the very purpose of the Act.
8. Finally it has been submitted by the Learned Additional Solicitor General that the decision of the Bombay High Court in The Union Western Bank’s case (supra) runs contrary to the letter and spirit of the EPF Act and does not give any logically discernible reason in support of its conclusion. Even while noticing the provisions of Section 1(5) of the Act it does not give full effect to the intendment of the said Section. The said judgment according to Mr. Ramachandran is contrary not only to the provisions of the EPF Act but also contrary to the aforementioned principles of interpretation laid down by the Hon’ble Supreme Court. Finally it has been submitted by the learned ASG that the Bombay High Court judgment in The Union Western Bank’s case (supra) is not binding on this Court and there are good reasons for this court not to follow the same. Learned ASG has accordingly prayed for dismissal of the writ petition.

9. I am of the view that there is merit in the plea of the learned ASG because the Letter dated 21st February, 1989 issued by the Government of India and the Letter dated 28th March, 1989 issued by the Central Provident Fund Commissioner are not based on any statute and indeed run contrary to the intendment of the Act. A bare perusal of the Section 1(5) of the EPF Act indicates that the concept of “decoverage” of an establishment is alien to the Act. Section 1(5) of the EPF Act reads as follows:-

“An establishment to which this act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty”
10. In my view the letter dated 21st February, 1989 is also not based on any statutory power nor is it in consonance with the objects and the provisions of the EPF Act. The Bombay High Judgment in Union Western Bank’s case (supra) has not given adequate weight to the concept of “decoverage” indicated in Section 1(5) of the EPF Act extracted above. The effect of the judgment of the Bombay High Court is that the object of the EPF Act is stultified and defeated.If the Bombay High Court judgment is carried to its logical conclusion it will lead to a situation that every bank wishing to avoid the applicability of the EPF Act has merely to open a branch in any other State. This could not have been the intendment behind the EPF Act. The decision of the Bombay High Court in Union Western Bank’s case (supra) which was given effect to by the letter dated 28th March, 1989, the relevant portion of which as extracted hereinabove, seeks to introduce the concept of “decoverage” of the establishment upon the opening of a branch in any State and clearly runs contrary to the object of the EPF Act.

11. Furthermore it is not open to the petitioner Bank to invoke the Doctrine of Promissory Estoppel when such invocation runs contrary to the objects underlying the EPF Act and such a plea is contrary to the law laid down in Sharma Transport’s case (supra). Similarly the Schedule I of the EPF Act clearly indicates that the industries which are covered are those which have all India/multi state coverage. Section 1(5) of the EPF supports the plea that even if the number of persons employed falls below 20, the establishment continued to be covered and thus also indicates that the concept of “decoverage” is alien to the EPF Act and the letters dated 21st February, 1989 and 28th March, 1989 which provided for “decoverage” of a bank having establishment in any State are thus clearly contrary to the EPF Act. If the view adopted by the Bombay High Court in Union Western Bank’s case (supra) is accepted, it will defeat the very object of the EPF Act and lead to manifest absurdity as proscribed by Industrial Supplier’s case (supra). The reliance by Shri Bhattacharya, the learned counsel for the petitioner on the order of the Allahabad High Court which merely records the statement made by the Union of India’s counsel based upon the letters dated 21st February, 1989 issued by the Government of India and the letter dated 28th March, 1989, issued by the Regional Provident Fund Commissioner is thus of no consequence in view of the findings recorded by me about the legal efficacy of such communication. In any event even if the order of the Allahabad High Court can be construed to uphold the legality of the aforesaid two letters I have already taken a view contrary to it while differing from the Bombay High Court’s view.

12. The learned ASG was also right in contending that the view advancing the object of the EPF Act must be preferred to one which obstructs the object of the Act. In accordance with the position of law laid down in Kunal Singh’s case (supra) the Court must prefer the view which advances the object of the Act and as per the law laid down in International Ore’s case (supra) a liberal construction must be placed to achieve the object of the legislation rather than frustrating or stultified it. The judgment in Shibu Metal Works’s case (supra) also held that the view which helps the achievement of the objects of the Act should be preferred when material provisions of the Act have been construed and two views are reasonably possible. Similarly in Andhra University’s case (supra) it was held that the Act being a social welfare legislation should not be construed by virtue of an narrow interpretation defeating the very object and the purpose of the Act.13.In my view, therefore, in view of the settled position of law summarized hereinabove, I am satisfied that the Bombay High Court’s view in Union Western Bank’s case (supra) does not conform to the well-settled position of law.I am thus regretfully unable to subscribe to and agree with the view of the Bombay High Court in Union Western Bank’s case (supra). I accordingly hold that the letters dated 21st February, 1989 and 28th March, 1989 issued by the Government of India and Central Provident Fund Commissioner respectively, do not have any statutory or legal basis and are merely administrative decisions and thus run contrary to the statutory intendment of the Act and reliance on such communications cannot be permitted. Accordingly the writ petition is devoid of merits and stands dismissed with no order as to costs. Since on 25th September, 2003 when arguments were concluded, both counsel had prayed that in case this Court does not agree with the view of the Bombay High Court, it may grant certificate of fitness for leave to appeal to the Hon’ble Supreme Court under Article 133. In view of the fact that not only a substantial question of law of general public importance arises and in light of my difference of opinion with the Bombay High Court needs a decision by the Hon’ble Supreme Court, I grant as per the provisions of Article 134-A at the request of both counsel, a certificate of fitness for leave to appeal to the Hon’ble Supreme Court in respect of this judgment. In so far as the funds which are lying deposited with the Regional Provident Fund Commissioner, Varanasi are concerned, they may be distributed to the petitioner’s employees within 12 weeks from today.