Radheshyam Electrical Industries vs State of Gujarat

Akil Abdul Hamid Kureshi, J.—The petitioner Radheshyam Electrical Industries has challenged a communication dated 29.06.2005, issued by the Executive Engineer, PGVCL, Rajkot as also another communication of the same date issued by Executive Engineer, PGVCL, Dhoraji.

The brief facts are as under.

The petitioner is a proprietary concern. It undertakes work of repairing of transformers for and on behalf of the PGVCL, for which the petitioner''s tender was accepted. The petitioner was awarded such work which the petitioner executed between the year 2000 to 2005 and later on also. I am informed that currently also, the petitioner undertakes such works for and on behalf of PGVCL.

The Electricity Company received notice under Section 7A of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (''the Act'' for short) for alleged unpaid provident fund dues of the some of the workmen. This included the workmen employed by the petitioner. The Electricity Company therefore insisted that the petitioner register itself with the Provident Fund Authorities and also deducts the employees'' provident fund as per rules. In his communication dated 29.06.2005, the Executive Engineer, Rajkot, conveyed to the petitioner that if he failed to produce necessary documents in this respect, the electricity company would release its bills only after effecting cut of 25.61% of the bill amount. Likewise, in his communication dated 29.06.2005, the Executive Engineer, Dhoraji insisted that the petitioner must register itself with the Provident Fund Authorities and produce necessary evidence in this respect before him.

On 27.10.2005, after briefly recording the stand of the petitioner, the electricity company and the provident fund authorities, following interim directions were issued.

"3. Learned advocate Shri Buch submitted that respondent No. 2 and 2/1 to 2/9 have not released the payment for the work already done by the petitioner. It is contended that the said respondents cannot withhold such payments solely on the ground that the petitioner has not obtained registration under the Employees Provident Fund and Misc. Provisions Act. He also submitted that the petitioner is ready to give an undertaking before this Court that ultimately if it is found that the petitioner is required to register itself under the said Act and deposit any amount towards PF dues of the workmen, the petitioner shall discharge such liability and will not raise the situation where the respondent No. 2 has to bear the burden in any manner.

Considering the submissions made, if the petitioner files such an undertaking before this Court within one week from today and also gives immovable security to respondent No. 2 for the amount to be paid, respondent No. 2 shall process the claim of the petitioner and shall not withhold the same only on the ground of dispute about the covering of the petitioner under the Employees Provident Fund and Misc. Provisions Act."

Learned advocate Shri Buch for the petitioner submitted that the petitioner employed maximum of 8 employees in the establishment. The establishment therefore did not require compulsory registration with the Provident Fund Authorities. He referred to the affidavit in reply dated 17.01.2006 filed by the provident fund officer, in which it is stated that;

"3. I say that Respondent Provident fund office has inspected to the petitioner establishment wherein it was found that for the period of April, 1998 to November, 2005 is not having the coverable strength of its workshop of the above establishment.

I further say that the petitioner establishment is set up w.e.f. August, 1983 and after verifying the Balance sheet and personal Ledger account, it is found that employment strength are below 20. Copy of monthwise employment strength as per photo copies of muster rall/wage register is annexed herewith and marked as ANNEXURE: R-1."

Shri Buch therefore submitted that now the controversy whether the petitioner was required to be registered under the said Act, no longer survives. The Electricity Company therefore cannot withhold the petitioner''s bills on the basis that the petitioner does not have provident fund registration.

Ms. Bhaya for the electricity company however opposed the petition contending that as per the agreement between the electricity company and the petitioner organization it has to be compulsorily registered under the said Act. The Provident Fund Authorities have raised demand against the electricity company. The company was therefore justified in withholding part of the bills of the petitioner.

Ms. Hina Desai for the provident fund organization relied on the affidavit dated 17.10.2006 and submitted that looking to the number of workers employed by the petitioner, registration under the said Act was not compulsory.

As of now, even as per the provident fund authorities, the number of workers employed by the petitioner organization does not exceed the minimum threshold level and therefore, the registration under the said Act is not compulsory. If that be so, the Electricity Company cannot withhold any part of the payment of the petitioner from its running bills. There cannot be insistence for registration under the said Act if the requirement has not arisen. Even under the revised agreement, all that is provided is that the petitioner organization would abide by the rules and regulations of provident fund commissioner regarding P.F. Code under the provisions of the said Act. Even, this condition therefore would require the petitioner to obtain a registration and contribute to the provident fund only if the requirement under the said Act has so arisen. In that view of the matter, looking to the stand of the provident fund authorities, the electricity company cannot withhold any part of the petitioner''s running bills towards its possible provident fund liabilities.

The matter however should not be allowed to rest here. Though, in the affidavit in reply, the Provident Fund Organization has given clean chit to the petitioner, I am of the opinion that the same is without full inquiries. I say so because alongwith the said affidavit dated 17.10.2006, the deponent has produced a communication dated 10.01.2006 from Regional Officer to the Provident Fund Commissioner, Rajkot, in which he has stated as under:

"The establishment having their Registered office 359/A G.I.D.C. CHITRA BHAVNAGAR. The said matter required to be inspected by the Regional Office Ahmedabad. On receipt of the detailed report regarding Employment Strength the establishment can be coverable or not coverable, could be Decided.

The employment strength verified by me for the period from April 98 to Nov. 2005 in the jurisdiction of Sub Regional Office Rajkot is not having the coverable Employment Strength that is workshop of the above establishment namely M/s. Radheshyam Electrical Industries at 31 Bhojraj Para Marg No. 15 Gondal."

The opinion of the said officer therefore that the organization does not employ more than 20 people, was only an ad hoc opinion and the complete picture would emerge only after the matter was inspected by the regional office at Ahmedabad regarding the registered office of the establishment at GIDC, Chitra, Bhavnagar. It was in this background, he stated that only upon receipt of the same, a detailed report regarding employment strength of the establishment can be made so as to judge whether the same would be covered under the said Act or not. Apparently, without any further inquiries, the said affidavit came to be filed. Ms. Desai for the provident fund organization did try to argue that since the affidavit is filed by the Ahmedabad office, the said office must be deemed to have inquired further on the point raised by the regional officer. I fail to see the point. Firstly, the report of the regional officer is dated 10.01.2006 and the affidavit before the High Court is filed on 17.01.2006. There is nothing on record to suggest that in such a short time further inquiry was carried out by the Provident Fund Authority. In absence of any material, it must be held that such inquiry remained incomplete and the statement made in the affidavit dated 17.01.2006 that the organization does not employ sufficient number of workers was not after complete inquiry.

There is yet another aspect of the matter that the Provident Fund Authorities have overlooked viz. that there are two organizations; Radheshyam Electrical Industries, the present petitioner and Radhakrishna Electricals. Whether there is any commonality of management and two organizations have been separated only to avoid provident fund liabilities, are the questions which the Provident Fund Authorities must address itself to. Even while therefore allowing this petition in part, suitable directions to the Provident Fund Authorities are required to be given.

In the result, the petition is disposed of with following directions.

I. The PGVCL shall not recover or withhold any part of the running bills of the petitioner only on the ground of possible provident fund liabilities.

II. This shall be conditional on the petitioner filing an undertaking before the electricity company that in case ultimately either the petitioner or the electricity company is held liable for provident fund dues of the workers employed by the petitioner, the petitioner shall discharge the full liabilities including the penalty and interest if any.

III. The Provident Fund Commissioner is directed to have further and full inquiry conducted into the petitioner''s liability to be compulsorily registered under the said Act with the special focus on the number of persons employed by the petitioner not only at its workshop but at its registered office. The said authorities shall also have it inquired whether there is any commonality of management between the petitioner and Radhakrishna Electricals and the two organizations are merely split on paper to avoid provident fund liability.

It is clarified that I have expressed no opinion whatsoever on these aspects of the matter and a totally independent inquiry would be conducted which may be completed preferably before 31.12.2014.

Petition is disposed of accordingly. Rule made absolute in above terms.