Contractual employees directly engaged by company entitled to Employee Provident Fund benefit

In Civil Appeal No. 353 of 2020, M/S. PAWAN HANS LIMITED vs AVIATION KARMACHARI SANGHATANA, the issue which arises for consideration is whether the contractual employees of the Appellant­Company are entitled to provident fund benefits under the Pawan Hans Employees Provident Fund Trust Regulations or under the Employees’Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees’ Provident Fund Scheme, 1952 framed thereunder.

The members of the Respondent -Union had made several representations to the company to extend the benefit of the PF Trust Regulations since they were directly engaged by the Company on contractual basis, some of whom were working for almost 20 years. Being aggrieved by the inaction of the Company, the Respondent­-Trade Union approached the High Court. The High Court directed a liberal view must be taken in extending social security benefits to the contractual employees and that the benefits under the EPF Act be extended to the members of the Respondent­ Trade Union, and other similarly situated employees.

The company approached Supreme Court against the High Court order claiming that the company did not come under EPF Act. The Supreme  Court  observed that in Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School, 1 (2007) 1 SCC 268, a twin­ laid down  test for an establishment to seek exemption from the provisions of the EPF Act, 1952. The twin conditions are:

1) First, the establishment must be either “belonging to” or “under the control of” the Central or the State Government. The phrase “belonging to” would signify “ownership” of the Government, whereas the phrase “under the control of” would imply superintendence, management or authority to

direct, restrict or regulate.

2) Second, the employees of such an establishment should be entitled to the benefit of contributory provident fund or old age pension in accordance with any scheme or rule framed by the Central Government or the State Government governing such benefits.

If both tests are satisfied, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act.

Applying the first test to the instant case, the Central Government has a 51% ownership in the Appellant­ Company, while the balance 49% is owned by the ONGC, a Central Government PSU . which is applicable to the Appellant company but as for the failed that second test as it was observed that the Company had its own Scheme viz. the Pawan Hans Employees Provident Fund Trust Regulations which was not framed by the Central or State Government and restricted to only the ‘regular’ employees. Therefore the Supreme Court decided that that the Company has failed to make out a case of exclusion from the applicability of the provisions of the EPF Act.

As for the issue of whether the members of the Respondent­Trade Union are entitled to the benefit of Provident Fund under the PF Trust Regulations or under the EPF Act, the Supreme Court held that the members of the Respondent­-Union have been in continuous employment with the Company for long periods of time. They have been receiving wages/salary directly from the Company without the involvement of any contractor since the date of their engagement. The work being of a perennial and continuous nature, the employment cannot be termed to be ‘contractual’ in nature.

The Supreme Court decided that Clause 2.5 of the PF Trust Regulations would undoubtedly cover all contractual employees who have been engaged by the Company, and draw their wages/salary directly or indirectly from the Company and are entitled to the benefit of provident fund under the PF Trust Regulations or the EPF Act.