ARE THE PROVISIONS OF THE EMPLOYEES PROVIDENT FUND AND MISCELLANEOUS PROVISIONS ACT, 1952, APPLICABLE TO THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI)?
We all seem to have the basic understanding of the Provident Fund Provisions. However, being a Fellow Member of the esteemed Institute of Chartered Accountants of India (ICAI), one question has always made me curious i.e. whether the provisions of 'The Employees Provident Fund And Miscellaneous Provisions Act, 1952', (hereinafter referred to as 'EPFO Act'), are applicable to an autonomous regulatory body like ICAI.
So, in order to find an answer to this interesting question and to fulfil my curiosity, I pondered upon the provisions of the EPFO Act and the Chartered Accountants Act, and applied my analysing skills, and the result has turned out to be quite satisfactory.
Friends, here are my observations and considered opinion on the subject matter in a simple and easy to understand, Question-Answer Form:
Question: Whether the Provisions of The Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPFO Act), are applicable to ICAI?
Answer: The answer to this intriguing question lies in the EPFO Act itself.
The provisions concerning the applicability of the EPFO Act, are contained in section 3 of the Act, which reads as under:
'(3) Subject to the provisions contained in section 16, it applies -
(a) to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty or more persons are employed and
(b) 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.'
Thus, by considering the above provisions of section 3 of EPFO Act, prima-facie, it may appear that the provisions of the EPFO Act, are applicable to ICAI.
However, I have learnt from my experiences that one should not jump to any conclusions in haste, and therefore, I studied the provisions of the EPFO Act, further. And then I came across the provisions of section 16 of the EPFO Act.
By virtue of the provisions contained in Section 16 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, certain establishments are considered as outside the purview of the said Act.
The section 16(1)(c) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952,reads as under:
'16. Act not to apply to certain establishments:
(1) This Act shall not apply-
(c) to any other establishment set up under any Central, Provincial or State Act and whose employees are entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that Act governing such benefits.'
On careful analysis of the above provision, it can be concluded that for an establishment to be outside the purview of the Act, twin conditions are required to be fulfilled viz.
(i) Establishment should be set up under any Central, Provincial or State Act; And,
(ii) The employees of the said establishment must be entitled to the benefits of contributory provident fund or old age pension in accordance with any scheme or rule framed under that Act governing such benefits.
Fulfillment of the aforesaid Twin Conditions by ICAI:
The Institute of Chartered Accountants of India (ICAI) is a statutory body set up by an Act of Parliament and established under the Chartered Accountants Act, 1949 (Act No. XXXVIII of 1949) for the regulation of the Profession of Chartered Accountants in India.
Therefore the first condition as mentioned in section 16(1)(c) supra is duly met by ICAI.
Further, in terms of section 9 of the Chartered Accountants Act, the Council of the ICAI has been set up and in terms of section 16 of the Act, the Council has appointed officers and employees from time to time for Head Office, Regional Offices and Decentralised Offices. The Council has framed ICAI Provident Fund Rules which are being managed through a Provident Fund Trust, which is recognized u/s 58-B(I) of the Income Tax Act 1922.And as such the employees of the ICAI are entitled to the benefits of the contributory Provident Fund.
Thus, the second condition as mentioned supra, is also being duly fulfilled by ICAI.
Thus, keeping in view the above stated legal and factual position, I have come up with my considered opinion that by virtue of provisions of section 16(1)(c) of the Employees Provident Fund and Miscellaneous Provisions Act, 1952,ICAI is outside the purview of the applicability of the provisions of the said Act, and the provisions of the EPFO Act can't be pressed into service against it.
Question: Whether the ICAI can be considered as Principal Employer, in relation to the Contractual Staff being engaged by it, and in that capacity, be made liable for deposition of PF contributions of contractual workmen?
Answer: The definition of 'employee' is given in section 2(f) of the EPFO Act. It reads as under:
'(f) employee means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets, his wages directly or indirectly from the employer, and includes any person,-
(i) employed by or through a contractor in or in connection with the work of the establishment;
While relying upon the definition of employee under section 2(f) of the Act read with para 30 of the Employees Provident Fund Scheme, the provident fund authorities always insist upon the principal employers to ensure that the contractors as engaged must pay the provident fund contributions and in case of non-payment, the principal employers are held liable.
However, in the case of ICAI, based upon our discussion supra, we have concluded that the provisions of the EPFO Act can't be pressed into service. Hence, the question of treating ICAI, as the principal employer of the contractual staff engaged by it, must not arise at all.
Otherwise also, time and again, numerous judicial pronouncements, have made it very clear that the employees of independent contractors having independent PF Registration and code under the EPFO Act, could not be considered as the employees of the establishment which hires such contractual manpower, for the purpose of deposition of PF contribution in relation to such contractual staff under the EPFO Act.
So, not just ICAI, infact, all the other establishments also, must not be considered as the principal employer in relation to the contractual staff of the independent contractors having independent registration under the EPFO Act.
The Hon'ble Delhi High Court in the cases of 'Group 4 Securitas Guarding Ltd vs Employees Provident Fund Appellate Tribunal & Ors. WPC No. 4433/2000 & M/s Whirlpool of India Ltd vs Employees Provident Fund Appellate Tribunal & Ors. WPC No. 4408/2000 & 4433/2000', have categorically held that the establishments can't be considered as the principal employer in relation to the contractual staff of the independent contractors having independent registration under the EPFO Act.
The Hon'ble Delhi Court in para 4 of the judgment has held as under:
'4. The contention of the petitioners is that it is M/s GSGL alone who is the employer in relation to those personnel who were employed by it in various establishments. I am in full agreement with the learned counsel for the petitioners in this regard. There is no dispute that M/s GSGL is engaged in the activities of providing "security guard services" which is recognized under the Act as primary activity and not as an agency. It is not disputed that M/s GSGL is an establishment with large number of employees and is directly covered by the provisions of the Act. It has been allotted a PF code number for direct compliance of the provisions of the Act. There is no dispute that such code number is allotted to the employers and not to the contractors. M/s GSGL clearly falls within the meaning of Section 2(e) of the said Act in respect of its personnel deputed at various establishments and factories. It is stated that M/s GSGL was submitting statutory returns and contributions in respect of such employees to the competent authority directly as employer. Section 2(e) (ii) of the Act defines employer in relation of any other establishments, the person who, or the authority which, has the ultimate control over the affairs of the establishment. It could not be said that the clients like M/s. Whirlpool and others have any control over the affairs of M/s GSGL. On the other hand M/s GSGL has control over its employees and the establishment. The said security personnel/guards not only received their appointment letters, but also wages and allowances from M/s GSGL after signing the registers maintained by M/s GSGL and were governed by the terms and conditions of their services with M/s GSGL. The clients of M/s GSGL have no control in the fixation of terms and conditions of the service of security guards. The security personnel are deputed by M/s GSGL in the establishment of their clients not permanently, but, on rotation and transfer basis depending upon the requirement and exigency of the services related to its clients. The clients have no disciplinary control over those personnel. The submissions of the learned counsel for the petitioners that in some cases M/s GSGL maintains control rooms in the clients establishment to supervise and regulate the working of the security guards/personnel deputed there and that besides security guards M/s GSGL also deputes other staff at their clients establishment who take care and regulate the working of the security personnel, was not extroverted. From all these it could be seen that the personnel provided by GSGL to its clients including M/s Whirlpool and others were not provided as a contractor, but on principal to principal basis. Thus the clients cannot be termed as the principal employer of those security guards provided by M/s GSGL.'
Similarly the Hon'ble Madras High Court in its judgment in the case of M/S Brakes India Ltd vs Employees Provident Fund Organisation W.P. No. 391 of 2014, have categorically held that, '..with respect to the contractors, who are registered with the Provident Fund Department, having independent code number, they are to be treated as independent employer. The petitioner therefore, cannot be treated as 'principal employer' for the purposes of these contractors.'
Above all, the EPFO Act is a beneficent piece of social welfare legislation aimed at promoting and securing the well-being of the employees. Thus, the blanket & blind application of EPFO Act provisions in the hands of the Establishments, on every class of contractual payments, by assuming them to be principal employers, where even the beneficiaries/employees are not identifiable or known by the establishments, will defeat the very legislative intent of promulgating the EPFO Act.
Before parting, an original philosophical thought:
'Whenever you are curious, don't let that curiosity die.'
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