REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5821 OF 2019

(Arising out of SLP (Civil) No. 22243 of 2015)

The Officer In­Charge, Sub­Regional  …Appellants

Provident Fund Office & Anr.

versus

M/s Godavari Garments Limited              …Respondent

J U D G M E N T

INDU MALHOTRA, J.

Delay condoned.

Leave granted. 

1.The present Civil Appeal has been filed to challenge the Order

dated 27.04.2012 passed in W.P. No. 1615 of 1993 by the

Bombay High Court, Aurangabad Bench.

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2.The background facts in which the present Civil Appeal has

been filed are briefly stated as under:

2.1.The   Respondent   Company   is   a   subsidiary   of   the

Marathwada   Development   Corporation,   which   is   an

undertaking of the Government of Maharashtra. It was

covered   under   the   provisions   of   the   Employees’

Provident Fund and Miscellaneous Provisions Act, 1952

(hereinafter referred to as “the EPF Act”) with effect from

01.01.1979.

2.2.The main objective of the Respondent Company, as per

its   Memorandum   of   Association,   was   to   encourage,

promote,   develop,   set­up   or   cause   to   be   set­up   a

readymade   garments   industry   in   the   Marathwada

Region, with a view to provide gainful employment to

people possessing skills in stitching, tailoring, and allied

activities, especially to women from the economically

weaker sections of the Society.

2.3.The Respondent Company engaged women workers who

were provided with cut fabric, thread, buttons, etc. to be

made into garments at their own homes. The sewing

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machines used by the women workers were owned by

them, and not provided by the Respondent Company.

2.4.On 12.03.1991, Appellant No. 1 – Officer In­Charge,

Sub­Regional  Provident   Fund   Office,   issued   a   Show

Cause Notice to the Respondent Company calling upon

it   to   pay   the   Provident   Fund   contributions   for   the

women workers. The Balance Sheet of the Respondent

Company for the year 1988 – 89, revealed large debits

towards   salary   and   wages   for   direct   and   indirect

workers, but the Respondent Company made a false

statement that it had only 41 employees.

2.5.On 30.11.1992, Appellant No. 1 issued summons to the

Respondent   Company   for   personal   hearing   under

Section 7­A of the EPF Act.

2.6.The   representative   of   the   Respondent   Company

appeared before Appellant No. 1, and contended that

the women workers who were fabricating garments for

the Respondent Company, were not their employees,

and hence not covered by Section 2(f) of the EPF Act.

Therefore, even though wages were paid to those women

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workers, the Respondent Company was not liable to pay

Provident Fund contribution in respect of them.

2.7.The Provident Fund Officer – Appellant No. 1 vide Order

dated 19.04.1993 held that the women workers engaged

for stitching garments were covered by the definition of

“employee”   under   Section   2(f)   of   the   EPF   Act.   An

amount   of   Rs.   15,97,087/­   was   assessed   towards

Provident Fund dues of the Respondent Company for

the period from November, 1979 to February, 1991. The

Respondent   Company   was   directed   to   pay   the   said

amount within 7 days.

2.8.The   Respondent   Company   challenged   the   aforesaid

Order   by   filing   W.P.   No.   1615   of   1993   before   the

Bombay High Court.

     The Bombay High Court, Aurangabad bench   vide

Final Judgment and Order dated 27.04.2012 allowed

the Writ Petition filed by the Respondent Company, and

set aside the Order dated 19.04.1993 passed by the

Appellant   No.   1.   It   was   held   that   the   Respondent

Company  had  no direct  or  indirect  control  over  the

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women workers. The conversion of cloth into garment

could be done by any person on behalf of the women

workers.   Hence,   the   Respondent   Company   did   not

exercise   any   supervisory   control   over   the   women

workers.

2.9.Aggrieved by the aforesaid Judgment, the present Civil

Appeal has been filed by the Provident Fund Office.

3.We   have   heard   the   learned   Counsel   for   the   parties,   and

perused the pleadings and written submissions filed by the

parties.

4.Mr. R.R. Rajesh, learned Counsel appearing on behalf of the

Appellants, submitted that the women workers employed by

the   Respondent   Company   fall   within   the   definition   of

“employee” under Section 2(f) of the EPF Act.

    Reliance was placed on this Court’s decision in M/s P.M.

Patel & Sons and Ors. v. Union of India and Ors.

1

 to contend

that   the   women   workers   employed   by   the   Respondent

Company were covered by the definition of “employee” under

Section 2(f) of the EPF Act. Hence, the Respondent Company

1 (1986) 1 SCC 32.

5

is liable to pay Provident Fund contribution in respect of

those women workers.

5.Mr. Anoop Kandari, learned Counsel appearing on behalf of

the   Respondent   Company,   submitted   that   there   was   no

employer­employee   relationship   between   the   Respondent

Company and the women workers. The women workers were

not employees under Section 2(f) of the EPF Act. They were

independent contractors.

   It was further submitted that the sewing machines used by

the women workers were owned by them, and not provided by

the Respondent Company. The women workers worked from

their   homes,   and   not   at   the   production   centers   of   the

Respondent Company. Hence, the work performed by them,

could be done by their relatives, or any other person on their

behalf. Furthermore, the women workers were not bound to

report to the production centers regularly, nor were they

required to work at the production centers. The Respondent

Company exercised no supervisory control over the women

workers.

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6.The short issue which arises for consideration is whether the

women workers employed by the Respondent Company are

covered by the definition of “employee” under Section 2(f) of

the EPF Act or not.

   Section 2(f) of the EPF Act is set­out hereinbelow for ready

reference:

“(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;

(ii)   engaged   as   an   apprentice,   not   being   an

apprentice engaged under the Apprentices Act,

1961 (52 of 1961), or under the standing orders

of the establishment;”

(emphasis supplied)

6.1.The definition of “employee” under Section 2(f) of the

EPF Act is an inclusive definition, and is widely worded

to   include   any   person   engaged   either   directly   or

indirectly   in   connection   with   the   work   of   an

establishment.

6.2.In the present case, the women workers employed by

the Respondent Company were provided all the raw

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materials, such as the fabric, thread, buttons, etc. from

the   Respondent   –   Employer.  With  this   material,   the

women workers were required to stitch the garments as

per   the   specifications   given   by   the   Respondent

Company.   The   women   workers   could   stitch   the

garments   at   their   homes,   and   provide   them   to   the

Respondent Company. The Respondent Company had

the absolute right to reject the finished product i.e. the

garments, in case of any defects.

6.3.The mere fact that the women workers stitched the

garments at home, would make no difference. It is the

admitted position that the women workers were paid

wages directly by the Respondent Company on a per­

piece basis for every garment stitched.

6.4.The issue in the present case is squarely covered by the

decision of this Court in Silver Jubilee Tailoring House

and Ors. v. Chief Inspector of Shops and Establishments

and Ors.

2

  The appellants therein were engaged in the

business   of   producing   garments.   They   employed

2 (1974) 3 SCC 498.

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workers who were provided with the cloth, and were

instructed   by   the   appellants   how   to   stitch   it.   The

workers were paid on piece­rate basis. If a worker failed

to   stitch   a   garment   as   per   the   instructions,   the

appellants rejected the work, and asked the worker to

re­stitch   the   garment.   This   Court   held   that   such

workers fell within the definition of “person employed”

under Section 2(14) of the Andhra Pradesh (Telangana

Area) Shops and Establishments Act, 1956. It was held

that:

“35. Quite apart from all these circumstances, as

the   employer   has   the   right   to   reject   the   end

product if it does not conform to the instruction of

the employer and direct the worker to restitch it,

the   element   of   control   and   supervision   as

formulated in the decisions of this Court is also

present.”

(emphasis supplied)

6.5.On the issue where payment is made by piece­rate to

the workers, would they be covered by the definition of

“employee”, this Court in  Shining Tailors  v.  Industrial

Tribunal II, U.P., Lucknow and Ors.,

3

 held that:

“5.   We   have   gone   through   the   record   and

especially the evidence recorded by the Tribunal.

The   Tribunal   has   committed   a   glaring   error

apparent on record that whenever payment is

3 (1983) 4 SCC 464.

9

made by piece rate, there is no relationship of

master   and   the   servant   and   that   such

relationship can only be as  between principal

and   principal   and   therefore,   the   respondents

were independent contractors. Frankly, we must

say that the Tribunal has not clearly grasped the

meaning of what is the piece rate, If every piece

rated   workmen   is   an   independent   contractor,

lakhs   and   lakhs   of   workmen   in   various

industries   where   payment   is   correlated   to

production would be carved out of the expression

‘workmen’ as defined in the Industrial Disputes

Act.  In   the   past   the   test   to   determine   the

relationship of employer and the workmen was

the   test   of   control   and   not   the   method   of

payment. Piece rate payment meaning thereby

payment   correlated   to   production   is   a   well­

recognised   mode   of   payment   to   industrial

workmen. In fact, wherever possible that method

of payment has to be encouraged so that there is

utmost   sincerity,   efficiency  and   single   minded

devotion to increase production which would be

beneficial   both   to   the   employer,   the   workmen

and the nation at large. But the test employed in

the past was one of determining the degree of

control   that   the   employer   wielded   over   the

workmen. However, in the identical situation in

Silver Jubilee Tailoring House and Ors. v. Chief

Inspector of Shops and Establishments and Anr.

(1973) IILLJ 495 SC Methew, J. speaking for the

Court observed that the control idea was more

suited   to   the   agricultural   society   prior   to

Industrial   Revolution   and   during   the   last   two

decades the emphasis in the field is shifted from

and no longer rests exclusively or strongly upon

the question of control. It was further observed

that a search for a formula in the nature of a

single test will not serve the useful purpose, and

all factors that have been referred to in the cases

on topics, should be considered to tell a contract

of   service.   Approaching   the   matter   from   this

angle,  the  Court  observed  that  the  employer's

right   to   reject   the   end   product   if   it   does   not

conform   to   the   instructions   of   the   employer

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speaks   for   the   element   of   control   and

supervision. So also the right of removal of the

workman or not to give the work has the element

of control and supervision. If these aspects are

considered decisive, they are amply satisfied in

the facts of this case. The Tribunal ignored the

well laid test in law and completely misdirected

itself by showing that piece rate itself indicates a

relationship of independent contractor and error

apparent on the record disclosing a total lack of

knowledge of the method of payment in various

occupations in different industries. The right of

rejection coupled with the right to refuse work

would   certainly   establish   master   servant

relationship   and   both   these   tests   are   amply

satisfied in the facts of this case. Viewed from

this angle, the respondents were the workmen of

the   employer   and   the   preliminary   objection

therefore,   raised   on   behalf   of   the   appellant­

employer was untenable and ought to have been

overruled and we hereby overrule it.”

(emphasis supplied)

6.6.In M/s P.M. Patel & Sons and Ors. v. Union of India and

Ors.,

4

  the   appellants   therein   were   engaged   in   the

manufacture and sale of bidis. The appellants engaged

contractors, and the contractors engaged workers who

rolled the bidis at their own homes after obtaining the

raw materials either directly from the appellants, or

through the contractors. The appellants contended that

those  workers were not covered by  the definition  of

“employee” under Section 2(f) of the EPF Act. This Court

4 (1986) 1 SCC 32.

11

rejected   the   contentions   raised   by   the   appellants

therein, and held that:

“8. … Clause (f) of Section 2 of that Act defines

an   “employee”   to   mean   “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   employed   by   or

through a contractor in or in connection with the

work  of   the   establishment.”   It  will  be  noticed

that the terms of the definition are wide. They

include not only persons employed directly by

the employer but also persons employed through

a   contractor.   Moreover,   they   include   not   only

persons   employed   in   the   factory   but   also

persons employed in connection with the work of

the factory. It seems to us that a home worker,

by   virtue   of   the   fact   that   he   rolls   beedis,   is

involved in an activity connected with the work

of   the   factory.   We   are   unable   to   accept   the

narrow   construction   sought   by   the   petitioners

that   the   words   “in   connection   with”   in   the

definition   of   “employee”   must   be   confined   to

work performed in the factory itself as a part of

the total process of the manufacture.

…

10.  In   the   context   of   the   conditions   and   the

circumstances set out earlier in which the home

workers of a single manufacturer go about their

work,  including  the  receiving  of   raw  material,

rolling the beedis at home and delivering them to

the manufacturer subject to the right of rejection

there   is   sufficient   evidence   of   the   requisite

degree   of   control   and   supervision   for

establishing   the   relationship   of   master   and

servant between the manufacturer and the home

worker. It must be remembered that the work of

rolling beedis is not of a sophisticated nature,

requiring   control   and   supervision   at   the   time

when the work is done. It is a simple operation

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which,   as   practice   has   shown,   has   been

performed   satisfactorily   by   thousands   of

illiterate   workers.   It   is   a   task   which   can   be

performed by young and old, men and women,

with equal facility and it does not require a high

order of skill.  In the circumstances, the right of

rejection   can   constitute   in   itself   an   effective

degree of supervision and control. We may point

out   that   there   is   evidence   to   show   that   the

rejection takes place in the presence of the home

worker.   That   factor,   however,   plays   a   merely

supportive role in determining the existence of

the relationship of the master and servant. The

petitioners point out that there is no element of

personal service in beedi rolling and that it is

open to a home worker to get the work done by

one or the other member of his family at home.

The element of personal service, it seems to us,

is of little significance when the test of control

and supervision lies in the right of rejection.”

(emphasis supplied)

6.7.The aforesaid judgments make it abundantly clear that

the   women   workers   employed   by   the   Respondent

Company are covered by the definition of “employee”

under Section 2(f) of the EPF Act.

6.8.The EPF Act is a beneficial social welfare legislation

which was enacted by the Legislature for the benefit of

the workmen.

5

  This Court in  The Daily Partap  v.  The

Regional   Provident   Fund   Commissioner,   Punjab,

5 Regional Provident Fund Commissioner v. The Hooghly Mills Company Ltd. and Ors., 2012

(1) SCALE 422.

13

Haryana,   Himachal   Pradesh   and   Union   Territory,

Chandigarh,

6

 held that: 

“9. … It has to be kept in view that the Act in

question, is a beneficial social welfare legislation

meant for the protection of weaker sections of

society, namely, workmen who had to eke out

their   livelihood   from   the   meagre   wages   they

receive after toiling hard for the same.”

    Hence, the provisions under the EPF Act have to be

interpreted   in   a   manner   which   is   beneficial   to   the

workmen.

6.9.In the present case, the women workers were certainly

employed for wages in connection with the work of the

Respondent   Company.   The   definition   of   “employee”

under   Section   2(f)   is   an   inclusive   definition,   and

includes workers  who are engaged either  directly  or

indirectly   in   connection   with   the   work   of   the

establishment, and are paid wages.

   In the present case, the women workers were directly

engaged by the  Management in connection with the

6 (1998) 8 SCC 90.

14

work of the Respondent Company, which was set up as

a ready­made garments industry in Marathwada. The

women workers were paid wages on per­piece basis for

the   services   rendered.   Merely   because   the   women

workers were permitted to do the work off site, would

not   take   away   their   status   as   employees   of   the

Respondent Company.

7.The Respondent Company placed reliance on this Court’s

decision in  C.E.S.C. Limited and Ors.  v.  Subhash Chandra

Bose and Ors.,

7

 wherein it was held that:

“14. … In the textual sense ‘supervision’ of the

principal employer or his agent is on ‘work’ at

the places envisaged and the word ‘work’ can

neither he construed so broadly to be the final

act of acceptance or rejection of work, nor so

narrowly so as to be supervision at all limes and

at   each   and   every   step   of   the   work.   A

harmonious construction alone would help carry

out the purpose of the Act, which would mean

moderating   the   two   extremes.   When   the

employee is put to work under the eye and gaze

of the principal employer, or his agent, where he

can   be   watched   secretly,   accidentally,   or

occasionally, while the work is in progress, so as

to   scrutinise  the   quality thereof   and   to   detect

faults   therein,   as   also   put   to   timely   remedial

measures by directions given, finally leading to

the   satisfactory   completion   and   acceptance   of

the work, that would in our view be supervision

for the purposes of Section 2(9) of the Act.”

7 (1992) 1 SCC 441.

15

     The decision in  C.E.S.C. Limited (supra)  however, is not

applicable to the facts of the present case. In that case, this

Court interpreted the meaning of the term “supervision” as

used   in   the   definition   of   “employee”   Section   2(9)   of   the

Employees’ State Insurance Act, 1948. However, the term

“supervision” is nowhere used in the definition of “employee”

under Section 2(f) of the EPF Act. The decision in P.M. Patel

(supra) could not be used to interpret the word “supervision”

under the Employees’ State Insurance Act, 1948 because the

said word has not been used in Section 2(f) of the EPF Act. 

8.In view of the aforesaid discussion, the judgment passed by

the   Bombay   High   Court  vide  the   Impugned   Order   dated

27.04.2012, being contrary to settled law, is set aside.

   The Order dated 19.04.1993 passed by the Appellant No. 1

is restored. The Respondent Company is directed to deposit

the amount assessed by Appellant No. 1 towards Provident

Fund dues of the women workers within 1 month from the

date of this Judgment.

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The   Civil   Appeal   is   allowed   in   the   aforesaid   terms.   All

pending Applications, if any, are accordingly disposed of.

Ordered accordingly.

.....................................J.

(ABHAY MANOHAR SAPRE)

.…...............………………J.

(INDU MALHOTRA)

New Delhi,

July 24, 2019

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