PF Not Applicable to Trainees

SUPREME COURT OF INDIA

Hon’ble Mr. Justice Arijit Pasayat and Hon’ble Mr. Justice R.V. Raveendran

The Regional Provident Fund Commissioner, Mangalore Appellant V / s M/s Central Aercanut & Coca Marketing and Processing Co-op Ltd., Mangalore – Respondent Civil Appeal No 978 of 2000 - 30 / 01 / 06

NOTE: 

Employees Provident Fund and Miscellaneous Provisions Act, 1952 – Section 2(f) –Trainees/Apprentices appointed either under Apprentices Act or under Standing Orders Act – Have no right to employment – Employer not liable to pay contribution for them. – Industrial Employment (Standing Orders) Rules, 1946 – S.O. 2, clause (g) – The company employed out of 270 applicants, 45 as apprentice and in a combined order by Managing Director, notified 45 persons as being selected as apprentices and were given training in the factory and also indicated clearly that they did not have right of employment after training in the factory. They were paid stipend during the training period. The Authority under Section 7-A of the E.P.F. Act determined that the trainees are the employees for the purpose of the Act and the company is liable to pay the quantified amount, which was challenged by the company and Single Judge as well as Division Bench held that the trainees were not covered under the Act and hence the company is not liable to pay as determined by the EPF Authorities. The Supreme Court has held that by virtue of Section 2(f), trainees are not employees under the Act, hence it affirmed the order of the Single Judge and Division Bench.

JUDGMENT 

Arijit Pasayat, J.:– Challenge in this appeal is to the judgment of a Division Bench of the Karnataka  High Court affirming the judgment of the learned Single Judge. Both the learned Single Judge and the  Division Bench held that 45 persons who were selected as trainees were not covered by Employees  Provident Fund & Misc. Provisions Act, 1952 (in short the ‘Act’) as they cannot be called as  “employees” as defined under Section2(f)oftheAct. 

2.Background facts in a nutshell are as follows: 

3. The respondent invited applications from the intending applicants for undergoing training at its  Chocolate Factory, Puttur on a stipend of Rs.600/- per month which may be increased to Rs.800/- per  month after six months. It was also provided that the successful candidates may be considered for  regular posting in the factory. By its resolution dated 21.1.1990 after interviewing 270 applicants, 45  persons were selected. By a combined order dated 3.2.1990, Managing Director notified the 45  persons who were selected. It was clearly indicated therein that the training in the factory does not  entitle any trainee to claim right of appointment after completion of training period. It was also  stipulated that if any trainee leaves the factory within one year, he was required to refund the amount  received by him as stipend. Notice was issued by the appellant purportedly under Section 7-A of the  Act in respect of the said 45 trainees. By order dated 15.5.1991 the appellant held that the trainees  were employees for the purpose of the Act and the respondent is liable to pay the quantified amount. 

4. Writ application was filed by the respondent questioning the determination. A learned Single Judge  with reference to various provisions of Industrial Employment (Standing Orders) Act, 1946 (in short  ‘Standing Orders Act’) and The Apprentices Act, 1961 (in short the ‘Apprentices Act’) held that the  demand was unsustainable. A writ appeal was filed before the Division Bench which as noticed above  dismissed the same. 

5. In support of the appeal Mr. Harish Chandra, learned senior counsel submitted that both the  learned Single Judge and the Division Bench have failed to notice the true import of Section 2(f) and  have erroneously held that the 45 trainees were not covered by the Act. It was also submitted that the  Act is a beneficial legislation and a wider meaning has to be given to the expression ‘employee’. 

6. In response, learned counsel for the respondent supported the judgments of the learned Single  Judge and the Division Bench. 

7. Undisputedly, the respondents are trainees. The question as rightly noted by the Division Bench is  whether an apprentice can be deemed to be an employee within the meaning of Section 2(f) of the  Act in the caseathand. 

8. For this purpose it is necessary to take note of the definition of ‘employee’ as given in Section 2(f)  of the Act. It reads as under: “Section 2 (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  theStandingOrdersoftheestablishment. 

9. Section 12-A of the Standing Orders Act, inter-alia provides as follows: “12A. Temporary  application of model standing orders. - (1) Notwithstanding anything contained in Sections 3 to 12, for  the period commencing on the date on which this Act becomes applicable to an industrial  establishment and ending with the date on which the standing orders as finally certified under this Act  come into operation under Section 7 in that establishment, the prescribed model standing orders shall  be deemed to be adopted in that establishment, and the provisions of section 9, sub-section (2) of  section 13 and section 13-A shall apply to such model standing orders as they apply to the standing  orders so certified.(2) Nothing contained in sub-section (1) shall apply to an industrial establishment in  respect of which the appropriate Government is the Government of the State of Gujarat or the  Government of the State of Maharashtra. 

10. From a bare reading of Section 12-A it is manifestly clear that until the Standing Orders are finally  certified and come into operation, the prescribed model standing orders shall be deemed to be  adopted in the concerned establishment. The Model Standing Orders prescribed under Rule 3(1) of  the Industrial Employment (Standing Orders) Central Rules, 1946 (in short the ‘Central Rules’) are  contained in Schedule I to the said Rules. Standing Order No.2 thereof classified workmen as follows:  1) Permanent 2) Probationers 3) badlis 4) temporary 5) casual 6) apprentices. 

11. ‘Apprentice’ is defined in clause (g) of Standing Order No.2 as follows: “An ‘apprentice’ is a  learner who is paid an allowance during the period of his training.” 

12. The Apprentices Act defines an ‘apprentice’ as follows: “2(aa): ‘apprentice’ means a person who is  undergoing apprenticeship training in pursuance of a contract of apprenticeship. 

13. In the present case, admittedly the Standing Orders were not at the relevant point of time certified.  Therefore, in terms of Section 12-A of the Standing Orders Act, the Model Standing Orders are  deemed to be applicable. Section 2(f) of the Act defines an employee to include an apprentice, but at  the same time makes an exclusion in the case of an apprentice engaged under the Apprentices Act or  under the Standing Orders. Under the Model Standing Orders an apprentice is described as a learner  who is paid allowance during the period of training. 

14. In the case at hand, trainees were paid stipend during the period of training. They had no right to  employment, nor any obligation to accept any employment, if offered by the employer. Therefore, the  trainees were ‘apprentices’ engaged under the ‘Standing Orders’ of the establishment. 

15. Above being the position, it cannot be said that the concerned 45 trainees were employee in  terms of Section 2(f) of the Act. In other words, an apprentice engaged under the Apprentices Act or  under the Standing Orders is excluded from the definition of an ‘employee’ as per Section 2(f) of the  Act. 

16. That being so, the view of the learned Single Judge as affirmed by the Division Bench of the High  Court cannot be faulted 

. 

17. The appeal fails and is dismissed. No costs.