25/03/2020 Delivery | Westlaw India

Westlaw India Delivery Summary

Request made by : IP USER

Request made on: Wednesday, 25 March, 2020 at 15:41 IST

Client ID: inapu-1

Content Type: Cases
Title : Cheslind Textiles Limited B. Muduganapalli,
Dharmapuri v Registrar/Presiding Officer,
Employees Provident Fund Appellate
Tribunal, New Delhi and another
Delivery selection: Current Document
Number of documents delivered: 1

© 2020 Thomson Reuters South Asia Private Limited

25/03/2020 Delivery | Westlaw India Page 2

Madras High Court

9 December 2019

Cheslind Textiles Limited B. Muduganapalli, Dharmapuri

v
Registrar/Presiding Officer, Employees Provident Fund Appellate
Tribunal, New Delhi and another
Case No : W. P. No. 22916 of 2005 & WPMP. No. 24959 of 2005
Bench : Abdul Quddhose
Citation : 2019 Indlaw MAD 6105
The Order of the Court was as follows :
1. This writ petition has been filed challenging the order of the 1st respondent dated
29.03.2005 in proceedings ATA No.127 (13)/2000 confirming the order of the second
respondent dated 11.02.2000 in proceedings No.TN/SRO-SLM/34970 dated
11.02.2000.
2. It is the case of the petitioner that they are manufacturers of cotton yarn and they are
100% export oriented unit which started commercial production in February 1994.
According to them, they enjoyed infancy protection under the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'EPF & MP
Act, 1952'). According to them, they do not have their own standing orders certified
under the provisions of Industrial Employment (Standing Orders) Act, 1946 (hereinafter
referred to as 'IESO Act, 1946'). According to the petitioner, by virtue of the Tamil Nadu
Industrial Employment (Standing Orders) Rules 1947, in the event of industrial
establishment not having its own certified Standing Orders, the Model Standing Orders
set out in Schedule 1 to the Rules would apply. According to the petitioner, the Model
Standing Orders classified the workmen into seven different categories and one of the
categories of workmen classified under the Model Standing Orders is Apprentice.
3. According to the petitioner, since their unit was set up only in February 1994, the
petitioner was entitled for infancy protection under the EPF & MP Act, 1952 for a period
of three years. It is their case that the Act will be applicable to the petitioner only from
January 1997 onwards. According to the petitioner, as of January 1997, there were 256
employees, out of which, 200 were apprentices and 56 were confirmed employees.
4. It is the case of the petitioner that they have also entered into a Memorandum of
Settlement under Section 18(1) of the Industrial Dispute Act, 1947 setting out a Scheme
of Apprenticeship. According to them, individual agreements have also been entered
into with each apprentice and the Agreements are as per the format contained in
Annexure-1 of the Settlement.
5. It is the case of the petitioner that they engaged the services of M/s.Harita
Consultancy Services, Bangalore, from October 1993 onwards which is a group of
textile technologists/engineers, having a combined experience over 15 decades and
they have entered into apprentice agreement with them for appointment of apprentices
for their establishment. According to the petitioner, the said M/s.Harita Consultancy
25/03/2020 Delivery | Westlaw India Page 3

Services cater to the specific needs of new textile mills on turn-key basis to fulfill their
needs in terms of scientific personnel training by using the latest techniques. According
to the petitioner, since the petitioner textile mill is situated in a backward area, there are
workmen who are hardly having experience of working in textile mills and therefore, it
became necessary for them to impart training to the apprentices in order to enable them
to acquire the required skills necessary for working in a textile mill.
6. According to the petitioner, the enforcement officer under the EPF & MP Act, 1952
having jurisdiction over the petitioner visited the petitioner's factory and sought certain
clarifications and in response thereto, the petitioner addressed letters dated 17.03.1997
and 20.03.1997 enclosing copies of various documents. It is also the case of the
petitioner that the letters were issued on 30.07.1997 and 20.01.1998 giving particulars
of Balance Sheet, Sales Tax Order, the total number of employees and the strength as
per Form-12A. According to the petitioner, by order dated 17.02.1998, the Enforcement
Officer requested the petitioner to produce a copy of the Model Standing Orders and
this was also produced by letter dated 18.02.1998. It is the case of the petitioner that
the petitioner also produced a copy of the Memorandum of Settlement under Section
18(1) of the Industrial Disputes Act containing Annexure-I setting out the Model
Apprenticeship Agreement.
7. It is the case of the petitioner that the Assistant Commissioner of Employees'
Provident Fund, Salem-1 issued summons under Section 7 A of the EPF & MP Act,
1952 on 10.03.1998. According to the petitioner, they appeared in response to the said
summons and submitted a detailed representation dated 16.03.1998. According to
them, the said Assistant Commissioner passed orders dated 31.03.1998 under Section
7A of the EPF & MP Act, 1952 determining a total sum of Rs. 7,51,779.35 payable by
the petitioner on the basis that all the workmen engaged right from the inception of
coverage were confirmed employees and that, there were not a single apprentice.
8. Aggrieved by the aforesaid order of the Assistant Commissioner passed under
Section 7-A of the Act, the petitioner filed an appeal before the Appellate authority under
Section 7-I of the Act. The Tribunal by its order dated 30.11.1998 allowed the appeal by
remanding the matter back to the original authority on the ground that the original
authority while passing orders under section 7-A of the Act, has not examined as to
whether the class of workmen shown by the petitioner as apprentices were infact
apprentices i.e., they were engaged by the petitioner only for imparting training or not.
9. According to the petitioner, after remand, the petitioner received a notice dated
16.07.1999 from the Assistant Commissioner (Original Authority) calling for hearing on
29.07.1999. According to the petitioner, the petitioner filed a detailed representation
dated 09.09.1999 enclosing copies of the training programme syllabus, certificate given
to M/s.Harita Consultancy Services, profile of Consultants, payment details to
Consultants, photo copies of apprenticeship agreements in respect of 20 employees,
statement giving details, number of apprentice from February 1994 to August 1999,
number absorbed on the permanent rolls etc. According to the petitioner, despite
submission of all relevant documents, the second respondent after remand, by his order
dated 11.02.2000 has once again held that all the apprentices engaged by the petitioner
were regular employees and on that basis, has determined a total sum of Rs.
7,51,779.35 payable towards Employee provident fund contributions. According to the
petitioner, while pending disposal of the earlier appeal, the petitioner had already
deposited 5,63,835/- being 75% of the amount determined by the earlier order and this
was done by a Demand Draft No.882005 dated 02.09.1998 payable at New Delhi in
favour of the Tribunal.
10. Aggrieved by the order dated 11.02.2000 passed by the second respondent,
determining the sum of Rs. 7,51,779.35 payable by the petitioner, the petitioner
25/03/2020 Delivery | Westlaw India Page 4

preferred an appeal to the first respondent which was taken on file by the first
respondent in ATA.No.127(13)/2000. By order dated 29.03.2005, the appeal was
dismissed confirming the order of the second respondent dated 11.02.2000. Aggrieved
by the order dated 29.03.2005 passed by the first respondent, this writ petition has been
filed.
11. A counter affidavit has been filed by the respondents stating that the so called
apprentices engaged by the petitioner were actually engaged in the actual production
and were paid salaries and other benefits. According to them, the so called apprentices
do not come under the purview of apprentices. According to them, the petitioner do not
have any certified Standing Orders. According to them, it is obligatory on the part of the
petitioner management to frame Standing Orders and send it for certification to the
competent authority within six months under the IESO Act, 1946. According to them, the
Model Standing Orders could be made applicable for the interim period starting from the
date of submission of Standing Orders to the date of Certification of the same.
According to them, the petitioner establishment has totally violated this condition under
the IESO Act, 1946 and therefore, they cannot claim any benefits which are allowed
under the EPF & MP Act, 1952 in respect of the category "apprentices" coming under
the Model Standing Orders.
12. According to the respondents, as per their records, the petitioner establishment
employed 374 persons and out of which 282 persons were treated as apprentices which
constituted about 75%. According to them, excessive employees named as apprentices
will amount to clear violation of ratio of apprentice as against the regular employees
prescribed by the appropriate Government. According to them, as per the agreement for
apprenticeship, the trainees are not entitled for any other allowances or concessions
apart from the stipend. Further according to them, under the alleged apprenticeship
agreements, the alleged trainees/apprentices have agreed to follow the work norms of
the mill, follow the procedures to fulfill the jobs entrusted to them, and they have also
agreed to accept any alternative work. According to the respondents, these conditions
are more suitable for a regularised worker than a trainee/apprentice. According to them,
as seen from the apprenticeship agreement, the main focus of the agreement is also on
the work to increase production. According to them, the issue of imparting on the job or
off the job training are not spelt out in the alleged apprenticeship agreement.
13. According to them, the petitioner have taken a stand that the so called apprentices
appointed by them for learning work are excluded employees as per Section 2(f) of the
EPF & MP Act, 1952 as they have been appointed under the provisions of the Model
Standing Orders. According to them, the petitioner has tried to take advantage of the
classification made in the Model Standing Orders treating all persons as "apprentices"
with the view to deny Provident Fund to them. According to them, by this action, the
petitioner is avoiding benefits under the Social Security Scheme to the workers. It is
their case that the second respondent under Section 7-A of EPF & MP Act, 1952 has
rightly held that the so called apprentices were infact regular employees of the petitioner
and according to them, the second respondent has rightly determined the provident
fund payable by the petitioner at Rs. 7,51,779.35. It is also their case that the first
respondent has also rightly confirmed the order of the second respondent by its order
dated 29.03.2005 passed under Section 7-I of the EPF & MP Act, 1952.
14. Heard, Mr.K.Parthiban, learned counsel for the petitioner and
Mr.R.Thirunavukarasu, learned counsel for the respondents.
15. The IESO Act, 1946 requires the industrial establishments to formally define
conditions of employment of the employees working under them. Under section 3 of the
IESO Act, 1946, within six months from the date on which the Act became applicable to
an industrial establishment, the employer shall submit five copies of the draft standing
25/03/2020 Delivery | Westlaw India Page 5

orders proposed by him for adoption in his industrial establishment to the certifying
officer. Thereafter, if the employer has fulfilled the requirements, the draft standing
orders shall be certified under Section 5 of the IESO Act, 1946. In the case on hand,
even though the petitioner establishment as per their own statement has set up their
unit in February 1994 itself, they have not adhered to the mandatory statutory
requirement prescribed under Section 3 of the IESO Act, 1946 by submitting draft
standing orders to the respondents for certification. The draft standing orders required
to be submitted under Section 3 of the IESO Act, 1946 should furnish the details of the
employees as set out in the schedule to the IESO Act, 1946. The schedule gives the
details of the classification of workmen namely Permanent, Temporary, Apprentice,
probationer and badli.
16. One of the points for consideration in this writ petition is whether the employer can
take protection under the Model Standing Orders even without adhering to the
mandatory statutory requirement under Section 3 of the IESO Act, 1946 of submitting
draft standing orders within six months from the date of commencement of the business
for certification. Admittedly in the case on hand, the petitioner has not submitted draft
standing orders for certification as prescribed under Section 3 of the IESO Act, 1946.
The IESO Act, 1946 is a welfare legislation to protect and safeguard the interest of
workers. The preamble of the IESO Act, 1946 makes it clear that it is impediment upon
every employer to define with sufficient precision the conditions of employment of their
workers and make those conditions known to the workmen employed by them. Only
with that object in mind, the legislature thought it fit to enact the IESO Act, 1946. It is
only to protect and safeguard the interest of the workers.
17. The IESO Act, 1946 comprises of fifteen sections and one Schedule. As seen from
all the sections in IESO Act, 1946, it is very clear that those sections are intended only
to protect the interest of the workers and not to protect an employer who has violated
Section 3 of the Act by not submitting draft standing orders for certification. Eventhough,
Section 12A of the IESO Act, 1946 stipulates that the prescribed model standing orders
is applicable pending certification of the draft standing orders by the certifying officer,
Section 12A of the IESO Act, 1946 can be applied only by a worker to enure to his
benefit and not by an employer who is seeking exemption from payment of Employees'
Provident Fund Contributions to their employees/ workers which is detrimental to their
interest. Section 12A of the IESO Act, 1946 is meant to protect the employees/
workers when there is no certified standing orders in place and is not meant to protect
an employer who seeks to get exemption from payment of Employees' Provident Fund
Contributions to their employees/ workers. If that is allowed, the object of the IESO
Act, 1946 will get defeated. The explicit inclusion of the application of provisions of
Section 9, 13(2) and 13-A of the IESO Act, 1946 and the exclusion of Section 13 of the
IESO Act, 1946 (that is provisions relating to penalties and procedures) in the
non-obstante clause of Section 12-A together with its very caption indicates by
implication that Section 12-A does not permit an employer to circumvent by simply
adopting the model standing orders indefinitely and does not absolve the employer of
his statutory requirement to comply with Section 3(1), (2) and (3) of the IESO Act, 1946
by submitting draft standing order for certification.
18. The petitioner establishment has failed to adhere to the mandatory requirement of
submitting the draft standing orders under Section 3 of the IESO Act, 1946 and
obtaining certification under Section 5 of the said Act. The model standing orders can
be made applicable only for a limited period i.e., for the interregnum period between the
date of submission of draft Standing Orders under Section 3 of the IESO Act, 1946 and
the date of Certification of the standing orders under Section 5 of the said Act, 1946. In
the case on hand, when the petitioner who has not complied with the statutory
requirements for certification of the draft standing orders as prescribed under Section 3
of the IESO Act, 1946, they are legally barred from taking protection under Section 12-A
25/03/2020 Delivery | Westlaw India Page 6

of the IESO Act, 1946 for adoption of model standing orders to circumvent the payment
of Employees' Provident Fund Contributions to their employees/workers.
19. As observed earlier, Section 12-A of the IESO Act, 1946 is applicable to the
employers only when they have already applied for certification of the draft standing
orders under Section 3 of the IESO Act, 1946 and when they have not done so, they are
not entitled to adopt the model standing orders. The model standing orders can only
enure to the benefit of employees/workers, when the employer has not applied for
certification of the draft standing orders under Section 3 of the IESO Act, 1946 or the
employer has applied for certification and the certification is awaited. When the
employer deliberately has not applied for certification of the draft standing orders under
Section 3 of the IESO Act, 1946, they cannot seek benefit of the model standing orders
as per Section 12-A of the IESO Act, 1946 as it is a welfare legislation to protect and
safeguard the interest of the employees/ workers alone.
20. Admittedly, the petitioner did not produce all the agreements relating to engagement
of apprentices in the earlier round of hearing before the second respondent under
Section 7-A of the EPF & MP Act, 1952 as well as before the Appellate Authority under
section 7-I of the EPF & MP Act, 1952. The documents relied upon by the petitioner, to
substantiate their case, were produced before the second respondent, only after the
order of remand passed by the first respondent in the appeal filed under Section 7-I of
the EPF & MP Act, 1952.
21. The second respondent after considering the documents which were placed before
him by the petitioner establishment after the Appellate authority remanded the matter for
fresh consideration has rightly rejected the contention of the petitioner establishment
that there were 256 employees, out of which, 200 were apprentices and only 56 were
confirmed employees. The second respondent while passing the order dated
11.02.2000 under Section 7-A of the EPF & MP Act, 1952 has noticed the following
from the various documents produced by the petitioner establishment:
"1. The training to the so called apprentices is imparted by M/s.Harita Consultancy
Services Ltd., who were paid meagre sum of Rs. 7,000/- during 1993 and presently Rs.
17,250/- per month for imparting training. As the amount offered for training, large
number of employees is very less, it has to be presumed that these programmes made
by M/s.Harita Consultancy Services Ltd., could be only in the form of guest lectures etc.,
intended for all categories.
2. There is no certified Standing Orders for the establishment.
3. There is no training programme syllabus for imparting training to the so called
apprentices.
4. he agreement for apprenticeship training was entered into longback on 04.10.1993 in
respect of certain employees whereas the training syllabus was formulated only on
06.09.1999.
5. As per the agreement for apprenticeship the trainees are not entitled for any other
allowances or concession apart from the stipend. But on a review of the statement of
stipend during January 1997 it was noticed that these persons have contributed to the
Labour Welfare Fund also.
6. he agreement provides for the conditions that as trainees/apprentices they should
follow the work norms of the mill, shall follow the conditions and procedures to fulfill the
jobs entrusted to them, shall be ready to accept any alternative work, shall not resort to
strike etc.,
7. hese conditions are more suitable for a worker than a trainee. The main focus of the
25/03/2020 Delivery | Westlaw India Page 7

agreement is also on the work which should result in more production. The issue of
teaching or learning is not spelt out in the agreement.
8. All workers were regarded as apprentices during the period from January, 1994 to
March, 1995. In the month of April, 1995 to December, 1996, 4% of the apprentices
were considered as employees. At the relevant time of coverage in February, 1997, 282
persons were treated as apprentices out of 374 work force."
22. The second respondent has also noticed that the number of apprentices engaged
by the petitioner far exceeds the number of regular employees.
23. After analysing the evidence available on record, the second respondent in its order
dated 11.02.2000 has come to the conclusion that the petitioner management has tried
to take advantage of the classification made in the Model Standing Orders treating of
persons as apprentices with the only objective of denying membership to provident fund
in respect of the employees by artificially distinguishing them as apprentices. The
second respondent has held that by this action, the petitioner establishment is not only
avoiding benefits under the Social Security Scheme of workers but also for saving huge
amounts for themselves. The second respondent has rightly held that it is obligatory and
mandatory on the part of the petitioner establishment to frame Standing orders and
send it for certification to the competent authority within six months.
24. Since the petitioner establishment failed to establish that the so called apprentices
were indeed real apprentices, the second respondent rightly rejected the contentions of
the petitioner establishment and held that the petitioner management is liable to pay
provident fund for the so called apprentices also and determined the amount payable by
the petitioner management at Rs. 7,51,779.35. The Appellate authority under Section
7-I of the EPF & MP Act, 1952 by its order dated 29.03.2005 has confirmed the order of
the second respondent dated 11.02.2000 by rightly dismissing the appeal filed by the
petitioner under Section 7-I of the EPF & MP Act, 1952.
25. The judgments relied upon by the learned counsel for the petitioner namely (a)
Hon'ble Supreme Court Judgment in the case of Regional Provident Fund
Commissioner, Mangalore vs. M/s. Central Arecanut & Coca Marketing And Processing
Coop. Ltd., Mangalore in Civil Appeal No.978 of 2000 reported in (2006) 2 SCC 381
2006 Indlaw SC 20 and (b) a Single Bench Judgment of the Madras High Court in th
case of T.Anantha Krishnan vs. The Management of Madras Purasawalkam Hindu
Janopakara Saswatha Nidhi or the Permanent General Benefit Fund Limited reported in
2011 (1) LNN 267 (Mad.) all pertain to cases where the employer had applied for
certification of the draft standing orders under Section 3 of the IESO Act, 1946 and
pending certification, they sought for application of the model standing orders. In the
case on hand, admittedly, the petitioner has not applied for certification of the draft
standing orders and this being the case, the judgments relied upon by the learned
counsel for the petitioner will not apply to the facts of the instant case.
26. For the foregoing reasons, this court is of the considered view that the petitioner has
violated the provisions of IESO Act, 1946 by not adhering to the statutory requirements
contained therein and is not entitled to rely upon the model standing orders to
circumvent the payment of Employees' Provident Fund Contribution to their employees/
workers. Only based on the evidence available on record, the respondents under the
impugned orders have held that the so called apprentices are infact regular employees/
workers of the petitioner.
27. For the foregoing reasons, there is no merit in this writ petition. Accordingly, this writ
petition is dismissed no costs. Consequently, connected miscellaneous petition is
closed.
25/03/2020 Delivery | Westlaw India Page 8

Petition dismissed
© 2019 Thomson Reuters South Asia Private Limited

This database contains editorial enhancements that are not a part of the original material. The database may also have mistakes or omissions. Users are requested to verify the contents with the relevant original
text(s) such as, the certified copy of the judgment, Government Gazettes, etc. Thomson Reuters bears no liability whatsoever for the adequacy, accuracy, satisfactory quality or suitability of the content.