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Section 2(b) of the Employees’ Provident Fund Act, 1952, cannot circumscribe the specific stipulations in Section 6, which exclusively deals with the respective contributions of the employer and employee regarding the PF, which includes the DA component along with the basic wages, as held by the Hon’ble High Court at Calcutta in the matter of The Calcutta Gujarati Education Society and another vs. The Regional Provident Fund Commissioner and others [C.O. No. 208 of 2006].

The facts of the case relate to an application of Article 227 of the Constitution of India preferred against an order dated 20^th October 2005, passed by the Employees’ Provident Fund Appellate Tribunal, whereby, the revisionist-petitioners had approached the Appellate Tribunal against an order dated 30^th April 2001, passed by the Regional Provident Fund Commissioner, West Bengal, determining the Provident Fund (PF) dues on the Government’s Dearness Allowance (DA) component for the period from August 1982 to January 1989 under Section 7-A of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, wherein it was found by the Commissioner that Provident Fund contribution was payable on the DA by the petitioner.

Furthermore, the learned counsel for the petitioners argued that the DA was granted by the State Government and the petitioner was a mere employer who had no role to pay such component of the PF. It has also been argued that the State had been disbursing such amounts with regard to the DA component of the PF through its own Disbursing Officer (DO), however, the Assistant Inspector of School (SE), Calcutta, and DDO of the petitioner, who intimated the District Inspector of Schools (SE), Calcutta seeking necessary instruction for taking further action in respect of the alleged dues based on deductions of the PF contribution for the relevant months, though, according to the Enforcement Officer of PF, West Bengal, who indicated that petitioner was not deducting any PF contributions on DA received from the Government of West Bengal since August 1982. The petitioner also intimated the Regional Provident Fund Commissioner (RPFC) that the DA sanctioned by the Government of West Bengal from time to time were neither received nor managed and disbursed to teachers but the same was placed at the disposal and control of the Disbursement Officer, which was the only person authorized to deal with it and he would directly disburse to the concerned teachers.

On behalf of the Regional Provident Fund Commissioner (RPFC), intimation was given asking the petitioner to appear at the designated place to represent its case against the determination of the amount due from such petitioner under the provisions of the EPF Act. The proceeding under Section 7-A of the EPF Act was disposed of, directing the petitioner to deposit the dues of Rs.29,92,848/- within 15 days from the date of receipt of the order, failing which, the dues would be recovered as per rules.

Learned counsel appearing for the petitioners relied on several annexures and documents of the contemporaneous period indicating that the DDO had been disbursing the amount directly to the concerned teachers and further argued that the petitioner, who was the employer, never had any control over such disbursal, and hence, the belated claim of arrears for a much prior period was not tenable in the eye of law as far as the DA component of PF was concerned. Thereby, it had been contended that the employer was not liable to pay the employees’ share of the DA component of the PF. Learned counsel also submitted that although Section 6 of the EPF Act stipulates that the contribution of the employer to the fund would be 10% of the basic wages, DA and Retaining Allowances (if any) for the time payable to each of the employees, the same ought to be read with the definition of “basic wages” in the Act itself. Therefore, it was argued that the liability to pay such component, at least in respect of the employees’ share, was on the State Government.

On the other hand, learned counsel for the opposite party (RPFC) contended that the provisions of Section 6 of the EPF Act had made it abundantly clear that the employers’ share of the DA component of PF was included within the employers’ contribution. Thereby, the liability was on the employer to pay such dues.

The Hon’ble Court relied on Section 2(b)(ii) of the EPF Act and stated that, although basic wages have been defined to exclude DA in the mentioned Section, the employers’ contribution as stipulated in Section 6 included overall, the basic wages, DA and Retaining Allowance. Also, the contributions payable by the employer under the Scheme would be at the rate of 10 percent of the basic wages and the DA payable to each employee to whom the Scheme originally applied, as provided under Section 29 of the EPF Act, and such that it reiterates the concept of Section 6 that the provident Fund shall be calculated not only on the basic wages but on the DA as well. The focus was also laid on Section 30 of the Act which implies that the employer would have to pay both the contributions payable by himself and on behalf of the member employed by him, directly or through a contractor, the contribution payable by such member. It had also been clarified in Section 30(3) of the EPF Act that it would be the responsibility of the principal employer to pay both the contribution payable by him in respect of the employees directly employed by him and also in respect of the employees employed by or through a contractor, as well as administrative charges. Emphasis was also laid on Section 31 of the EPF Act which provides the employer would not be entitled to deduct the employer’s contribution from the wage of a member or otherwise to recover it from him.

Hence, the Hon’ble Court was satisfied upon consideration of relevant provisions and submissions of the parties, that there was no doubt that the Court had jurisdiction to take up such matter under Article 227 of the Constitution of India. The Hon’ble Court stated that the question of DA component of the PF had been covered under Section 6 of the EPF Act, which indicates that the contribution of PF of the employer shall, over and above 10 percent of the basic wages, which also include the DA component and Retaining Allowance. Adding to that, the definition of “basic wages” in Section 2(b) specifically excludes DA in sub-clause (ii) of such provision, and hence, Section 6 attributes the liability on the employer to pay the employer’s share of the entire amount payable to the employee, including 10 percent of the basic wages as well as the DA.

The Hon’ble Court stated that the petitioner failed to discharge its duties in clearing the DA component of PF for the relevant period, i.e., August 1982 to January 1999, and therefore, the RPFC was perfectly justified in directing petitioner no. 1 to pay such amount. It has also been held that, according to the Payment of Wages Act, 1936, the definition of “wages” refers to any remuneration expressed in terms of money or capable of being so expressed which would be payable to a person employed in respect of his employment or of work done in such employment.

Subsequently, the Hon’ble Court held that, although the petitioner relied on a memo which stipulated that the Deputy Director of Public Instruction, West Bengal, was authorized to release the requisite funds every quarter in favor of the authorities concerned, such Circular could not be read in exclusion of Section 6 of the EPF Act, which clarified that the liability of payment of the DA component was entirely on the employer, as much as the employer’s share was concerned.

Hence, it has been stated that, although DA is not a part of the basic wages, Section 6 read with Section 29 and 30 of the EPF Act indicate that not only it is the employer’s liability to pay his share of the DA component of PF along with other components, the first liability of payment of the contributions of both the employer and employee lies on the employer.

Thus, His Lordship held that the contentions brought in by the petitioners had “no legs to stand upon”, and disposed of the matter passed by the Appellate Tribunal. Consequently, petitioner no. 1 was directed to pay the liabilities as ascertained by the Appellate Tribunal, confirming the order of the RPFC within two months from the date of such order. Henceforth, upon fulfillment of such payment, the Disbursing Authority would take appropriate steps to distribute such arrear component of the PF in favor of the respective employees, or their heirs and legal representatives in the event where the employees were no longer alive. Additionally, the RPFC would be at liberty to recover such an amount by law from petitioner no. 1. However, the petitioners would be at liberty to approach the appropriate authorities of the State Government for recovery of the employees’ share of the DA component for the period between April 1982 and January 1999, and alternatively, to deduct the employees’ share of the DA component of the PF for the said period, in the event the same has not been disbursed in favor of the employees, from the total amount directed to be paid by the impugned orders.

Click here to read the Judgment.