Sambuddha Chakrabarti JUDGMENT
Sambuddha Chakrabarti, J.
1. The petitioners have primarily challenged the notification, dated January 8, 2011, issued by the Ministry of Labour and Employment applying the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the Act, for short) to the municipal councils and municipal corporations constituted under Article 243Q (1)(b) and (c) of the Constitution of India and employing 20 or more persons. This notification was issued in exercise of the powers conferred by Section 1(3)(b) of the Act.
2. The principal thrust of the petitioners is that till the publication of the notification the Act was not applicable to Kolkata Municipal Corporation (the Corporation, for short) in view of Section 16 of the Act. Section 14(1) of the Kolkata Municipal Corporation Act, 1980 provides for certain officers with statutory designations. The Corporation maintains a schedule of posts which includes the designation and number of posts under each designation of officers and employees constituting the establishment of the Corporation. The Corporation mainly discharges civic services to the municipal area of Kolkata including supply of water, sewerage and drainage, solid waste management, construction and maintenance of streets, so on and so forth. It also discharges other duties as provided in the Kolkata Municipal Corporation Act.
3. It is the specific case of the petitioners that in view of the continuous upward growth in urban population resulting in greater demand for providing civic services, the Corporation is required to utilize the services of persons on the basis of contingent/casual/temporary/piece rate/daily rate/contract by or through the contractor or sub-contractor or any other such employer either severally or perennially in the public interest. This the petitioners have to do for rendering appropriate civic services in the interests of public. The employees who are not covered by or under the establishment of the Corporation are paid as per the terms and conditions of their engagement.
4. The Corporation has its own General Provident Fund regulations applicable to the employees and officers of the establishment. Therefore, the provisions of the Act and as well as the scheme framed thereunder are not applicable to the Corporation.
5. The Employees' Provident Fund authorities initiated two proceedings under Section 7A of the Act against the Corporation for determination of amount of money allegedly due from the employer towards the provident fund. They on an earlier occasion also initiated such a proceeding in respect of the employees engaged through the security agencies in different departments of the KMC. The security agencies filed a writ petition before the Hon'ble Court alleging that the amount towards provident fund for such workers was to be paid by the Corporation. The writ petition was disposed of with a direction upon the Municipal Commissioner to give a hearing to the petitioners and to take a decision on the issue of enhancement of the rate of remuneration. It was, however, observed that for the persons engaged by KMC it is under no obligation to deposit any contribution under the Act as the provisions of the Act were not applicable to it.
6. The further contention of the petitioners is that if the said proceeding for determination of the dues is not against the establishment of the KMC but against the security agencies, the provident fund authorities cannot enquire many things pertaining to the employees of the security agencies at this long distance of time. The KMC very reasonably do not maintain or preserve records relating to engagement of such persons for years together. On December 3, 2015, the Assistant Provident Fund Commissioner issued a notice requiring the municipal commissioner to appear before him for a hearing to determine the provident fund and allied dues for the period from August 2011 to November 2014 in respect of the employees and workers engaged on contract basis under certain terms and conditions. The petitioners say that it is very clear from the said notice that the Act and the Scheme framed thereunder were not applicable to the establishment till August 2011.
7. Section 16 of the Act inter alia says that it shall not apply to any other establishment set up under the 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 under the Act governing such benefits. The Corporation was set up by a State Act and its employees are entitled to the benefits of contributory provident fund or old age pension in accordance with the rule framed under this Act. By virtue of the notification dated January 8, 2011, the Act has been sought to be made applicable to the Corporation.
8. The petitioners have further contended that the department of Municipal Affairs, Government of West Bengal, on an erroneous appreciation about the applicability of the Act to the municipal councils and the corporations issued a letter, dated September 2, 2013 to the Joint Secretary, Ministry of Labour and Employment, Government of India, whereby a request was made to take necessary action to exempt the urban and local bodies of the State from the purview of the said notification or to provide fund from the Central Government to meet the expenditure or to provide proper guidelines as to how the municipality being an unprofitable organization can meet such expenses. The reason for making the request was specifically mentioned in the said letter. Till now the letter had not been replied by the Ministry of Labour and Employment.
9. The Joint Municipal Commissioner wrote a letter dated April 25, 2016 to the Central Provident Fund Commissioner and also the Ministry of Labour and Employment requesting them to grant exemption from the operation of the Act in respect of the Corporation. The Ministry of Labour and Employment issued an order on August 12, 2016 which inter alia to the effect that the matter relating to the grant of exemption had been examined by the Ministry in consultation with the provident fund authorities. It was further observed in the said order that the Corporation had failed to comply with the provisions of the Act and the application for grant of exemption could not be acceded to for such non-compliance.
10. The petitioners have specifically pleaded that exemption from the operation of an Act can be granted only to an establishment to which the said Act is otherwise applicable. According to them the said Act was not applicable to the Corporation by virtue of Section 16 of the Act till the publication of the notification, dated January 8, 2011. The authority of the Central Government to make the Act applicable to the Corporation has also been questioned, particularly, when no notice was given to it earlier. If the Act is not applicable to the Corporation because of Section 16 of the Act there is no scope to make the Act applicable by issuing a notification in exercise of the power under Section 1(3)(b) of the Act.
11. On an issue being raised about the applicability of the Act to the Corporation in the proceeding under Section 7A of the Act the provident fund authorities directed to the Corporation to comply with the provisions of the Act with effect from the date of notification dated January 8, 2011. They have criticized this order of the provident fund authority on the ground that the impugned notification on which they had relied on was issued in violation of law.
12. The petitioners have assailed the notification, dated January 8, 2011 and have inter alia prayed for a writ in the nature of mandamus commanding the respondents to withdraw, cancel and rescind the said notification in so far as the Corporation is concerned, a writ in the nature of mandamus commanding the respondents to withdraw and cancel the order dated August 12, 2016 refusing to grant exemption from the operation of the Act, a direction upon the provident fund authorities to drop the proceeding under Section 7A of the Act and for a declaration that the provisions of the act are not applicable to the Corporation and alternatively to grant exemption from operation of all the provisions of the Act or any scheme with retrospective effect, and for other reliefs.
13. The provident fund authorities in their affidavit-in-opposition to have stated that pursuant to the impugned notification a letter was issued to the Corporation for furnishing necessary documents/details of employees etc. for obtaining a provident fund code number. The Corporation has been brought under the purview of the Act with effect from the date of the notification and a code number has also been provided to it. The summons of the proceeding under Section 7A of the Act was issued due to non-compliance of the Act. The Corporation filed a petition challenging the applicability of the Act to it on the ground that GPF has been introduced at the Corporation and its regulations have also been framed under Section 20 of the Act. Therefore, the Corporation contended that since GPF has already been introduced to its employees the Act may not be applied to it. Since the notification has been issued by the Central Government the challenge to the applicability of the Act was turned down by the provident fund authorities by the order, dated June 30, 2016.
14. Pursuant to the direction of this Court in WP No. 13283(W) of 2003 the Corporation had conveyed its decision to M/s. Star Security and Detective Agency and M/s. Reliance Security and Protection Services that there was no contractual obligation of the Corporation to include the ESI and the provident fund contribution of the employees of the said two establishments and rejected the prayer of the said two agencies. The petitioner being the principal employer of those two establishments violated the provisions of Section 6 of the Act read with Paragraphs 30(3), 6A and 6C of the Employees' Provident Fund Scheme by not extending the benefit of the Act to the poor employees of the establishments and committed default by non-payment of the workers' dues. Therefore, the action was rightly taken against the Corporation as well as the establishments for realization of the dues and social security.
15. The affidavit also contains various statements which are entirely irrelevant for the adjudication of the real issue in dispute. The steps taken by the provident fund authorities in connection with the two establishments mentioned above have been stated with great details which are not the subject matter of challenge in the writ petition. It is surprising that the provident fund authorities in a detailed affidavit-in-opposition never addressed itself to the real issue in controversy as pleaded by the petitioners.
16. The unnecessary details regarding the earlier writ petitions filed by the two establishments never constituted the subject matter of challenge in the present writ petition. In the process the issue raised in this petition has been addressed rather perfunctorily and that too without responding to the points agitated in the present writ petition.
17. All that the provident fund authorities say is how and why a letter was issued to the Corporation pursuant to the impugned notification. Here also there are some statements which do not carry any meaning rendering it difficult to appreciate what the answering respondent meant by "M/s. Kolkata Municipal Corporation is engaged in municipality...." or "it has fulfilled the provisions of Section 1(3)(b) of the EPF & MP Act, 1952 on 08.01.2011". Such loose sentences betray lack of specific answer to main subject and is never expected from a statutory body.
18. With regard to the petitioners' grievance about the rejection of the prayer for exemption from the operation of the Act also the answering respondents have very little substance to offer. It is not very clear why the provident fund authorities have taken a stand that after the publication of the impugned notification in the gazette it is not open to the petitioners to contend that the Act is not applicable to them.
19. The petitioners have filed an affidavit-in-reply to the affidavit-in-opposition of the provident fund authorities. In the reply the petitioners have taken the point that the respondents failed to understand the case made out on behalf of the petitioners and could not appreciate the scope of the writ petition. The respondents made an attempt to bring certain facts on record which were not relevant for the purpose of the disposal of the case. They have tried to make a confusion in the matter and to divert the attention of the Court from the real issue. The petitioners submitted that the Court may not take the affidavit into consideration.
20. It is the further case of the petitioners that the Corporation is not within the mischief of the provision of the Act and the respondent authorities upon misunderstanding the scope and the fact of the provisions of Section 1(3)(b) and Section 16 of the Act issued the impugned notification. Admittedly till January 8, 2011 the said Act and the Schemes framed thereunder were not applicable in the establishment of the Corporation. The Central Government by issuing the notification cannot make the Act applicable to the Corporation.
21. The Corporation has also assailed the stand of the Provident Fund authorities that the notification has been issued by the Central Government for all Municipal councils/Corporations to extend the social security to all employees under the General provident fund as not sustainable as the notification has never stated so. The stand of the petitioners is that since the relevant facts in paragraphs 1 to 9 of the petition have not been practically dealt with, they should be treated as correct and proper. With reference to the facts pertaining to W.P. No. 13283(W) of 2003, W.P. No. 23880(W) of 2012 and W.P. No. 11338(W) of 2012 the petitioners stated why the facts of those cases have been highlighted in the affidavit-in-opposition is not known to them. The provident fund authorities has miserably failed to appreciate the judgment dated June 13, 2012 passed in W.P. No. 13283(W) of 2003. However, the petitioners have denied that the Corporation is the principal employer of the establishments or they had violated the provisions of the Act and the Scheme as mentioned in the affidavit-in-opposition of the provident fund authorities. Since the Corporation should not be covered by the Act and the Schemes framed thereunder the provident fund authorities should not have initiated a proceeding for determination of the provident fund dues against the Corporation.
22. The petitioners have repeated that matters relating to the security agencies are not the subject matter of consideration in this writ petition. On the contrary, what is under challenge is the impugned notification issued by the Central Government. The petitioners have made out an alternative case to the extent that even if that the Act and the Schemes framed thereunder are applicable to the concerned establishment the Corporation is entitled to claim the grant of exemption. But the representation of the Corporation has been arbitrarily rejected. The Central Government cannot whimsically bring an establishment under the purview of this Act. The allegation of the provident fund authorities that after the publication in the gazette of the impugned notification the petitioners cannot challenge that has been strongly denied by the petitioners. The allegation that the Corporation is depriving the weaker section of the society from getting the benefit provided by the Act and under the Schemes framed thereunder has also been denied.
23. The Union of India did not file any affidavit. But they had submitted written notes of submission. The stand of the Union of India is that the purpose of issuing the impugned notification was to bring the employees of the Corporation within the ambit of the Act. Therefore, this should also apply to the Kolkata Municipal Corporation as well. The learned Advocate appearing for the Union of India referred to the letter written by the Joint Secretary, Department of Municipal Affairs, Government of West Bengal and submitted that by that letter the Union of India was requested to take necessary action either to exempt the urban local bodies of the State from the purview of the notification or to provide fund from the Central Government to meet the expenditure or to provide proper guidelines to the Corporation to meet such expenditure. Again by a subsequent letter dated April 25, 2016 the Corporation requested the Provident Fund Commissioner and the Ministry of Labour and Establishment, Government of India, for exemption of the Corporation from the Act on various grounds. The Corporation did not file or produce any document which were required by the authorities to consider its prayer. Subsequently, their prayer for exemption was turned down. After this the petitioners did not prefer any appeal but has filed a writ petition. A further stand of the Union of India is that the Corporation is estopped from challenging the notification as it had applied for exemption or asked for fund from Central Government and further asked for providing guideline for meeting such expenditure. It clearly shows that the Corporation had accepted the provisions of the Act and notifications and submitted to its jurisdiction.
24. Both the sets of respondents, i.e., the Union of India as well as the provident fund authorities have not answered the main thrust of the petitioners' case. The sheet anchor of the petitioners' case is that by virtue of the provisions of Section 16 the Act does not apply to the Corporation. According to Mr. Banerjee, the learned Senior Counsel for the petitioners, Kolkata Municipal Corporation is to be governed by Section 16(1)(c) of the Act and consequently the Corporation is excluded from the mischief of the Act.
25. For Mr. Banerjee the opening words of Section 1(3) of the Act makes it clear that establishments already covered by Section 16 of the Act cannot be brought within its fold and ambit. The Act may be made applicable in exercise of powers under Section 1(3) of the Act or any establishment employing 20 or more persons or class of such establishments.
26. Mr. Banerjee further referred to Article 243Q of the Constitution of India which provides for constitution of municipalities. Article 243Q(1)(C) provides for a municipal corporation for a larger urban area in accordance with the provisions of Part-IX A of the Constitution of India. Article 243Q under Part IX A defines a municipality as an institution of self government constituted under Article 243Q of the Constitution of India. The Corporation was constituted long before by the Act which was then in force. The notification in question speaks of municipal council or municipal corporations constituted under Article 243Q of the Constitution of India. The Kolkata Municipal Corporation was never constituted under Article 243Q (1)(b) or (c) of the Constitution of India and was established long before the insertion of part-IX A in the Constitution of India.
27. A further submission of the petitioners is that Section 1(3)(b) of the Act cannot override Section 16 of the Act nor by resorting to Section 1(3)(b) of the Act the provisions of Section 16 may be altered, varied or even modified. Therefore, the Act cannot be made applicable by virtue of the impugned notification.
28. The petitioners have also sought to meet the contention of the respondents that the Corporation had applied for exemption from the Act. They have specifically submitted that such an application was made on an improper advice which appears to have been given in view of the letter dated September 2, 2013 issued by the Joint Secretary, Government of West Bengal to the Joint Secretary, the Ministry of Labour and Establishment, Government of India, requesting him to take necessary action either to exempt the urban local bodies of the State from the purview of the notification or to provide fund from the Central Government to meet the expenditure or to provide proper guidelines on how the municipalities with financial paucity could meet such expenditure.
29. The Under Secretary of the Government of India, Ministry of Labour and Establishment by order dated August 12, 2016 refused to grant exemption under Section 17(2) of the Act read with paragraph 27 A of the Scheme in view of the alleged non-compliance of the provisions of the Act. From this, the petitioners submitted, it would be obvious that the Government was inclined to see that the Corporation should start working in compliance with the provisions of the Act before entertaining any application for exemption. But the Corporation is aggrieved by and dissatisfied with the impugned notification and also with the attempt to apply the Act to the establishment of the Corporation. According to Mr. Banerjee an application for exemption and its eventual rejection do not operate as a bar to challenge the impugned notification as well as the subsequent actions and the proceedings initiated on behalf of the respondents to apply the Act to the Corporation, particularly when the only reason for rejection of the application for exemption is non-compliance with the provisions of the Act in terms of the impugned notification.
30. The petitioners further submitted that this application did not take away their right to challenge the notification as there is no estoppel against them on the issue. The application of the Act to a particular establishment definitely raises a legal issue and consideration of such a legal issue cannot be rendered infructuous by a misconceived application made by the petitioners.
31. In this connection, the petitioners have relied on the case of Commissioner of Customs and Central Excise, Nagpur Vs. Ispat Industries Limited, reported in MANU/SC/1151/2015 : (2016) 1 SCC 631, for a proposition that an erroneous statement by a party cannot bind it on a question of law. Based on that, the petitioners sought to argue that even if there was any representation on their behalf for the grant of exemption from the operation of the Act, it does not operate as an estoppel from challenging the applicability of the Act to the Corporation.
32. The primary thrust of the petitioners' submission is that the Act is not applicable to the Corporation in view of the provision of Section 16(1)(c) of the Act. In order to appreciate the scope of Section 16(1)(c) it is necessary to consider the language employed in the said provision of the Act. Section 16(1)(c) reads as follows:-
"16. Act not to apply to certain establishments. - (1) This Act shall not apply-
(a) .........
(b) ..........
(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".
33. A careful reading of the said provision makes it clear that in order to claim exclusion for an establishment from the operation of the Act under Section 16(1)(c) two conditions have to be fulfilled, viz., i) it must be set up under any Central, Provincial or State Act and ii) 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. If any establishment fulfills both these criteria then and then only it can be said that the Act does not apply to it. The Corporation does not fulfill the first requirement. It cannot be said that it is an establishment which has been set up under any Central, Provincial or State Act. It has certainly been constituted by a State Act, namely, Kolkata Municipal Corporation Act, but not set up under the same.
34. There is always a subtle difference between an establishment being constituted by an Act and set up under an Act. In the present case the earlier Kolkata Municipal Act or the present Kolkata Municipal Corporation Act constituted the Corporation, but it is not an establishment which has been set up under the Act. The legal meaning attached to the word "under" is either 'pursuant to' or 'in terms of'. It can never be said that the Corporation was either set up pursuant to or in terms of the Kolkata Municipal Corporation Act. The Corporation has been constituted by that Act. In this respect, the case made out by the petitioner must fail. There is no scope for granting exclusion to the Corporation under Section 16(1)(c) of the Act as it does not satisfy the criteria for such exclusion.
35. However, the second point taken by the petitioners merits a favourable consideration. The impugned notification by which the Act has been sought to be applied to the Corporation specifically says that in exercise of the powers conferred by Section 1(3)(b) of the Act the Central Government has specified the municipal councils and municipal corporations constituted under Article 243Q (1)(b) &(c) of the Constitution of India as the class of establishments to which the said Act shall apply with effect from the date of publication of the notification in the official gazette. Thus, the class of establishments to which the Act shall apply in terms of the said notification are those which have been or shall be constituted by Article 243Q (1)(b)&(c) of the Constitution of India, and not otherwise.
36. Article 243Q is in part IX A of the Constitution of India. Under Article 243P, a municipality means an institution of self government constituted under Article 243Q. Article 243Q deals with constitution of a municipality. It, inter alia, says that a) there shall be constituted in every State a Nagar Panchayat for transitional area, b) a Municipal Council for a smaller urban area and c) a Municipal Corporation for a larger urban area in accordance with the provision of Part IX A of the Constitution of India.
37. It cannot be glossed over that part IX A of the Constitution of India has been inserted by the 74th Amendment of the Constitution of India, 1992 with effect from June 1, 1993. The Kolkata Municipal Corporation has been in existence from long before. The law relating to various functions of the Corporation, the power of its officials etc. are governed by the Kolkata Municipal Corporation Act, 1980. But the Corporation came into being even before this Act. It was initially constituted by the Act of 1889, followed by the Act of 1923, subsequently by the Act of 1951 and then followed by the Act of 1980. By whichever Act it might have been constituted it undoubtedly preceded the insertion of Article 243Q of the Constitution of India. If any law providing for constitution of a municipal body has been subsequently inserted in the Constitution of India it cannot be said that the such bodies which were in existence from before have been constituted by or under the subsequent amendment in the Constitution of India.
38. Therefore, if, as per the concerned notification the Act is to apply to the municipal councils and municipal corporations constituted under Article 243Q of the Constitution of India, it cannot, for reasons far too obvious, apply to a municipal corporation which was not constituted under the said provision of law. In other words, the present notification seeking to apply the provision of the Act to the municipal councils and municipal corporations constituted under Article 243Q of the Constitution of India, as mentioned in the notification, has no manner of application to the present Corporation. Thus, it cannot be said that by the impugned notification the Act has been made applicable to the Corporation.
39. Mr. Singhania has taken a point that the petitioners have never pleaded that the concerned notification did not apply to them and, therefore, they cannot be allowed to take a point beyond their pleading at the stage of hearing.
40. It is not entirely correct that the petitioners have not prayed any relief against the impugned notification. Their principal prayer is for quashing the impugned notification so far as the Corporation is concerned. In the body of the writ petition also the notification has been assailed though primarily on different grounds. Nonetheless the petitioners have variously claimed that the Act does not apply to the Corporation. The effect of the notification is only to apply the Act to the Corporation.
41. The importance of pleading in a legal proceeding, particularly in a writ petition, cannot be overstated. It is true that if facts on which a party wants to rely are not properly articulated it has the effect of taking the other side by surprise. But law also recognises an exception to this rule in respect of an issue relating to a point of law. The reason for making a departure for such issues bared on pure questions of law is not very far to seek. When a party to a proceeding makes a factual statement that has either to be controverted or admitted or otherwise dealt with by the opposite side. In either case facts involved in a case do not emerge on their own nor can they be taken cognizance of unless specifically pleaded.
42. But a point of law emerges from the facts pleaded. A court can also take into cognizance legal issues arising out of the factual conspectus of the case without necessarily requiring the parties to plead the same separately. The consistent judicial pronouncements on the issue make it clear that even without a formal pleading a point of law can be taken into cognizance and adjudicated upon by a Court if no denial on fact is necessary. A party is not only entitled to rely on a point of law, he can also take it even before the highest court for the first time. A pure question of law can be urged at any point of time before any forum provided it does not require any further adjudication of any disputed fact.
43. A Constitution Bench of the Supreme Court in the case of State of Madras and Another Vs. K.M. Rajagopalan, reported in MANU/SC/0068/1955 : AIR 1955 SC 817 had recognized this principle decades ago. Since then there has not been any deviation from this axiomatic principle. For the present purpose, it is not necessary to multiply the decisions. Suffice, however, it to say that in a comparatively recent decision also the Supreme Court had reiterated the said principle of law. In Ariane Orgachem Private Limited Vs. Wyeth Employees Union and Others, reported in MANU/SC/0507/2015 : (2015) 7 SCC 561, the Supreme Court observed that a pure question of law for which no enquiry or proof is required can be raised at any stage. In fact, in that case the Supreme Court allowed a plea based on a point of law to be taken for the first time before the Supreme Court itself.
44. In the present case the point of law arising out of the notification in question squarely falls within the permissible limits and accepted connotation of a point of law where the issue relating to the inapplicability of the notification to the Corporation can be taken. The applicability of the Act to the Corporation based on the notification or, in other words, the coverability of the Corporation by the notification is not a matter of factual dispute calling for any adjudication. I find no reason why in a case such as this the petitioners shall not be entitled to take a point of law about the applicability of the notification to the Corporation, even if the same has not been pleaded. It is all the more so when the Court is satisfied that the notification cannot be made applicable to the Corporation for the same not being constituted under Article 243Q of the Constitution of India. Refusal to consider this point of law on the technical ground of pleading would have the undesirable effect of driving the petitioners to a separate litigation which can never be the object of any adjudication.
45. After having found that the notification excludes the Corporation from the class of establishments to be covered by the Act it is not necessary to go into the question whether the representation of the petitioners seeking exemption from the operation of the Act can be said to have bound it. But the position of law must be re-stated that an application for exemption from the Act does not take the wind from the sail of the applicant to challenge the application of the Act in terms of the notification which itself excludes such application.
46. On this point, I find sufficient merit in the submission of the petitioners that the notification has no application to the Corporation and it is so declared. Consequently, all the steps taken by the provident fund authorities pursuant to the notification are declared to be not sustainable in law and are hereby set aside and quashed. The provident fund authorities are directed not to take any further step in connection with the proceeding initiated against the Corporation.
47. The writ petition is allowed.
48. There shall be no order as to the costs.
49. Urgent Photostat certified copy of this order, if applied for, be supplied to the parties on priority basis upon compliance of all requisite formalities.
© Manupatra Information Solutions Pvt. Ltd.