Op EdsOP. ED.

To develop a workforce of world-class competence, skilling and upskilling is the sine qua non. Towards this endeavour, the Government of India has taken an initiative in collaboration with All India Council for Technical Education (hereinafter referred to as “AICTE”) and in this exercise emerged is the National Employment Enhancement Mission (hereinafter referred to as “NEEM”) Scheme to impart on-the-job training (OJT) to eligible candidates to enhance their employability. For this purpose, the AICTE had exercised its power under Section 23(1)[1] read with Section 10 of the AICTE Act, 1987[2] and in supersession of the AICTE Regulations, 2013[3], the AICTE had made the All India Council for Technical Education [National Employability Enhancement Mission (NEEM)] Regulations, 2017 (hereinafter referred to as “the AICTE NEEM Regulations, 2017”).

The objective of this Scheme is specified under Regulation 2.1 as follows:

The objective of National Employability Enhancement Mission  is to offer on the job practical training to enhance the employability of a person either pursuing his or her postgraduation/graduation/diploma in any technical or non-technical stream or has discontinued studies after Class 10th to enhance his or her employability.

Under this Scheme, establishments can induct trainees under the NEEM Scheme and engage them under the OJT programme and after the completion of the programme, there is no compulsion on the establishments/organisations to provide the said trainees fixity of tenure in their respective organisations. The training period ranges from 3 months to 3 years and should be National Skills Qualifications Framework (NSQF) compliant.

The trainees under the NEEM Scheme are regulated by a facilitator. The NEEM facilitator shall be in the business of training for at least five years. A person registered under the NEEM Regulations is called a trainee under NEEM. A contract needs to be signed between NEEM facilitator and the NEEM trainee to capture all terms and conditions which would govern the relationship. The NEEM training shall be deemed to have started from the date of joining of the NEEM trainee. The NEEM contract shall not be either an offer of employment or a guarantee of employment. The duration of NEEM training shall be determined by the nature of industry or trade where a NEEM trainee would be engaged in such training and shall be at the sole discretion of NEEM.

In accordance with Regulations 15.1 and 15.2 of the AICTE NEEM Regulations, 2017, the NEEM facilitator shall pay the enrolled NEEM trainees a stipend which shall be at par with the prescribed minimum wages for unskilled category. The said stipend shall be paid as single consolidated amount and such payment will not attract any statutory deductions or payments applicable to regular employees, namely, provident fund (PF)/Employees’ State Insurance (ESI)since the NEEM contract assures training and does not constitute employment.

Even prior to the advent of the AICTE NEEM Regulations, 2017, the Employees’ Provident Fund Organisation (EPFO) Head Office vide their Circular Coord/40 (5) 2015/Misc/Clarification/ 27300 dated 12-10-2015, has clarified that in the matter of student trainees of educational/technical institutes recognised by Central/State Government or any authority constituted by them, there is no employer-employee relationship between the industry and the student trainee who is on industrial on-the-job training. Therefore, payment of stipend, if any, provided by the industry to such student trainees do not attract the provisions of the EPF Act[4]. However, it was clarified that so far as the students getting placement in companies and appointed as employees of establishments, the EPF Act will be applicable on such employees even during the on-the-job training after becoming an employee.

In contra, the EPFO Head Office vide their Circular ACC (HQ)/ACC dated 24-2-2022, clarified as under:

  1. The NEEM trainees are not exempted from the definition of “employee” under Section 2(f) of the EPF Act[5].
  2. Under Para 26-B of the EPF Scheme[6], the Regional Provident Fund (RPF) Commissioner has been vested with the power to decide whether an employee is entitled to or required to become a member of the Scheme after ascertaining the facts and circumstances of the case.
  3. Cases of subterfuge shall be distinguished from genuine arrangements for training.
  4. Any question whether a person is a trainee or employee may be decided as per the law and considering the Circular dated 12-1-2015.

Hence, the questions whether the NEEM trainee should be treated as an “employee” under the EPF Act and whether the RPF Commissioner is having the power to decide that matter under Para26-B of the EPF Scheme and all the more the construction of Section 2(f)of the EPF Act, assume significance.

Section 2(f) of the EPF Act which defines the term “employee” reads as under:

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 get 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;
  • engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961[7] or under the Standing Orders of the establishment.[8]

(emphasis supplied)

It is pertinent to note that by virtue of an Amendment Act dated 1-8-1988[9] (Act 33 of 1988) the words “and includes any person” and the two sub-clauses to this section were incorporated. Against this scenario, it may be noted that the AICTE NEEM Regulations were brought into force only in 2017. Hence, the definition does not speak about NEEM trainees.

In Regional Provident Fund Commr. v. Central Arecanut & Coca Mktg. and Processing Coop Ltd.[10], the  Supreme Court has categorically held that if the trainees were paid stipend during the period of training and neither they had any right to employment nor any obligation to accept employment if offered by employer, therefore they were engaged under the Standing Orders and they were specifically excluded from the definition of employee under Section 2(f) of the EPF Act. In view of the above authoritative decision of the Supreme Court, it is inappropriate to construe the NEEM trainee as “employee” under Section 2(f) of the EPF Act.

About Para 26-B of the EPF Scheme, in Express Publication (Madurai) Ltd. v. Regional Provident Commr. II[11], the Kerala High Court has held that the Regional Provident Fund Commissioner is competent to determine the employee-employer relationship and to determine whether a particular employee comes under the definition of “employee” as defined under the EPF Act.

As elaborated in the second paragraph of this article, the nature of the NEEM Scheme is very much unique wherein the contract will be between the facilitator and the NEEM trainee, and the NEEM trainee will be deputed to an establishment for on-the job training. The said trainee will undergo training in the said establishment for a prescribed period and after the completion of the traineeship programme, there is no obligation on the part of the establishment to absorb him as a full-time employee and the said trainee also does not have a reciprocal obligation to accept the offer if given by the establishment.

In addition to the above, the NEEM trainee is entitled to only stipend during the traineeship programme and that too will be paid by the facilitator and not by the establishment wherein he or  she is undergoing training. Hence, it is clearly established that there is no employee-employer relationship between the NEEM trainee and the establishment concerned.

Without prejudice to the above contention, the NEEM Scheme is a creature of the AICTE Act and as such in the event of any subterfuge, the AICTE alone should abrogate the registration made by the NEEM facilitator and as a natural consequence, the approval given to them by the AICTE as NEEM facilitator will be cancelled.

Finally, when Section 2(f) of the EPF Act defines the term “employee” in such a way to exclude the apprentices under the Apprentices Act, 1961 and the apprentices/trainees under the Standing Orders of the establishment and in view of the authoritative decision of the Supreme Court in Central Arecanut case[12], invoking Para 26-B of the Scheme under Employees’ Provident Fund Scheme, 1952 is not at all feasible and far-fetched.

In any case, assuming that if there is a subterfuge and the payment of employees’ provident fund contribution on NEEM trainees is adhered to, will it allow AICTE to remain as a silent spectator and allow the facilitator to continue as a NEEM facilitator?


*Chief Human Resource Officer, Global HR, Automotive Robotics (India) (P) Ltd. Author can be reached at srajagoplan@arigs.com.

[1]All India Council for Technical Education Act, 1987, S. 23(1).

[2]All India Council for Technical Education Act, 1987, S. 10.

[3]All India Council for Technical Education [National Employability Enhancement Mission (NEEM)] Regulations, 2013.

[4]Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

[5]Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, S. 2(f).

[6]Employees’ Provident Funds Scheme, 1952, Para 26-B.

[7]Apprentices Act, 1961.

[8]Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, S. 2(f).

[9] Employees’ Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988.

[10](2006) 2 SCC 381.

[11]2013 SCC OnLine Ker 6852.

[12](2006) 2 SCC 381.

Case BriefsSupreme Court

Supreme Court: In a case where a company provided trained and efficient security guards to clients, claimed that security guards were the employees of the client, the was bench of Navin Sinha* and Surya Kant, JJ has held that merely because the client pays money under a contract to the appellant and in turn the appellant pays the wages of such security guards from such contractual amount received by it, it does not make the client the employer of the security guard nor do the security guards constitute employees of the client.

Background

By Notification dated 17.05.1971[1] issued under Section 1(3)(b) of the EPF Act, the provisions of the EPF Act were made applicable to specified establishment rendering expert services and employing twenty or more persons.

The appellant contended that it was not covered by the said Notification since it was not engaged in rendering any expert services and merely facilitated in providing Chowkidars to its clients at the request of the latter. The salary was paid to the Chowkidars by the client who engaged their services and that the appellant had only 5 persons on its rolls.

The Assistant Provident Fund Commissioner on basis of balance sheets seized during a raid opined that

  • the appellant had more than twenty employees on its rolls and stood covered by the term “expert services” such as providing of personnel under the Notification.
  • wages were not paid directly by the clients to the security guards deployed by the appellant but that the payments were made by the clients to the appellant, who in turn disbursed wages to the security guards.
  • the remedy of an appeal before the Tribunal under Section 7-I was bypassed by the appellant instituting the writ petition directly.

The Allahabad High Court declined interference with the conclusion of expert services being rendered by the appellant. A review petition contending that the appellant stood duly registered under the Private Security Agencies (Regulation) Act, 2005 was also rejected.

Analysis

Private Security Agencies (Regulation) Act, 2005

The Act of 2005 defines a private security agency under Section 2(g) as an organization engaged in the business of providing security services including training to private security guards and providing such guards to any industrial or business undertakings or a company or any other person or property.  A licence is mandatory under Section 4 and those security agencies existing since earlier were mandated to obtain such licence within one year of coming into force of the Act.

A complete procedure is provided with regard to making of an application for grant of a licence under Section 7, renewal under Section 8 of the Act.The eligibility for appointment as a security guard with such security agency is provided under Section 10 of the Act.

Section 11 provides for the condition of the licence and the licence can be cancelled under Section 13. A private security agency under Section 15 is required to maintain a register inter alia with the names, addresses, photographs and salaries of the private security guards and supervisors under its control.

Private Security Agencies Central Model Rules, 2006

The 2006 Rules framed under the Act of 2005, requires verification by the security agency before employing any person as a security guard or supervisor in the manner prescribed. Proper security training of the person employed is the responsibility of the security agency under Rule 5, and Rule 6 prescribes the standard of physical fitness for security guards.

Under Rule 14 the security agency is required to maintain a Register in Form VIII, Part-I of which contains details of the management, Part¬II contains the name of guard, his parentage, address, photograph, badge no. and the salary with the date of commencement.

Part III contains the name of the customer, address, the number of guards deployed, date of commencement of duty and date of discontinuance.

Part IV contains the name of the security guard/supervisor, address of the place of duty, if accompanied by arms, date and time of commencement of duty and date and time of end of duty.

Conclusion

Considering the aforementioned analysis, the Court concluded that the appellant is engaged in the specialised and expert services of providing trained and efficient security guards to its clients on payment basis. The provisions of the Act of 2005 make it manifest that the appellant is the employer of such security guards and who are its employees and are paid wages by the appellant.

Merely because the client pays money under a contract to the appellant and in turn the appellant pays the wages of such security guards from such contractual amount received by it, it does not make the client the employer of the security guard nor do the security guards constitute employees of the client. The appellant therefore is squarely covered by the Notification dated 17.05.1971.

The Court further noticed that the appellant refused to show the statutory registers under the Act of 2005 to the authorities under the EPF Act.  It also took note of the letter dated 03.04.2001 written by the appellant, with the appellant’s balance sheet seized for the financial years 2003¬04, 2004-05,   2005¬06 and 2006¬07 showing payment of wages running into lacs.

The Court, hence, concluded that the appellant has more than 20 employees on its roles and hence, provisions of the Act therefore necessarily apply to it.

[Panther Security Services Pvt. Ltd. v. Employees’ Provident Fund Organisation, 2020 SCC OnLine SC 981, decided on 02.12.2020]


*Justice Navin Sinha has penned this judgment. Read more about him here

For appellant: Advocate S. Sunil

For Respondent: Advocate Divya Roy

[1] “G.S.R. No. 805 : In exercise of the powers conferred by clause   (b)   of   sub-section   (3)   of   Section   1   of   the Employees’ Provident Funds and Family Pension Fund Act, 1952 (19 of 1952), the Central Government hereby specifies that with effect from the  31st May, 1971, the said Act shall apply to every establishment rendering expert services such as supplying of personnel, advice on domestic or departmental enquiries, special services in rectifying pilferage, thefts and payroll, irregularities to factories   and   establishments   on   certain   terms   and conditions   as   may   be   agreed   upon   between   the establishment and the establishment rendering expert services and employing twenty or more persons.”
Case BriefsHigh Courts

Kerala High Court: The Division Bench of K. Surendra Mohan and A.M. Babu, JJ. dismissed an appeal filed by a bank and concluded that deposit collectors, who act as agents of the bank, are ‘employees’ for the purpose of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act).

The instant appeal was filed assailing dismissal of a petition challenging order of Regional Provident Fund Commissioner whereby deposit collectors of the appellant bank were held to be persons to whom the EPF Act would apply, and accordingly, contributions were directed to be paid in respect of such employees.

The question herein was that whether contributions under the EPF Act is due or payable in respect of the commission that is paid to deposit collectors.

Mr M.R. Anison, learned counsel on behalf of the appellant submitted that deposit collectors are not ‘employees’ under the EPF Act. Therefore, no contributions under the EPF Act were either due or payable in respect of such employees.

The Court relied on Indian Banks Assn. v. Workmen of Syndicate Bank, (2001) 3 SCC 36 where it was held that deposit collectors are covered under the definition of ‘workmen’ in the Industrial Disputes Act, 1947. It was opined that commission paid to deposit collectors depends upon the terms of the agreement entered into between the bank and deposit collectors. An agent is paid commission at the rate or rates determined by the Board of Directors of the bank from time to time. Therefore, commission so paid to the deposit collectors constitutes their wages.

In view of the above, it was held that there was no infirmity in the impugned order.[South Malabar Gramin Bank v. Regional Provident Fund Commr., 2019 SCC OnLine Ker 843, Order dated 27-02-2019]