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.”
Legislation UpdatesRules & Regulations

Union Ministry of Labour and Employment has notified the draft rules under the Code on Social Security, 2020 on 13.11.2020 inviting objections and suggestions, if any, from the stakeholders. Such objections and suggestions are required to be submitted within a period of 45 days from the date of notification of the draft rules.

The draft rules provide for operationalization of provisions in the Code on Social Security, 2020 relating to Employees’ Provident Fund, Employees’ State Insurance Corporation, Gratuity, Maternity Benefit, Social Security and Cess in respect of Building and Other Construction Workers, Social Security for Unorganised Workers, Gig Workers and Platform Workers.

The draft rules also provide for Aadhaar based registration including self-registration by unorganised workers, gig workers and platform workers on the portal of the Central Government. Ministry of Labour and Employment has already initiated action for the development of such portal. For availing any benefit under any of the social security schemes framed under the Code, an unorganised worker or a gig worker or platform worker shall be required to be registered on the portal with details as may be specified in the scheme.

The rules further provide for Aadhaar based registration of Building and Other Construction Workers on the specified portal of the Central Government and the State Government or the State Welfare Board. Where a building worker migrates from one State to another he shall be entitled to get benefits in the State where he is currently working and it shall be the responsibility of the Building Workers Welfare Board of that State to provide benefits to such a worker.

Provision has also been made in the rules regarding gratuity to an employee who is on fixed-term employment.

The rules also provide for single electronic registration of an establishment including cancellation of the registration in case of closure of business activities.

Provision has also been made regarding manner and conditions for exiting of an establishment from EPFO and ESIC coverage.

The procedure for self-assessment and payment of Cess in respect of building and other construction workers has been elaborated in the rules. For the purpose of self-assessment, the employer shall calculate the cost of construction as per the rates specified by the State Public Works Department or Central Public Works Department or on the basis of return or documents submitted to the Real Estate Regulatory Authority.

The rate of interest for delayed payment of such cess has been reduced from 2 per cent every month or part of a month to 1 per cent. Under the existing rules, the Assessing Officer has the power to direct that no material or machinery can be removed or disturbed from the construction site. Such power for indefinitely stopping of construction work has been withdrawn in the draft rules. Further, under the draft rules, the assessing officer can visit the construction site only with the prior approval of the Secretary of the Building and Other Construction Workers Board.

The rules have also provided for the manner of payment of contribution by the aggregators through self-assessment.

For Draft Notification of Rules (Hindi & English) under Code on Social Security please click on the Link


Ministry of Labour and Employment

[Press Release dt. 15-11-2020]

[Source: PIB]

Amendments to existing lawsLegislation Updates

The Code on Social Security, 2020 received Presidential Assent on 28-09-2020.

The Code on Social Security, 2020

Second National Commission on Labour, which submitted its report in June, 2002 had recommended that the existing set of labour laws should be broadly amalgamated into the following groups, namely:—

(a) industrial relations; (b) wages; (c) social security; (d) safety; and (e) welfare and working conditions.

With the introduction of the Code, the following Acts are repealed:

 1. The Employee’s Compensation Act, 1923;

2. The Employees’ State Insurance Act, 1948;

3. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;

4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;

5. The Maternity Benefit Act, 1961;

6. The Payment of Gratuity Act, 1972;

7. The Cine-Workers Welfare Fund Act, 1981;

8. The Building and Other Construction Workers’ Welfare Cess Act, 1996;

9. The Unorganised Workers Social Security Act, 2008.

Benefit of amalgamation of the above-stated laws:

It will remove the multiplicity of definitions and authorities without compromising the basic concepts of welfare and benefits to workers.

Widening the scope of the benefits to the fixed-term employees would be a big step towards equity.

Features of the Bill:

(i) to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers either in the organised or unorganised or any other sectors;

(ii) to provide for an establishment to be covered under Chapter III relating to Employees’ Provident Fund (EPF) and under Chapter IV relating to Employees State Insurance Corporation (ESIC) on a voluntary basis even if the number of employees in that establishment is less than the threshold. It further seeks to make those Chapters inapplicable to such establishments on fulfilment of certain conditions;

(iii) to define various expressions used in the Bill such as, “career centre”, “aggregator”, “gig worker”, “platform worker”, “wage ceiling”, etc. Further, the definition of “employee” has been comprehensively elaborated to cover maximum number of employees and workers;

(iv) to provide for registration, electronically or otherwise, of every establishment to which the Bill applies, within such time and in such manner as the Central Government may by rules determine. It further provides for an option for cancellation of registration by any establishment whose business activities are in the process of closure, subject to the conditions as may be prescribed by the Central Government;

(v) constitution of various social security organisations for the administration of the Bill, namely, (a) the Central Board of Trustees of the Employees’ Provident Fund (Central Board), (b) the Employees’ State Insurance Corporation (Corporation), (c) the National Social Security Board for Unorganised Workers (National Social Security Board), (d) the State Unorganised Workers’ Social Security Board and (e) the State Building Workers Welfare Boards;

(vi) to provide that the medical education institutions and training institutes of the Employees’ State Insurance Corporation may be run by the Corporation itself or on the request of the Corporation, by the Central Government, any State Government, any Public Sector Undertaking of the Central Government or the State Government or any other body notified by the Central Government;

(vii) to empower the Central Government to frame schemes for unorganised workers, gig workers and platform workers and the members of their families for providing benefits relating to Employees’ State Insurance Corporation;

(viii) provisions for maternity benefits such as prohibition from work during certain periods, provision of nursing breaks, crèche facility, claim for maternity benefits, etc.;

(ix) to empower the Central Government, by notification, to assign additional work, including administration of any other enactment or scheme relating to social security, to any of the social security organisations and the expenses towards such additional work shall be borne by the Central Government;

(x) to empower the Central Government to frame schemes for the purposes of providing social security benefits to self-employed workers or any other class of persons;

(xi) to empower the Central Government to specify by notification, rates of employees’ contributions to the Employees’ Provident Fund Scheme and the period for which such rates shall apply for any class of employee;

(xii) to provide for an appeal against an order passed by any authority in regard to determination and assessment of dues and levy of damages relating to Employees’ Provident Fund by an employer only after depositing with Social Security Organisation concerned, twenty-five per cent. of the amount due from him as determined by the authority against whose order the appeal has been preferred;

(xiii) to provide that in the case of an employee employed on fixed-term employment or a deceased employee, the employer shall pay gratuity on a pro-rata basis and not on the basis of continuous service of five years;

(xiv) to make provision for payment of cess by an employer in case of building and other construction work, payable under Chapter VIII on the basis of his self-assessment;

(xv) to provide for the registration of every unorganised worker, gig worker or platform worker on the basis of self-declaration electronically or otherwise, along with such documents including Aadhaar number, in such form and in such manner, containing such information as may be prescribed by the Central Government;

(xvi) to empower the Central Government by order, to defer or reduce employer’s contribution, or employee’s contribution, or both, payable under Chapter III or Chapter IV, as the case may be, for a period up to three months at a time, in respect of establishment to which Chapter III or Chapter IV, as the case may be, applies, for the whole of India or part thereof in the event of a pandemic, endemic or national disaster;

(xvii) to provide for establishment and maintenance of separate accounts under social security fund, for the welfare of unorganised workers, gig workers and platform workers; and a separate account for the amount received from the composition of offences under the Bill or under any other central labour laws.

Read the detailed Act, here: Code on Social Security, 2020


Ministry of Law and Justice

COVID 19Hot Off The PressNews

EPFO released  Rs  868 crore pension along with Rs 105 crore arrear on account of restoration of commuted value of pension.

On the recommendation of Central Board of Trustees (EPFO), the Government of India accepted one of the long standing demands of workers to allow restoration of commuted value of pension after 15 years. Earlier there was no provision for restoration of commuted pension and the pensioners continued to receive reduced pension on account of commutation lifelong. This is a historical step for the benefit of pensioners under EPS-95.

EPFO has more than 65 lakhs pensioners catered through its 135 regional offices. EPFO officers and staff battled all odds during this Covid-19 lockdown period  and processed pension payment for May, 2020  to ensure credit of pension in the bank account of pensioners on schedule.


Ministry of Labour and Employment

[Press Release dt. 01-06-2020]

[Source: PIB]

Business NewsCOVID 19Hot Off The PressNews

Background:

Amidst the Corona crisis, PM announced  a special economic package with a new resolution. This economic package will serve as an important link in the ‘AtmaNirbhar Bharat Abhiyan” (Self Reliant India Campaign)‘.

What the Prime Minister said about the package?

In the recent past economic announcements made by the government related to the Corona crisis, which were the decisions of the Reserve Bank. The economic package that is being announced today, if added, comes to around Rs. 20 lakh crores. This package is about 10 percent of India’s GDP. With this various sections of the country and those linked to economic system will get support and strength of 20 lakh crore rupees. This package will give a new impetus to the development journey of the country in 2020 and a new direction to the Self-reliant India campaign. In order to prove the resolve of a self-reliant India, Land, Labor, Liquidity and Laws all have been emphasized in this package.

This economic package is for our cottage industry, home industry, our small-scale industry, our MSME, which is a source of livelihood for millions of people, which is the strong foundation of our resolve for a self-reliant India. This economic package is for that labourer of the country, for the farmers of the country who are working day and night for the countrymen in every situation, every season. This economic package is for the middle class of our country, which pays taxes honestly and contributes to the development of the country. This economic package is for Indian industries, which are determined to give a boost to the economic potential of India. Starting tomorrow, over the next few days, the Finance Minister will give you detailed information about this economic package inspired by the ‘Self-reliant India campaign’.

First press conference on the decoding Rs 20 Lakh Crore Package held today.

LIVE UPDATES

  • Focal point: Liquidity, Labour, Law and Land.
  • 6 Major steps for MSMEs
  • Collateral free Automatic Loans upto Rs 3 lakh Crores
  • 100 % credit guarantee
  • Additional Funds for MSME revival
  • Loans to be given till October 31st
  • Rupees 20 Crore for stressed MSMEs
  • 50,000 Crore equity to be infused for viable and potential MSMEs
  • New Definition of MSMEs — Investment can be upto 1 Cr and turnover upto 5 Crore
  • Global tender to be allowed upto Rs 20 Crores
  • Other interventions for MSMEs
  • Rs 2500 crores EPF support for businesses and Workers for 3 months
  • EPF contribution reduced for Business and Workers for 3 months — Rs 6750 Crores
  • Rs 30,000 crores liquidity facility for NBFC/HCs/MFIs
  • Rs 45,000 Crores Partial Credit Guarantee Scheme 2.0 for NBFC
  • Rs 90,000 CR liquidity injection for DISCOMs
  • Relief to contractors
  • Extension of registration and completion date of real estate projects under RERA; No individual applications needed; Suo Moto be done; Registered projects expiring on or after 25th March
  • Rs 50,000 crores Liquidity through TDS/TCS reductions till March 2021
  • Tax filing due date extended to 30th November, 2020
  • Pending refunds to charitable trusts and non-corporate businesses & professions including proprietorship, partnership, LLP and Co-operatives shall be issued immediately.
  • Due date of all income tax return for FY2019-20 extended from 31st July, 2020 & 31st October, 2020 to 30th November, 2020 and Tax audit from 30th September, 2020 to 31st October, 2020.
  • Date of Assessments getting barred on 30th September, 2020 extended to 31st December, 2020 and those getting barred on 31st March, 2021 will be extended to 30th September, 2021.
  • Period of Vivad se Vishwas Scheme for making payment without additional amount will be extended to 31st December, 2020
COVID 19Legislation UpdatesNotifications

Union Ministry of Labour and Employment has issued notification GSR 225(E) amending EPF Scheme 1952 to allow withdrawal of non-refundable advance by EPF members/subscribers in the wake of COVID -19 pandemic in the country. The notification permits withdrawal of upto the amount of basic wages and dearness allowance for three months or upto 75% of the amount standing to member’s credit in the EPF account, whichever is less, in the event of outbreak of epidemic or pandemic.

COVID-19 has been declared pandemic by appropriate authorities for the entire country and therefore employees working in establishments and factories across entire India, who are members of the EPF Scheme, 1952 are eligible for the benefits of non-refundable advance. A sub-para(3) under para 68L has been inserted in the EPF scheme,1952. The amended scheme Employees Provident Fund (Amendment) Scheme, 2020 has come into force from 28 March, 2020.

Following the notification, EPFO has issued directions to its field offices for promptly processing any applications received from EPF members to help them fight the situation. In its communication EPFO has stated that officers and staff must process claims of EPF subscribers promptly so that relief reaches the worker and his family to help them fight with COVID-19.

To read the notification, please click on the link below:

NOTIFICATION


Ministry of Labour & Employment

[Press Release dt. 29-03-2020]

[Source: PIB]

Business NewsNews

As reported by media,

Employees’ Provident Fund Organisation (EPFO) will pay interest at the rate of 8.5 per cent for the current financial year.

This is lower than the 8.65% interest rate given on employees’ provident fund (EPF) deposits for the previous financial year 2018-19.

Central Board of Trustees (CBT) of Employees Provident Fund Organisation (EPFO) has recommended an interest rate of 8.5 per cent on provident funds for Financial Year 2019-2020.


[Economic Times]

Hot Off The PressNews

As reported by money control, Ministry of Labour and Employment has recommended reducing the contribution made by employees towards the Employees’ Provident Fund (EPF).

Presently, the mandated EPF contribution is 24 percent of basic pay, divided equally between employers and employees. The above-made suggestion is a part of the proposed Employees’ Provident Fund and Miscellaneous Bill, 2019.

It has been stated that once there would be a reduction in worker’s contribution to the Employees’ Provident Fund (EPF) it would result in the improvement of their in-hand-salaries.

Another proposal is allowing employees to switch between the Pension Fund Regulatory and Development Authority-run National Pension Scheme (NPS) to the Employees Provident Fund Organisation (EPFO) scheme.

A preliminary draft of the EPF and MP (Amendment) Bill, 2019, dated August 23 has sought suggestions and comments until September 22, 2019.


[Source: MoneyControl]

Hot Off The PressNews

The subscribers of Employees Provident Fund Organisation (EPFO) who resign from their service can now withdraw 75% of their total provident fund after one month from the date of cessation of service to meet their monthly financial commitments. Members will continue to have the choice of withdrawing the entire amount, if they want to close the account, after two months. A decision to this effect was taken at the 222nd Central Board of Trustees (CBT) meeting of EPFO on 27th June.

Moreover, the subscriber may not withdraw the remaining amount, thus ensuring he continues to get social security on the existing account. Currently, the EPF Scheme 1952 allows final withdrawal after two months from the date of cessation of employment of the member, as a result of which many members end up withdrawing the entire amount. This leads to closure of the account and no social security cover for the subscribers. With this new provision, members will now have an option to retain their account with the EPFO, which one can use after finding another job. CBT has also decided to extend the term of SBI Mutual Fund and UTI Mutual Fund, the two fund managers for EPFO investment in exchange-traded funds (ETFs), by one year to July 2019. Their term was due to end on June 30, 2018.

CBT, the highest decision-making body of EPFO, comprises equal number of representatives of employees, employers and state government representatives. It is chaired by the labour minister.

[Source: Economic Times]