Case BriefsHigh Courts

Punjab and Haryana High Court:The Division Bench of Ravi Shanker Jha, CJ. and Arun Palli, J., upheld the impugned order of Single Judge whereby, the Single Judge had held that the appellant is not entitled to pensionary benefits as he has resigned from service.

The petitioner joined the services of Punjab National Bank in the year 1963 and due to personal reasons, after rendering 25 years of service; he submitted his resignation on 05-01-1988, which was accepted belatedly by the bank on 14-10-1991 with effect from 05-02-1988. Petitioner requested the Bank to release his retiral benefits including gratuity, provident fund, leave encashment, sick leave salary and arrears of increments. The claim of the petitioner had been resisted by the Bank in view of Regulation 22(1) of the Punjab National Bank(Employees’)Pension Regulations, 1995, Which is extracted herein below:-

22. Forfeiture of service(1) Resignation or dismissal or removal or termination of an employee from service of the Bank shall entail forfeiture of his entire past service and consequently shall not qualify for pensionary benefits.”

The Single Judge while considering the issue of pension relied on the judgment of Supreme Court rendered in Senior Divisional Manager, Life Insurance Corporation of India v.. Shree Lal Meena, (2019) 4 SCC 479, and Uco Bank v. Sanwar Mal, 2004(4) SCC 412, wherein, the Court had held that, In a self financing scheme, a separate fund is earmarked as the Scheme is not based on budgetary support but on adequate contributions from the members of the fund. Retirement is allowed only on completion of qualifying service which is not there in the case of resignation. When such a retiree opts for self financing Pension Scheme, he brings in accumulated contribution earned by him after completing qualifying number of years of service under the Provident Fund Rules whereas a person who resigns may not have adequate credit balance to his provident fund account. Similarly, the pension payable to the beneficiaries under the Scheme would depend on income accruing on investments and unless there is adequate corpus, the Scheme may not be workable and, therefore, Regulation 22 prescribes a disqualification to dismissed employees and employees who have resigned.

 On the basis of above-mentioned precedent, the Single Judge had held that there was no doubt that the petitioner had invited the forfeiture of pension by his own conduct and, therefore, no interference was called for by the Court to that extent. However, regarding the other claims, the Court observed that the same had been withheld by the Bank without any plausible explanation.  Therefore, the Court had directed the Bank to make requisite calculations and give benefits of all the retiral benefits except pension, to the petitioner by reckoning his date of resignation as 14-10-1991. The petitioner was also granted interest at 8% per annum on the amount, which was found due and payable to him.

In the light of above, the Bench dismissed the appeal holding that it did not find any reason to interfere with the order passed by the Single Judge, as the Single Judge had already granted adequate relief to the appellant. [Kanwar Kesri Singh v. Punjab National Bank, 2020 SCC OnLine P&H 2359, decided on 19-02-2020]

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.


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.


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.


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 BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Tribunal (NCLT): The Coram of Dr Deepti Mukesh (Judicial Member) and Sumita Purkayastha (Technical Member), reiterated that any shortfall in gratuity payable to employees has to be made over by the Resolution Professional and payment of dues has to be paid outside the waterfall mechanism provided under Section 53 of the Insolvency and Bankruptcy Code, 2016.

The instant application was filed by Sandeep Tyagi on behalf of 52 Ex-Employees of MOSER BAER ELECTRONICS LTD. who sought directions to release the lawful dues of the ex-employees who submitted their resignation prior to the initiation of the CIRP process.


Facts pertaining to the present case are that the Corporate Debtor is a wholly-owned subsidiary of MOSER BAER INDIA LIMITED. It is stated that all the employees were forced to resign by the ex-management by March 2019. Further, it was stated that, they were not paid their dues.

The dues were not settled by the ex-management of the Corporate Debtor citing financial instability.

As an application for CIRP was preferred by Autonix Lighting Private Limited (Operational Creditor) under Section 9 of the IBC on account of default. Mr Hemant Sharma was appointed at the Interim Resolution Professional of the Corporate Debtor.

Applicant stated that the Corporate debtor did not deposit Provident Fund till their dates of resignation respectively. The salary slips of the ex-employees show that Provident Fund was deducted every month but admittedly it was not deposited with the EPFO.

Applicant relied on the decision of Principal Bench in CA (PB) No. 19 (PB) of 2019 dated 19-03-2019 filed by the Moser Baer Karamchari Union of the MOSERBAER INDIA LIMITED (Holding Company) against the Resolution Professional in CP No. (IB) 378(PB)/2017 Alchemist Asset Reconstruction Co. Ltd. v. Moser Baer India Limited for release of their dues.

It was observed that the above-stated Order dated 19-03-2019 of the Adjudicating Authority had been challenged before the Appellate Authority. In the Order dated 19-08-2019, the Appellate Authority upheld the same and stated the following:

“Para 24- Once the liquidation estate/asset of the Corporate Debtor under Section 36(1) read with Section 36(3), do not include all sum due to any workman and employees from the provident fund, the pension fund and the gratuity fund, for the purpose of distribution of assets under Section 53, the provident fund, the pension fund and the gratuity fund cannot be included.

Para 25- The Adjudicating Authority having come to such finding that the aforesaid funds i.e., the provident fund, the pension fund and the gratuity fund do not come within the meaning of liquidation estate’ for the purpose of distribution of assets under Section 53. we find no ground to interfere with the impugned order dated 19th March, 2019.”

Bench while parting with the decision held that it would like to fall in line with the ratio laid down by the Principal Bench:

“…any shortfall in gratuity has to be made over by the Resolution Professional and payments of the dues has to be paid outside the waterfall mechanism.”

Bench directed the Resolution Professional to release the dues of the ex-employees and deposit the Provident Fund with EPFO and release Gratuity dues forthwith.[Autonix Lighting Industries (P) Ltd. v. Moser Baer Electronics Ltd., 2020 SCC OnLine NCLT 1111, decided on 19-11-2020]

Advocates for parties:

For Resolution Professional: Milan Singh

For Applicant: Advocate Swarnendu Chatterjee

Ed. Note: See, however, the judgment of NCLAT in Savan Godiwala v. Apalla Siva Kumar, 2020 SCC OnLine NCLAT 191.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Bench comprising of Justice S.J. Mukhopadhaya, Chairperson and Justice A.I.S Cheema, Member (Judicial) and Kanthi Narahari, Member (Technical) decided an appeal including the following question for consideration:

“Whether the Provident Fund, Pension Fund and Gratuity Fund come within the meaning of assets of ‘Corporate Debtor’ for distribution under Section 53 of the Insolvency and Bankruptcy Code, 2016?”

Following is the timeline in order to understand the issues pertaining to sections of Companies Act and Insolvency and Bankruptcy Code:

14th November, 2017-

Pursuant to an Application under Section 7 of Insolvency and Bankruptcy Code, 2016, the ‘Corporate Insolvency Resolution Process’ was initiated against ‘Corporate Debtor’.

20th September, 2018 –

National Company Law Tribunal, New Delhi passed a liquidation order stating that the workmen stood discharged under Section 33(7) of the Insolvency and Bankruptcy Code, 2016.

5th December, 2018 –

Liquidator, by email, denied payment of:

Gratuity Fund, Provident Fund and Pension Fund preferentially and included the same for the payments under ‘waterfall mechanism’ under Section 53 of the Insolvency and Bankruptcy Code, 2016.

January, 2019 –
‘Moser Baer Karamchari Union’ prayed that –

Directions be issued to the liquidator to exclude amount due to them towards:

  • Provident Fund, Pension Fund and Gratuity Fund from ‘Waterfall Mechanism’ under Section 53 of I&B Code, 2016 as these will not constitute part of liquidation estate.

19th March, 2019 –

National Company Law Tribunal, New Delhi held that provident fund dues, pension fund dues and gratuity dues cannot be a part of Section 53 of the I&B Code. State Bank of India, a secured creditor, challenged the order in this present appeal.

Contentions as placed by the parties:

The counsel on behalf of the appellant stated that, for the purpose of ‘distribution of assets’ of ‘Corporate Debtor’ under Section 52 of I&B Code, 2016 – dues of employees as mentioned in sub-clause (c) of sub-section (1) includes the contribution of ‘Provident Fund’.

To suggest the view that, ‘workmen’s dues’ shall bear the same meaning as given under Section 326 of Companies Act, 2013, appellant placed reliance on the same. Further, it also stated that explanation (iv) below Section 326 of Companies Act, 2013 relating to ‘Overriding Preferential Payments’ and it is mentioned that sums due to any workman from any of the above-stated funds maintained by the company are covered under the term ‘Workmen’s dues’.

Reliance was also placed on Section 327 of the Companies Act, 2013 related to ‘Preferential Payments’.

Resolution Professional’s counsel submitted that Section 36(3) of I&B Code, 2016 defines the components of liquidation estate and lays down what forms the liquidation estate.

Therefore, it was submitted that, workmen have the first charge on the aforesaid funds.

Thus, while concluding in consideration of the issue as was stated earlier in this appeal, Section 36 (Liquidation Estate) and Section 53 (Distribution of Assets) were mentioned for understanding the relevance with the present case.

Tribunal stated that, Appellant cannot derive the meaning as assigned to it in Section 326 of the Companies Act, 2013 including the explanation below it.

It further added that, Section 326 of the Companies Act, 2013 provides ‘Overriding Preferential Payments’.

Explaining the difference between the distribution of assets and preference/ priority of workmen’s dues under Section 53(1)(b) of I&B Code, 2016 and Section 326(1)(a) of the Companies Act, 2013. Applying Section 53 of the I&B Code, Section 326 of the Companies Act, 2013 is relevant for the limited purpose of understanding ‘workmen’s dues’ which can be more than the provident fund, pension fund and gratuity fund kept aside and protected under Section 36(4)(iii).

Another point stated by the Tribunal was that, appellant for the purpose of determining workmen’s dues under Section 53(1)(b), cannot derive any advantage of Explanation (iv) of Section 326 of Companies Act, 2013.

Provisions of I&B Code have overriding effect in case of inconsistency in any other law for the time being enforced. Therefore, it is held that Section 53(1) (b) read with Section 36 (4) will have an overriding effect on Section 326(1) (a), including the Explanation (iv) mentioned below Section 326 of Companies Act, 2013.

The finding of the adjudicating authority, that the aforesaid funds do not come within the meaning of ‘liquidation estate’ for the purpose of distribution of assets under Section 53, Tribunal found no ground for interference with the impugned order of 19th March, 2019. [State Bank of India v. Moser Baer Karamchari Union, 2019 SCC OnLine NCLAT 447, decided on 19-08-2019]

Case BriefsHigh Courts

Rajasthan High Court: The Bench of P.K. Lohra and Manoj Kumar Garg, JJ. allowed the application which was made on behalf of applicant petitioners for modification of order dated February 2018.

In the application, it was averred that while allowing the writ petition filed by petitioners, the Court had also directed the petitioners to deposit Provident Fund amount drawn by them with interest @ 6% within two months from the date of passing of order. It was further averred that subsequently endeavor was made by petitioners for seeking modification of the order and extension of the period for depositing the amount aforesaid, which was allowed by the Court and lastly the Court allowed various employees/petitioners to deposit the amount latest by 31st of August, 2018. The Counsel for the petitioners had informed the Court that petitioners had already deposited requisite PF amount with interest before 31st of August, 2018.

The Court directed the State Government to accept the same and proceed to carry out the directions of the judgment as was carried out in the case of other employees. [Shiv Singh Dulawat v. State of Rajasthan, 2019 SCC OnLine Raj 158Order dated 19-02-2019]

Case BriefsHigh Courts

Calcutta High Court: A Single Judge Bench comprising of Debangsu Basak, J. dismissed a petition filed by widow of a deceased teacher seeking directions to respondent authorities to accept her change of option from provident fund to family pension scheme.

The petitioner submitted that the deceased employee did not exercise the option of change-over during his lifetime because he had no opportunity to do so as the law relating to switchover stood settled subsequent to his death. On the other hand, the Government Pleader submitted that the option of switchover was available only to living employees, and the deceased teacher never exercised the option in his lifetime, so her widow could not be allowed to exercise such option now.

The High Court perused the record and considered submissions made by the parties. It also referred to its various earlier decisions on the same subject. The Court found that there was a divergence of opinion as to whether a widow of deceased employee should be allowed to exercise the option of switchover from contributory provident fund cum gratuity scheme to pension including family pension cum gratuity scheme? However, the Court followed the decision in Renuka Khatua v. State of W.B., 2016 SCC OnLine Cal 1442,  rendered by a Division Bench which was later in time. Furthermore, in the facts of the present case, there was nothing on record to suggest that the deceased employee opted for Revision of Pay Allowances, 1990 during his lifetime. The employees who opted for ROPA 1990 were given fresh opportunity to submit option for switchover. The Court held that in such circumstances no relief could be given to the accused. The petition was accordingly dismissed. [Bula Chakraborty v. State of W.B.,2018 SCC OnLine Cal 5951, dated 04-09-2018]

Case BriefsHigh Courts

Calcutta High Court: In the matter where 71 petitioners had filed a writ application challenging the fixation of the cut-off date of the Contributory Provident Fund Scheme on publication of the West Bengal Comprehensive Area Development Corporation Employee’s [Death cum Retirement] Benefit Regulations 2008, I.P. Mukerji, J struck down the part of regulations fixing a cut-off date and held that the petitioners will be entitled to the benefits of the impugned Regulations. However, they will have to return the entire amount of the employer’s share towards Contributory Provident Fund with interest

The Regulation which was merely an Administrative Instruction, was published on 10th December, 2008 and was made applicable with retrospective effect from 1st April, 2008 and and the benefit was extended to all whole time employees, permanent and temporary who were in the service of the Corporation on 1st April, 2008 and also to those who were appointed on and after that date. The employees, by these Regulations became entitled to pension after ten years of qualifying service.

The court observed that, “After termination of their service, the retired employees cannot sit as watchdogs on the periphery of the organization and expect that this benefit will also be extended to them in full measure”. However, the Court took note of the ratio of D.S. Nakara v. Union of India, (1983) 1 SCC 305 where it was observed that the court is entitled to read down an offending piece of legislation to make it compatible with the Constitution. Applying the above-mentioned ratio to the case at hand, the Court said that the impugned regulations treat the members of the same class differently as they make a discrimination between members of the same class i.e. retired employees. It confers benefits on those who retired between 1st April, 2008 and 10th December 2008 and leave out the rest. Hence, reading down the Regulations, the Court held that the benefits of these regulations have to be extended to the remaining petitioning retired employees also. [Rabindra Nath Munsi v. State of West Bengal, 2016 SCC OnLine Cal 2302 decided on 15.06.2016]