Case Note & Summary
The petitioner, Johnson & Johnson Employees' Union, a registered trade union, filed a writ petition under Article 226 of the Constitution of India seeking a writ of mandamus directing the Commissioner, Employees' Provident Fund Organisation (EPFO), to recall its decision treating Account No. MH/18838 as an inoperative account and to credit interest due from 1 April 2011 onwards. The second respondent, Johnson & Johnson Ltd., sold its factory at Safed Pool, Andheri, Mumbai, to the third respondent, PRS Permacel Pvt. Ltd., as a going concern pursuant to an agreement dated 10 August 1999. The members of the petitioner union were employees of the second respondent at the time of sale. The petitioner had filed a complaint alleging unfair labour practices before the Industrial Court. During the pendency of that complaint, both the second and third respondents informed the Industrial Court that the third respondent had purchased the Permacel division as a going concern and that the services of employees would not be interrupted. The employees continued to work for the third respondent, and their provident fund contributions were made to the same account. However, the EPFO treated the account as inoperative from 1 April 2011 and stopped crediting interest. The petitioner contended that since the establishment was transferred as a going concern and the employees continued in service, the account could not be treated as inoperative. The court analyzed the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, and the Employees' Provident Fund Scheme, 1952, particularly Paragraph 72(1) which defines an inoperative account as one where no amount has been credited for 36 consecutive months. The court found that contributions were being made by the third respondent to the same account, and thus the account was not inoperative. The court held that the EPFO's decision to treat the account as inoperative was arbitrary and illegal. The court allowed the petition, directing the EPFO to recall its decision and credit interest to the account from 1 April 2011 until the date of permissible withdrawal by the employees.
Headnote
A) Employees' Provident Fund - Inoperative Account - Interest - Paragraph 72(1) of the Employees' Provident Fund Scheme, 1952 - The court considered whether the EPFO could treat the provident fund account of employees as inoperative and deny interest after the transfer of the establishment as a going concern. The court held that the account cannot be treated as inoperative as the employees continued in service and the employer continued to make contributions. The EPFO was directed to credit interest to the account from the date it was treated as inoperative. (Paras 1-22)
Issue of Consideration
Whether the Employees' Provident Fund Organisation (EPFO) can treat a provident fund account as inoperative and deny interest on the amount lying in the account, when the establishment has been transferred as a going concern and the employees continue to be in service.
Final Decision
The court allowed the petition and directed the EPFO to recall its decision treating Account No. MH/18838 as an inoperative account and to credit interest to the account from 1 April 2011 until the date of permissible withdrawal by the employees.
Law Points
- Employees' Provident Fund and Miscellaneous Provisions Act
- 1952
- Paragraph 72(1) of the Employees' Provident Fund Scheme
- Inoperative Account
- Interest on Provident Fund
- Transfer of Establishment as Going Concern
- Writ of Mandamus
Case Details
2015 LawText (BOM) (03) 82
WRIT PETITION NO. 352 OF 2014
V. M. KANADE, REVATI MOHITE DERE
Mr. Arshad Shaikh with Mr. Mahesh Londhe i/b M/s. Sanjay Udeshi & Co. for the Petitioner; Mr. Suresh Kumar for the Respondent No.1; Mr. Saumil Rege i/b Chitnis & Co. for the Respondent No.2; Mr. Pratik K. Salgaonkar i/b Crawford Bayley & Co. for the Respondent No.3
Johnson & Johnson Employees' Union
The Commissioner, Employees Provident Fund Organisation; Johnson and Johnson Ltd.; PRS Permacel Pvt. Ltd.
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging the decision of the EPFO to treat the provident fund account as inoperative and deny interest.
Remedy Sought
The petitioner union sought a writ of mandamus directing the EPFO to recall its decision treating Account No. MH/18838 as inoperative and to credit interest from 1 April 2011 onwards.
Filing Reason
The EPFO treated the provident fund account of the employees as inoperative from 1 April 2011 and stopped crediting interest, despite the employees continuing in service and contributions being made by the transferee employer.
Previous Decisions
The petitioner had filed a complaint alleging unfair labour practices before the Industrial Court, which was pending at the time of the writ petition.
Issues
Whether the EPFO can treat a provident fund account as inoperative under Paragraph 72(1) of the Employees' Provident Fund Scheme, 1952, when the establishment has been transferred as a going concern and employees continue in service with contributions being made to the same account.
Whether the EPFO is liable to pay interest on the amount lying in the provident fund account from the date it was treated as inoperative.
Submissions/Arguments
The petitioner argued that since the establishment was transferred as a going concern and the employees continued in service, the account could not be treated as inoperative, and the EPFO was bound to credit interest.
The respondents contended that the account became inoperative as no contributions were made for 36 consecutive months, and thus no interest was payable.
Ratio Decidendi
Under Paragraph 72(1) of the Employees' Provident Fund Scheme, 1952, an account becomes inoperative only if no amount has been credited for 36 consecutive months. In the present case, contributions were being made by the transferee employer to the same account, and thus the account was not inoperative. The EPFO's decision to treat it as inoperative and deny interest was arbitrary and illegal.
Judgment Excerpts
By this petition, preferred under Article 226 of the Constitution of India, the Petitioner Union seeks the following principal reliefs : (a) That this Hon'ble Court be pleased to issue a writ of mandamus ... directing the Respondent No.1 to forthwith recall, rescind and / or revoke its decision to treat Account No. MH/18838 as an inoperative account; (b) ... directing Respondent No. 1 to credit Account No. MH/18838 with interest due on and from 01.04.2011 till date and further till closure of the account by permissible withdrawal thereof by the employees.
Few facts as are germane for deciding the petition are : The petitioner is a registered trade union incorporated under the Trade Unions Act. ... The second respondent i.e. Johnson & Johnson Ltd. is a Public Limited Company, who sold and transferred its factory at Safed Pool, Andheri, Mumbai to the third respondent i.e. PRS Permacel Pvt. Ltd., a company of the Premchand Group, headed by one Mr. Sushil Premchand.
Procedural History
The petitioner union filed a complaint alleging unfair labour practices before the Industrial Court under the MRTU & PULP Act. During the pendency of that complaint, the third respondent sought impleadment. The petitioner then filed the present writ petition under Article 226 of the Constitution of India challenging the EPFO's decision to treat the provident fund account as inoperative.
Acts & Sections
- Employees' Provident Fund and Miscellaneous Provisions Act, 1952:
- Employees' Provident Fund Scheme, 1952: Paragraph 72(1)
- Trade Unions Act, 1926:
- Constitution of India: Article 226
