Holding

Pawan Hans Ltd. does not qualify for exemption under Section 16(1)(b) of the EPF Act, and its contractual employees are entitled to provident‑fund benefits either under the PF Trust Regulations or the EPF Act.

Summary

The Supreme Court examined whether Pawan Hans Ltd., a government‑owned company, was exempt from the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) and whether its contractual employees were entitled to provident‑fund benefits. The trade union representing the contractual workers claimed that they were paid directly by the company and should receive benefits either under the company’s PF Trust Regulations or the EPF Act. The Court applied the twin‑test from Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School, finding that while the company satisfied the first limb (government ownership), it failed the second limb because its PF Trust Regulations were not framed by the government nor applied to all employees. Consequently, the exemption under Section 16(1)(b) of the EPF Act did not apply, and the contractual workers were deemed employees entitled to PF benefits. The Court modified the High Court’s order, directing that the workers be covered under the company’s PF Trust Regulations with contributions payable retroactively from January 2017, and awarded costs to the union. The appeal was disposed of with these directions.

Issues considered

The applicability of the EPF Act to Pawan Hans Ltd. as a government company
Whether the company satisfies the twin‑test for exemption under Section 16(1)(b) of the EPF Act
Whether contractual employees paid directly by the company are covered by the PF Trust Regulations or the EPF Act
The appropriate date from which PF benefits should be extended to the contractual employees

Legislation cited

Companies Act, 2013s. 2(45)
Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 1(3), s. 16(1)(b), s. 2(f), s. 7Q

Subjects

EPF ActSection 16 exemptiongovernment companycontractual employeesprovident fundPF Trust Regulationstwin testEmployees’ Provident Fund Schemesocial security benefits

Judgment

728 [2020]
SUPREME COURT 1 S.C.R. 728
REPORTS [2020] 1 S.C.R.

A M/S. PAWAN HANS LIMITED & ORS.
v.
AVIATION KARMACHARI SANGHATANA & ORS.
(Civil Appeal No. 353 of 2020)
B JANUARY 17, 2020
[UDAY UMESH LALIT AND INDU MALHOTRA, JJ.]
Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952 – Employees’ Provident Fund Scheme, 1952 – Benefits
under the Pawan Hans Employees provident Fund Trust Regulations
C
or under the EPF Act, 1952 and EPF Scheme, 1952 of contractual
employees of the Appellant-Company – Entitlement to – Appellant-
Company framed and notified the Pawan Hans Employees Provident
Fund Trust Regulations for giving provident fund benefits to all its
regular employees – The members of the Respondent-Trade Union
D made several representations to extend the benefit of the PF Trust
Regulations since they were directly engaged by the Company on
contractual basis – The Company failed to respond to the
representations made by the Respondent-Trade Union – Writ Petition
by the Respondent- Trade Union – The High Court directed that the
benefits under the EPF Act be extended to the members of the
E
Respondent-Trade Union and other similarly situated employees –
The Appellant-Company having framed its own PF Trust Regulations,
claimed exemption from the applicability of the EPF Act and EPF
Scheme – On appeal, held: The Supreme Court in Regional Provident
Fund Commissioner v. Sanatan Dharam Girls Secondary School
F laid down a twin test for an establishment to seek exemption from
the provisions of the EPF Act, 1952 – The first, the establishment
must be either ‘belonging to’ or ‘under the control of ’ the Central
or the State Government – Second, the employees of such an
establishment should be entitled to the benefit of contributory
provident fund or old age pension in accordance with any scheme
G
or rule framed by the Central Government or the State government
governing such benefits – In the instant case, the first test is satisfied
as the Appellant- Company can be termed as a Government
Company u/s. 2(45) of the Companies Act, 2013 – With respect to
the second test, the PF Trust Regulations of the Company were not
H
728
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 729
SANGHATANA & ORS.

framed by the Central or State Government, nor were they applicable A
to all the employees of the Company, so as to satisfy the second test
– The Company did not satisfy the second test, consequently the
exemption u/s. 16 of the EPF Act not applicable to the Appellant -
Company – Insofar as the entitlement of the members of the
Respondent-Trade Union to the benefit under the PF Trust
B
Regulations or under the EPF Act is concerned, the members were
receiving wages/salary directly from the Company without the
involvement of any contractor since their date of engagement and
their work being of a perennial and continuous nature cannot be
termed to be ‘Contractual’ in nature – Therefore, the members of
the Respondent Union are entitled to the benefit of the provident C
fund under the PF Trust Regulations or the EPF Act – Since, the PF
Trust Regulations are already in force and are applicable to all
employees of the company, the Respondent-Trade Union granted
the benefit of provident fund under the PF Trust Regulations so
that there is uniformity in the service conditions of all the employees.
D
Disposing of the appeal, the Court
HELD: 1. As per Section 1(3) of the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952, the EPF Act is
applicable to every establishment in which 20 or more persons
are employed, which is either a factory engaged in any industry E
specified in Schedule I, or an establishment which the Central
Government may by notification in the Official Gazette specify in
that behalf. Section 1(3) of the EPF Act. Section 1(3) is subject to
Section 16 of the EPF Act. Sub-section (1) of Section 16 enlists
those establishments which are excluded from the applicability
of the EPF Act. As per clause (b) of sub-section (1), an F
establishment belonging to or under the control of the Central
or State Government, and whose employees are entitled to the
benefit of contributory provident fund in accordance with any
scheme or rules framed by the Central or State Government
governing such benefits, is excluded from the purview of the EPF G
Act. [Para 6.2][741-B, C, G-H]
2. As per Section 2(45) of the Companies Act, 2013, a
“Government Company” means any company in which not less
than 51 % of the paid-up share capital is held by the Central
Government. Since 51% of the shares of the Appellant-Company H
730 SUPREME COURT REPORTS [2020] 1 S.C.R.

A are owned by the Central Government, the first test is satisfied
as the Appellant-Company can be termed as a Government
Company under Section 2(45) of the Companies Act, 2013. [Para
6.2][743-D-E]
3. With respect to the second test, it is relevant to note
B that the Company had its own Scheme viz. the Pawan Hans
Employees Provident Fund Trust Regulations in force. The
Company, however, restricted the application of the PF Trust
Regulations to only the ‘regular’ employees. The PF Trust
Regulations of the Company were not framed by the Central or
State Government, nor were they applicable to all the employees
C of the Company, so as to satisfy the second test. The Regional
Provident Fund Commissioner, Bandra issued letter dated
24.05.2017 addressed to the Company wherein it was stated that
the benefit of contributory provident fund was not being provided
to contractual/casual employees of the Company; and was directed
D to implement the provisions of the EPF Act. In view of this Court,
the Company does not satisfy the second test, since the members
of the Respondent-Union and other similarly situated contractual
workers were not getting the benefits of contributory provident
fund under the PF Trust Regulations framed by the Company, or
under any Scheme or any rule framed by the Central Government
E or the State Government. Consequentially, the exemption under
Section 16 of EPF Act would not be applicable to the Appellant-
Company. In view of the above discussion, this Court holds that
the Company has failed to make out a case of exclusion from the
applicability of the provisions of the EPF Act. [Para 6.2][743-E-
F G; 744-D-E]
4. The next issue which arises for consideration is whether
the members of the Respondent-Trade Union are entitled to the
benefit of Provident Fund under the PF Trust Regulations or under
the EPF Act. Clause 1.3 of the Regulations would show that the
G PF Trust Regulations were made applicable to “all employees”
of the Appellant-Company. Clause 2.5 of the Regulations, defines
an “employee”, to include any employee who is employed for
wages/salary in any kind of work, monthly or otherwise, or in
connection with the work of the Company, and who gets his wages/
salary directly or indirectly from the Company. Clause 2.5 excludes
H
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 731
SANGHATANA & ORS.

only a person employed by or through a contractor in connection A
with the work of the Company, and any person employed as an
apprentice or trainee. In the present case, the Respondent-Union
submitted that even though the appointment letters refer to the
employees as ‘contractual’ employees, they were not engaged
through any contractor. They were being paid directly by the
B
Company, which is evidenced from the pay-slips issued to them.
It was submitted that about 250 contractual employees receive
wages directly from the Company, and are eligible to be included
under the PF Trust Regulations framed by the Company. [Para
6.3][744-F-H; 745-A-B]
5. The members of the Respondent-Union have been in C
continuous employment with the Company for long periods of
time. They have been receiving wages/salary directly from the
Company without the involvement of any contractor since the
date of their engagement. The work being of a perennial and
continuous nature, the employment cannot be termed to be D
‘contractual’ in nature. In view of this Court, Clause 2.5 of the PF
Trust Regulations would undoubtedly cover all contractual
employees who have been engaged by the Company, and draw
their wages/salary directly or indirectly from the Company. [Para
6.4][745-C-D]
E
6. As per Section 2(f) of the EPF Act, the definition of an
‘employee’ is an inclusive definition, and is widely worded to
include “any person” engaged either directly or indirectly in
connection with the work of an establishment, and is paid wages.
In view of the above discussion, this Court finds that the members
of the Respondent-Union and all other similarly situated F
contractual employees, are entitled to the benefit of provident
fund under the PF Trust Regulations or the EPF Act. Since the
PF Trust Regulations are in force and are applicable to all
employees of the Company, it would be preferable to direct that
the members of the Respondent-Union and other similarly situated G
contractual employees are granted the benefit of provident fund
under the PF Trust Regulations so that there is uniformity in the
service conditions of all the employees of the Company. [Para
6.5][745-F-G]

H
732 SUPREME COURT REPORTS [2020] 1 S.C.R.

A 8. The following directions are passed to effectuate the
reliefs granted:
(i) The interests of justice would be best subserved if the
benefit of Provident Fund is provided to the members of the
Respondent-Union, and other similarly situated contractual
B employees, from January 2017 when the Writ Petition was filed
before the High Court.
(ii) Respondent No.3 - the Regional Provident Fund
Commissioner, Regional Office is directed to determine and
compute the amount to be deposited by the Company on the one
C hand, and the members of the Respondent-Union and other similar
situated employees on the other hand. The computation would
be required to be made for the past period i.e. January 2017 to
December 2019;
(iii) The Company shall be liable to pay Simple Interest @
D 12% p.a. on the amount payable by it towards contribution of
provident fund for the past period, i.e., January 2017 to December
2019, as per Section 7Q of the EPF Act,1952;
(iv) The statement of computation made by Respondent
No.3 will be placed before this Court within a period of 12 weeks
E from the date of this Judgment, and thereafter the matter will be
listed for issuance of necessary directions, so that the amount
can be remitted from the deposit made before this Court, directly
to the PF Trust;
(v) The employees will be obligated to deposit their
F matching contribution for the past period i.e. January 2017 to
December 2019, within a period of 12 weeks along with interest
@ 6% p.a., after the contribution of the Company has been
remitted to the PF Trust;
(vi) With respect to the period from January 2020 onwards,
the Company and the members of the Respondent-Union as also
G
other similary situated employees, will make their respective
contributions as per the PF Trust Regulations;
(vii) The benefit shall not be extended to those employees
who have superannuated, expired, resigned, or ceased to be in
the employment of the Company on the date of this Judgment;
H
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 733
SANGHATANA & ORS.

(viii) This Court considers it appropriate to award Costs of A
Rs. 5,00,000 (Rupees Five Lacs) to the Respondent-Union
towards litigation expenses incurred in the High Court and in
this Court.
(ix) After the aforesaid amounts are disbursed, the balance
amount lying deposited in this Court shall be refunded to the B
Appellant-Company. [Para 8][747-E-H; 748-A-F]
Regional Provident Fund Commissioner v. Sanatan
Dharam Girls Secondary School (2007) 1 SCC 268 :
[2006] 7 Suppl. SCR 849; Shamrao Vithal Coop. Bank
Ltd. v. Kasargode Panduranga Maliya, (1972) 4 SCC C
600 : [1972] 2 SCR 162 – relied on.
Sub-Regional Provident Fund Office v. Godavari
Garments Ltd., (2019) 8 SCC 149 : (2019) 2 SCC (L&S)
483; M/s P.M. Patel & Sons and Ors. v. Union of India
and Ors (1986) 1 SCC 32 : [1985] 3 Suppl. SCR 55 – D
referred to.
Case Law Reference
[2006] 7 Suppl. SCR 849 relied on Para 6.2
[1972] 2 SCR 162 relied on Para 6.2
E
(2019) 8 SCC 149 referred to Para 6.5
[1985] 3 Suppl. SCR 55 referred to Para 6.5
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 353 of
2020.
F
From the Judgment and Order dated 12.09.2018 of the High Court
of Judicature at Bombay in Writ Petition No. 325 of 2017.
Ms. Pinky Anand, ASG, Puneet Taneja, Ms. Laxmi Kumari, Sumit
Teterwal, Advs. for the Appellants.
P.S. Narasimha, Sr. Adv., G.R. Naik, Rahul G. Tanwani, Anantha G
Narayana M.G., Siddharth, Amit Kumar Agrawal, Rajesh Kumar Sinha,
RPFC-1, Mumbai, Advs. for the Respondents.

H
734 SUPREME COURT REPORTS [2020] 1 S.C.R.

A The Judgment of the Court was delivered by
INDU MALHOTRA, J.
Leave granted.
1. The issue which arises for consideration is whether the
B contractual employees of the Appellant-Company are entitled to provident
fund benefits under the Pawan Hans Employees Provident Fund Trust
Regulations or under the Employees’ Provident Funds and Miscellaneous
Provisions Act, 1952 (“EPF Act”) and the Employees’ Provident Fund
Scheme, 1952 (“EPF Scheme”) framed thereunder.

C 2. The background facts in which the present Civil Appeal has
been filed are as under :
2.1 The Company was incorporated on 15.10.1985 under the
Companies Act, 1956, and is registered as a Government of
India company with the Registrar of Companies, Delhi. The
D Government of India holds 51% shareholding in the Appellant-
Company and the remaining 49% is held by Oil and Natural
Gas Company Ltd. (ONGC).
The Company was incorporated with the primary
objective of providing helicopter support services to the oil
sector for its off-shore exploration operations, services in
E
remote and hilly areas, and charter services for promotion of
tourism. It is classified as a non-scheduled operator under
Rule 134 of the Aircraft Rules, 1937.
2.2 On 01.04.1986, the Appellant-Company framed and notified
the Pawan Hans Employees Provident Fund Trust Regulations
F
(hereinafter referred to as “the PF Trust Regulations”)
for giving provident fund benefits to all the employees of the
Appellant-Company.
Regulations 1.3 and 2.5 of the PF Trust Regulations are
set out hereunder for ready reference:
G
“1.3 - These Regulations shall apply to all the employees of
the Corporation.
2.5. – “Employee” means any person who is employed for
wages/salary in any kind of work, monthly or otherwise, in
H or in connection with the work of the Corporation and who
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 735
SANGHATANA & ORS. [INDU MALHOTRA, J.]

gets his wages/salary directly or indirectly from the A
Corporation, and excludes any person employed by or
through a contractor or in connection with the work of the
Corporation but does not include any person employed as
an apprentice or trainee.”
[emphasis supplied] B
2.3 On 26.03.1987, the Appellant-Company instituted the Pawan
Hans Employees Provident Fund Trust (“PF Trust”) wherein
the management started depositing its share towards the
provident fund contribution with respect to employees on the
regular cadre of the Company; correspondingly, the regular C
employees started depositing the matching contribution with
the PF Trust.
2.4 Out of a total workforce of 840 employees, the Company
had engaged 570 employees on regular basis, while 270
employees were engaged on ‘contractual’ basis. D
The Company implemented the PF Trust Regulations
only with respect to the regular employees, even though the
term “employee” had been defined to include “any person”
employed “directly or indirectly” under the PF Trust
Regulations. E
2.5 The Company having framed its own PF Trust Regulations,
was claiming exemption from the applicability of the EPF
Act and EPF Scheme under Section 16 of the EPF Act.
2.6 On 08.01.1989, the Ministry of Labour, Government of India,
issued a communication to the Central Provident Fund F
Commissioner, New Delhi, pertaining to the grant of exemption
to departmental undertakings under the control of the Central/
State Government statutory bodies. The Central Provident
Fund Commissioner was directed to instruct the Regional
Provident Fund Commissioners to carefully review the cases
G
of departmental undertakings and statutory bodies falling
under the categories specified in Section 16(1)(b) and 16(1)(c)
of the EPF Act, and take further action as indicated in the
said letter.
Clause (iv) of the said letter dated 08.01.1989 is of relevance, and
is extracted hereunder for ready reference: H
736 SUPREME COURT REPORTS [2020] 1 S.C.R.

A “(iv) There may be establishments which employ large member
of casual/contingent staff, who are not entitled to the benefit
of provident fund or pension. The casual/contingent staff of
such establishment will continue to be covered under the Act,
but their regular employees who are entitled to the benefit of
provident fund or pension should be excluded from the
B
purview of the Act.”
[emphasis supplied]
2.7 The Central Government, in exercise of the powers under
S.1(3)(b) of the EPF Act, issued a Notification dated
C 22.03.2001, making the provisions of the EPF Act applicable
to aircraft or airlines establishments employing 20 or more
persons, excluding aircraft or airlines establishments owned
or controlled by the Central or State Government.
The Gazette Notification No. SO 746 dated 22.03.2001
D (“Notification”) is extracted for ready reference:-
“ S.O. 746 – In exercise of the powers conferred by clause
(b) of sub section (3) of Section 1 of the Employees Provident
Fund and Miscellaneous Provisions Act 1952 (19 of 1952),
the Central Government hereby specifies the following
E establishment employing 20 or more persons as the class of
establishments to which the said Act shall apply with effect
from 1st April 2001 namely:
(i) An establishment engaged in rendering courier services;
(ii) An establishment of aircraft or airlines other than the
F aircraft airlines owned or controlled by the Central or
State Government.
(iii) An establishment engaged in rendering cleaning and
sweeping services.”
[emphasis supplied]
G
The said Notification was brought into force w.e.f 01.04.2001.
2.8 Correspondingly, amendments were made to the EPF Scheme
framed under Section 5 of the EPF Act. Clause 3 (b)(ci) was
inserted vide Notification No. S-35016/1/1997-SS II dated
H 22.07.2002, by which the EPF Scheme was made applicable
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 737
SANGHATANA & ORS. [INDU MALHOTRA, J.]

to aircraft or airlines establishments other than the aircraft or A
airlines establishments owned or controlled by the Central or
State Government.
2.9 The members of the Respondent-Union made several
representations on 18.09.2012, 29.09.2012, 13.03.2013,
19.11.2014 to extend the benefit of the PF Trust Regulations B
since they were directly engaged by the Company on
contractual basis, some of whom were working for almost
20 years.
The Company failed to respond to the representations.
2.10 Being aggrieved by the inaction of the Company, the C
Respondent-Trade Union, filed CWP No.325 of 2017 on
20.12.2016 against the Company praying for thefollowing
reliefs:
“(a) A declaration that the members of the
Respondent-Trade Union and other similarly situated D
employees, employed on contract basis by the Appellant-
Company are entitled to the benefit of Provident Fund as
per the EPF Act and the EPF Scheme, and that the
Appellant-Company be directed to forthwith enrol all such
eligible contract employees under the EPF Scheme and E
deposit their contribution with the Respondent No. 3-
Regional Provident Fund Commissioner, Employees’
Provident Fund Organisation, from the date they are
eligible till remittance, and thereafter, till they are in the
employment of the Appellant-Company.
F
(b) Alternatively, the Appellant-Company forthwith
be directed to suitably amend the PF Trust Regulations to
permit the enrolment of contract workers as members of
the PF Trust instituted by the Appellant-Company and to
make all eligible contract employees members of the PF
Trust from their respective dates of entitlement and continue G
to contribute amounts to the PF Trust in respect of contract
employees.”
2.11 During the pendency of the Writ Petition, the Regional
Provident Fund Commissioner, Bandra issued a letter dated
24.05.2017 to the Company wherein it was stated that even H
738 SUPREME COURT REPORTS [2020] 1 S.C.R.

A though the EPF Act would not apply to establishments owned/
controlled by the Central Government as per S.16(1)(b) and
(c), however social security benefits such as provident fund
must be provided to all “employees/workers who are
engaged on contractual/casual/daily wages basis” since
there is no distinction between a person employed on
B
permanent, temporary, contractual, or casual basis under S.2
(f) of the EPF Act.
2.12 The High Court vide the impugned Judgment & Order dated
12.09.2018 allowed the Writ Petition in terms of prayer (a),
with the direction that the benefits under the EPF Act be
C extended to the members of the Respondent-Trade Union,
and other similarly situated employees. It was held that a
liberal view must be taken in extending social security benefits
to the contractual employees. The High Court directed the
Company to enrol all eligible contractual employees under
D the EPF Scheme, and deposit their contribution with
Respondent No.3 – Regional Provident Fund Commissioner
from the date they became eligible till remittance, and
thereafter till they are in employment of the Company. This
was to be carried out latest by 31.12.2018.
E 3. Aggrieved by the impugned Judgment, the Appellant-Company
filed the present Civil Appeal.
This Court vide Order dated 14.01.2019 issued notice and granted
stay of the impugned Judgment subject to the Company depositing a
sum of Rs.5,00,00,000/- (Rupees Five Crores) within 3 months in this
F Court.
Pursuant thereto, the Company deposited the said amount on
09.04.2019, which has been invested in a Fixed Deposit.
4. We have heard the learned counsel for both the parties, and
have considered the oral and written submissions made on their behalf.
G
4.1 Ms. Pinky Anand, learned Additional Solicitor General of India,
appearing for the Appellant-Company inter alia submitted
that:
a) The Company is excluded from the applicability of the
EPF Act since it neither falls under Schedule I of the
H
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 739
SANGHATANA & ORS. [INDU MALHOTRA, J.]

EPF Act, nor is it covered by Notification dated 22.03.2001 A
issued under Section 1(3)(b) of the EPF Act, since the
Notification itself expressly excludes airline companies
“owned or controlled by the Central Government” from
the purview of the EPF Act.
b) The Notification 22.03.2001 was inapplicable to the B
Appellant-Company since Section 16(1)(b) of the EPF
Act, excludes an establishment owned or controlled by
the Central Government from the scope of the EPF Act.
c) The Central Government holds 51% of the shareholding
in the Appellant-Company, and the Board of Directors of C
the Appellant-Company have been appointed by the
Ministry of Civil Aviation. The Appellant-Company is
governed by the guidelines issued by the Department of
Public Enterprises, Government of India. The Appellant-
Company is thus an establishment owned and controlled
by the Central Government. Even after the EPF Act D
became applicable to the airlines industry, the Appellant-
Company being an establishment owned and controlled
by the Central Government, was excluded from the
purview of the EPF Act.
d) The High Court committed a grave error in giving E
retrospective application to the provisions of the EPF Act,
i.e., from the date of the members joining the Respondent-
Trade Union, given that several contractual employees
had superannuated, passed away, resigned, or ceased to
be in the employment of the Company. The extension of F
benefits under the EPF Act to contractual employees
irrespective of their status of employment with the
Company was wholly illegal, arbitrary, and liable to be set
aside.
e) The members of the Respondent-Union and other similarly G
situated employees have already been paid in full their
monthly financial benefits/emoluments. The direction of
the High Court to the Company to contribute to the
provident fund of the contractual employees would amount
to burdening the Company with twice the liability.
H
740 SUPREME COURT REPORTS [2020] 1 S.C.R.

A 4.2 Mr. P.S. Narasimha, learned Senior Counsel appearing on
behalf of the Respondent-Union inter alia submitted that:
a) The term “employee” defined by Clause 2.5 of the PF Trust
Regulations is widely defined to cover all employees, including
those engaged on contractual basis, who are in the direct or
B indirect employment of the Company. The members of the
Respondent-Union are in direct employment of the Company,
since they have not been engaged through any contractor.
The contractual workers are paid directly as evidenced by
the pay slips issued by the Company. The benefits under the
PF Trust Regulations, or the EPF Act, are required to be
C provided to even contractual employees from the date of their
joining till the date of remittance.
b) The Company is not controlled by the Central Government
since its affairs are managed and controlled by a Board of
Directors. The Company is not a company controlled by the
D Central Government.
The Notification dated 22.03.2001, specified certain
establishments including the airlines industry, other than airlines
owned or controlled by the Central or State Government, to
be covered under the EPF Act. Consequently, the Company
E was obligated to extend the benefits under the EPF Act to all
its employees.
c) The EPF Act is a beneficial piece of legislation, which has to
be liberally construed. The denial of statutory benefits and
entitlements like provident fund to the members of the
F Respondent-Union is ex-facie illegal, arbitrary, discriminatory
and in violation of the provisions of the EPF Act and the
Constitution of India.
5 The issue which arises for consideration in the present Civil
Appeal is whether the Appellant-Company is under a statutory obligation
G to provide the benefit of provident fund to its contractual employees
under the PF Trust Regulations or the EPF Act?
If so, the date from which the aforesaid benefit is to be extended
to the contractual employees.

H
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 741
SANGHATANA & ORS. [INDU MALHOTRA, J.]

6 Discussion and Analysis A
6.1 It is first required to be seen whether the Appellant-Company
is excluded from the applicability of the provisions of the
EPF Act and the EPF Scheme framed thereunder as
contended by them.
6.2 As per Section 1(3) of the EPF Act, the EPF Act is B
applicable to every establishment in which 20 or more
persons are employed, which is either a factory engaged in
any industry specified in Schedule I, or an establishment
which the Central Government may by notification in the
Official Gazette specify in that behalf. Section 1(3) of the C
EPF Act reads as:
“Section.1(3) : Subject to the provisions contained in
section 16, it applies —
(a) to every establishment which is a factory engaged
in any industry specified in Schedule I and in D
which twenty or more persons are employed, and
(b) to any other establishment employing twenty or more
persons or class of such establishments which the
Central Government may, by notification in the Official
Gazette, specify in this behalf: E
Provided that the Central Government may, after
giving not less than two months’ notice of its intention
so to do, by notification in the Official Gazette, apply
the provisions of this Act to any establishment employing
such number of persons less than twenty as may be F
specified in the notification.”
[emphasis supplied]
Section 1(3) is subject to Section 16 of the EPF Act. Sub-section
(1) of Section 16 enlists those establishments which are excluded from
the applicability of the EPF Act. As per clause (b) of sub-section (1), an G
establishment belonging to or under the control of the Central or State
Government, and whose employees are entitled to the benefit of
contributory provident fund in accordance with any scheme or rules
framed by the Central or State Government governing such benefits, is
excluded from the purview of the EPF Act. H
742 SUPREME COURT REPORTS [2020] 1 S.C.R.

A Sub-section (1) of Section 16 reads as:
“Section 16. Act not to apply to certain establishment. –
(1) This Act shall not apply-
(a) to any establishment registered under the Co-operative
B Societies Act, 1912 (2 of 1912), or under any other law
for the time being in force in any State relating to
cooperative societies employing less than fifty persons
and working without the aid of power; or
(b) to any other establishment belonging to or under the
C control of the Central Government or a State Government
and whose employees are entitled to the benefit of
contributory provident fund or old age pension in
accordance with any Scheme or rule framed by the Central
Government or the State Government governing such
benefits; or
D
(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;
E
(2) If the Central Government is of opinion that having regard
to the financial position of any class of establishment or
other circumstances of the case, it is necessary or
expedient so to do, it may, by notification in the Official
Gazette, and subject to such conditions, as may be
F specified in the notification, exempt, whether prospectively
or retrospectively, that class of establishments from the
operation of this Act for such period as may be specified
in the notification.”
[emphasis supplied]
G This Court in Regional Provident Fund Commissioner v. Sanatan
Dharam Girls Secondary School 1 laid down a twin-test for an
establishment to seek exemption from the provisions of the EPF Act,
1952. The twin conditions are:

1
H (2007) 1 SCC 268 : (2007) 1 SCC (L&S) 167
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 743
SANGHATANA & ORS. [INDU MALHOTRA, J.]

First, the establishment must be either ‘‘belonging to” or “under A
the control of” the Central or the State Government. The phrase
“belonging to” would signify “ownership” of the Government, whereas
the phrase “under the control of” would imply superintendence,
management or authority to direct, restrict or regulate.2
Second, the employees of such an establishment should be entitled B
to the benefit of contributory provident fund or old age pension in
accordance with any scheme or rule framed by the Central Government
or the State Government governing such benefits.
If both tests are satisfied, an establishment can claim exemption/
exclusion under Section 16(1)(b) of the EPF Act. C
Applying the first test to the instant case, the Central Government
has a 51% ownership in the Appellant-Company, while the balance 49%
is owned by the ONGC, a Central Government PSU.
As per Section 2(45) of the Companies Act, 2013, a “Government
Company” means any company in which not less than 51 % of the paid- D
up share capital is held by the Central Government. Since 51% of the
shares of the Appellant-Company are owned by the Central Government,
the first test is satisfied as the Appellant-Company can be termed as a
Government Company under Section 2(45) of the Companies Act, 2013.
With respect to the second test, it is relevant to note that the E
Company had its own Scheme viz. the Pawan Hans Employees Provident
Fund Trust Regulations in force. The Company however restricted the
application of the PF Trust Regulations to only the ‘regular’ employees.
The PF Trust Regulations of the Company were not framed by the Central
or State Government, nor were they applicable to all the employees of F
the Company, so as to satisfy the second test.
The Regional Provident Fund Commissioner, Bandra issued letter
dated 24.05.2017 addressed to the Company wherein it was stated that
the benefit of contributory provident fund was not being provided to
contractual/casual employees of the Company; and was directed to
G
implement the provisions of the EPF Act.
The relevant extract from the letter is set out hereinbelow:

2
Shamrao Vithal Coop. Bank Ltd. v. Kasargode Panduranga Maliya, (1972) 4 SCC
600 H
744 SUPREME COURT REPORTS [2020] 1 S.C.R.

A “approximately 370-400 employees have been engaged by
M/s Pawan Hans Ltd. on contract basis in various cadres.
But no social security benefit is being extended to them. The
EPF & MP Act, 1952 under Section 2(f) lays down that any
person employed for wages in any kind of work in or in
connection with the work of the establishment and includes a
B
worker engaged by or through a contractor. There is no
distinction between a person employed on permanent,
temporary, contractual or casual basis under Section 2(f) of
the EPF & MP Act, 1952.
You are therefore, requested to implement the provisions
C of the EPF & MP Act, 1952 in respect of all the contractual/
causal employees engaged by M/s Pawan Hans Ltd. who are
still not getting benefits of PF and Pension.”
[emphasis supplied]
D In our view, the Company does not satisfy the second test, since
the members of the Respondent-Union and other similarly situated
contractual workers were not getting the benefits of contributory provident
fund under the PF Trust Regulations framed by the Company, or under
any Scheme or any rule framed by the Central Government or the State
Government. Consequentially, the exemption under Section 16 of EPF
E Act would not be applicable to the Appellant-Company.
In view of the above discussion, we hold that the Company has
failed to make out a case of exclusion from the applicability of the
provisions of the EPF Act.

F 6.3 The next issue which arises for consideration is whether the
members of the Respondent-Trade Union are entitled to the benefit of
Provident Fund under the PF Trust Regulations or under the EPF Act.
Clause 1.3 of the Regulations would show that the PF Trust
Regulations were made applicable to “all employees” of the Appellant-
Company.
G
Clause 2.5 of the Regulations, defines an “employee”, to include
any employee who is employed for wages/salary in any kind of work,
monthly or otherwise, or in connection with the work of the Company,
and who gets his wages/salary directly or indirectly from the Company.
Clause 2.5 excludes only a person employed by or through a contractor
H
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 745
SANGHATANA & ORS. [INDU MALHOTRA, J.]

in connection with the work of the Company, and any person employed A
as an apprentice or trainee.
In the present case, the Respondent-Union submitted that even
though the appointment letters refer to the employees as ‘contractual’
employees, they were not engaged through any contractor. They were
being paid directly by the Company, which is evidenced from the pay- B
slips issued to them. It was submitted that about 250 contractual employees
receive wages directly from the Company, and are eligible to be included
under the PF Trust Regulations framed by the Company.
6.4 We find that the members of the Respondent-Union have been
in continuous employment with the Company for long periods of time. C
They have been receiving wages/salary directly from the Company
without the involvement of any contractor since the date of their
engagement. The work being of a perennial and continuous nature, the
employment cannot be termed to be ‘contractual’ in nature.
In our considered view, Clause 2.5 of the PF Trust Regulations D
would undoubtedly cover all contractual employees who have been
engaged by the Company, and draw their wages/salary directly or
indirectly from the Company.
6.5 As per Section 2(f) of the EPF Act, the definition of an
‘employee’ is an inclusive definition, and is widely worded to include E
“any person” engaged either directly or indirectly in connection with the
work of an establishment, and is paid wages.3
In view of the above discussion, we find that the members of the
Respondent-Union and all other similarly situated contractual employees,
are entitled to the benefit of provident fund under the PF Trust Regulations F
or the EPF Act. Since the PF Trust Regulations are in force and are
applicable to all employees of the Company, it would be preferable to
direct that the members of the Respondent-Union and other similarly
situated contractual employees are granted the benefit of provident fund
under the PF Trust Regulations so that there is uniformity in the service
conditions of all the employees of the Company. G
6.6 The question which now arises is the date from which the
benefit of provident fund is to be extended to the contractual employees.
3
Sub-Regional Provident Fund Office v. Godavari Garments Ltd., (2019) 8 SCC 149 :
(2019) 2 SCC (L&S) 483; M/s P.M. Patel & Sons and Ors. v. Union of India and Ors
(1986) 1 SCC 32. H
746 SUPREME COURT REPORTS [2020] 1 S.C.R.

A This Court vide Order dated 24.10.2019 had passed the following
Order:
“Provident Fund is normally managed on actuarial basis; the
contributions received from employer and the employee are
invested and the income by way of interest forms the substantial
B fund through which any pay-out is made. For all these years
the Fund in question was subsisting on contributions made
by the other employees and, if at this stage, the benefit in
terms of the judgment of the High Court is extended with
retrospective effect, it may create imbalance. Those who had
never contributed at any stage would now be members of the
C fund. The fund never had any advantage of their contributions
and yet the fund would be required to bear the burden in
case any pay-out is to be made. Even if concerned employees
are directed to make good contributions with respect to
previous years with equivalent matching contribution from
D the employer, the fund would still be deprived of the interest
income for past several years in respect of such contributions.
In order to have clear perspective in the matter and to
see if there could be any solution to the problem as posed
above, we call upon the petitioner to depute a person who is
E well versed in the matter and who has been managing the
Provident Fund Scheme of Pawan Hans Limited to have a
dialogue with the respondent No.3 before 15.11.2019 (a
representative of the respondent(s) is also at liberty to remain
present during such discussion) so that a workable solution
could then be presented by such person and the representative
F of respondent No.3 before us on the next occasion.
List the matter on 29.11.2019 at 10.30 a.m.”
6.7 The learned ASG submitted that no workable solution could
be worked out at the meeting held between the representative of the
G Appellant-Company, Respondent No.3, and the representative of the
Respondent-Union. The learned ASG however offered that the Appellant-
Company was willing to extend the benefit under the PF Trust Regulations
to the members of the Respondent-Union and other similarly situated
employees, from the date of the impugned Judgment.

H
M/S. PAWAN HANS LIMITED & ORS. v. AVIATION KARMACHARI 747
SANGHATANA & ORS. [INDU MALHOTRA, J.]

6.8 Respondent No.3 – the Regional Provident Fund Commissioner A
submitted that since the Company had remained out of the purview of
the EPF Act, the direction to deposit contribution from the date of
eligibility of the contractual employees till the date of remittance was not
workable, and could not be sustained.
7. After hearing the parties at length, and in light of the peculiar B
facts and circumstances of this case, we affirm the Judgment & Order
dated 12.09.2018 passed by the Bombay High Court in W.P.No.325/
2017 holding that members of the Respondent-Union are covered by the
EPF Act. However, we modify the direction of the High Court to grant
the benefits under the EPF Act, and direct that the members of the
Respondent-Union and other similarly situated contractual employees C
be enrolled under the Pawan Hans Employees Provident Fund Trust
Regulations so that there is uniformity in the conditions of service of all
employees of the Appellant-Company.
Furthermore, the direction of the High Court to pay the contribution
from the date of their eligibility till the date of remittance is also modified D
in terms of the directions given in this Judgment.
8. We pass the following directions to effectuate the reliefs
granted:
(i) The interests of justice would be best subserved if the benefit E
of Provident Fund is provided to the members of the
Respondent-Union, and other similarly situated contractual
employees, from January 2017 when the Writ Petition was
filed before the High Court.
(ii) Respondent No.3 - the Regional Provident Fund F
Commissioner, Regional Office, Bhavishya Nidhi Bhawan,
341 Bandra (E), Mumbai is directed to determine and
compute the amount to be deposited by the Company on
the one hand, and the members of the Respondent-Union
and other similar situated employees on the other hand. The
computation would be required to be made for the past G
period i.e. January 2017 to December 2019;
(iii) The Company shall be liable to pay Simple Interest @ 12%
p.a. on the amount payable by it towards contribution of
provident fund for the past period, i.e., January 2017 to
December 2019, as per Section 7Q of the EPF Act,1952 ; H
748 SUPREME COURT REPORTS [2020] 1 S.C.R.

A (iv) The statement of computation made by Respondent No.3
will be placed before this Court within a period of 12 weeks
from the date of this Judgment, and thereafter the matter
will be listed for issuance of necessary directions, so that
the amount can be remitted from the deposit made before
this Court, directly to the PF Trust;
B
(v) The employees will be obligated to deposit their matching
contribution for the past period i.e. January 2017 to
December 2019, within a period of 12 weeks along with
interest @ 6% p.a., after the contribution of the Company
has been remitted to the PF Trust;
C
(vi) With respect to the period from January 2020 onwards, the
Company and the members of the Respondent-Union as
also other similary situated employees, will make their
respective contributions as per the PF Trust Regulations;
D (vii) The benefit shall not be extended to those employees who
have superannuated, expired, resigned, or ceased to be in
the employment of the Company on the date of this
Judgment ;
(viii) We consider it appropriate to award Costs of Rs.5,00,000
E (Rupees Five Lacs) to the Respondent-Union towards
litigation expenses incurred in the High Court and in this
Court.
(ix) After the aforesaid amounts are disbursed, the balance
amount lying deposited in this Court shall be refunded to
F the Appellant-Company.
The present civil appeal along with all pending applications, if any,
stand disposed of.
Ordered accordingly.

G
Ankit Gyan Appeal disposed of.

H