Holding

Retired railway employees who were never members of the Fund established under the EPF Scheme, 1952 cannot be treated as “excluded employees” and the employer must make EPF contributions.

Summary

The Supreme Court examined whether retired railway employees who had withdrawn their full superannuation benefits, including provident fund, and were later re‑employed on a retainer basis by a private limited company could be treated as “excluded employees” under Paragraph 2(f)(i) of the Employees’ Provident Fund Scheme, 1952, thereby exempting the employer from EPF contributions. The Court analysed the statutory definitions of “Fund”, “Scheme” and “excluded employee” in the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and its Scheme, emphasizing that “Fund” refers only to the fund created under the Scheme of 1952. It held that the retired employees were never members of that specific Fund, having withdrawn from the General Provident Fund, and thus could not fall within the exclusion clause. Accordingly, the employer remained obligated to contribute to the EPF for those employees. The appeal was dismissed.

Issues considered

Whether retired railway employees who withdrew full benefits from the General Provident Fund and were re‑employed on a retainer basis qualify as “excluded employees” under Paragraph 2(f)(i) of the EPF Scheme, 1952.
Whether the term “Fund” in the exclusion provision refers exclusively to the fund created under the Scheme of 1952 or to any provident fund.

Legislation cited

Employees' Provident Fund and Miscellaneous Provisions Act, 1952s. 14, s. 17, s. 17(1A), s. 2(f), s. 2(ff), s. 2(fff), s. 2(h), s. 2(l), s. 5, s. 5A, s. 6

Subjects

Employees' Provident FundExcluded employeeSection 17 exemptionScheme of 1952General Provident FundRetirementRe‑employmentStatutory interpretation

Judgment

[2019] 5 S.C.R. 61 61

MODERN TRANSPORTATION CONSULTATION SERVICES A
PVT. LTD. & ANR.
v.
CENTRAL PROVIDENT FUND COMMISSIONER EMPLOYEES
PROVIDENT FUND ORGANISATION & ORS.
B
(Civil Appeal No. 7698 of 2009)
MARCH 26, 2019
[ABHAY MANOHAR SAPRE AND
DINESH MAHESHWARI, JJ.]
C
Employees’ Provident Fund and Miscellaneous Provisions
Act, 1952:
s. 17 (1) – Exemption from Employees’ Provident Fund
Scheme, 1952 – Retired employees of Railways who had withdrawn
all superannuation benefits including full amount in their Provident
D
Fund account – Re-employed on retainer basis with Private Limited
Company – Whether covered under Provident Fund Scheme or were
to be treated as ‘excluded employees’ in terms of Para 2(f) of the
Scheme – Held: To be covered under the expression ‘excluded
employee’ by virtue of clause (i) of para 2(f) r/w. clause (a) of para
69 (1), the employee must be such who was a member of the fund E
established under the Provident Fund Scheme and had withdrawn
full amount of his accumulations in the said fund on retirement –
The employees in question since were not the members of the Fund
established under the Scheme, they could not have been treated as
‘excluded employees’.
F
Dismissing the appeal, the Court
HELD: 1. The concept underlying the enactment of
Employees’ Provident Fund and Miscellaneous Provisions Act,
1952 had been of providing for compulsory contributory provident
funds for safeguarding the future of industrial workers. Elaborate G
provisions have been made in the Act for creation of a Fund, to
be settled in accordance with a Scheme to be framed by the Central
Government. However, the Act also provides for continuation of
such of the other provident funds, which are offering equal or

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62 SUPREME COURT REPORTS [2019] 5 S.C.R.

A more advantageous terms to the employees concerned and are
operating efficiently. [Para 9.1] [75-F-H]
2. There is no definition of an “excluded employee” in the
Act of 1952. In fact, this expression comes in operation for the
purpose of exclusion of certain employees from compulsion to
B join the Fund created under the Scheme of 1952. Therefore, this
expression is defined only in the Scheme of 1952, in clause (f) of
paragraph 2 thereof. [Para 9.2.1] [79-E-F]
3. Paragraph 26 of the Scheme of 1952 specifies the classes
of employees entitled to, and required to, join the Fund as also
C the co-related aspects. The expression “Fund”, as occurring in
Paragraph 26 refers to the Fund created under the Scheme of
1952. In the scheme and structure of the Act of 1952, it is but
clear that for the specified establishments or class of
establishments, the Central Government was to frame a Scheme,
to be called “the Employees’ Provident Fund Scheme”; and soon
D after framing of such Scheme, a Fund was to be established, which
was to vest in, and administered by, the Board constituted under
Section 5A. The expression “Fund” is defined in the Act of 1952
to mean the provident fund established under a Scheme; and the
expression “Scheme” is defined to mean the Employees
E Provident Fund Scheme framed under Section 5. Indisputably,
the Scheme of 1952 is the one framed by the Central Government
in exercise of the powers conferred by Section 5. [Paras 9.2.2
and 11] [80-D; 85-C-E]
4. By virtue of sub-section (1) of Section 17, an
F establishment could be exempted from the operation of all or
any of the provisions of any Scheme if: (a) in regard to the
establishment to which the Act applies, the appropriate
Government is of opinion that the rules of its provident fund,
with respect to the rates of contributions, are not less favourable
for the employees than those specified in Section 6 and the
G employees are in enjoyment of other provident fund benefits
which, on the whole, are not less favourable than the benefits
available under the Act or under the Scheme in relation to any
other establishment of similar character; and (b) in regard to any
other establishment, the appropriate Government is of opinion
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that benefits in the nature of provident fund, pension or gratuity, A
as available to the employees of such establishment are, on the
whole, not less favourable than the benefits provided under the
Act or any Scheme in any other establishment of similar character.
[Para 12] [85-F-H; 86-A]
5. When an exemption is granted to an establishment under B
clause (a) of sub-section (1) of Section 17 of the Act of 1952,
several duties are cast upon the employer as specified in sub-
section (1-A) thereof, with penal provisions in the event of default.
The employees are expected to be covered by the Scheme framed
under Section 5 of the Act of 1952 with the exception being that
in case of availability of equivalent or more favourable benefits in C
an establishment, the appropriate Government could grant
exemption. As per sub-section (2) of Section 17, even the Scheme
may make a provision for exemption but the basic requirement
being again that the persons or the class of persons to be
exempted are entitled to such benefits which are, on the whole, D
not less favourable than the benefits provided under the Act and
the Scheme thereunder i.e., the Scheme of 1952. All the
requirements of Section 17 make the position undoubtedly clear
that the provisions are intended to ensure optimum benefits for
the employees and even the exemption is granted only on the
satisfaction of appropriate Government about existence of E
equivalent or more favourable provident fund Scheme for the
employees concerned. [Para 12.1] [86-B-E]
6. The provisions of the Scheme are generally made
applicable, subject to the provisions of Sections 16 and 17 of the
Act, to all the factories and other establishments to which the F
Act applies or is applied under sub-sections (3) and (4) of Section
1 or under Section 3 of the Act. The provisions of the Scheme of
1952 have been extended to various establishments from time
to time under clause (b) of sub-paragraph (3) of Paragraph 1
thereof. As per Paragraph 26 of the Scheme of 1952, every G
employee employed in or in connection with the work of the
factory or other establishment to which this Scheme applies, is
entitled to, and is obliged to, become a member of the Fund from
the date the Scheme would come into force for such factory or

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64 SUPREME COURT REPORTS [2019] 5 S.C.R.

A establishment, except the “excluded employees”. Significantly,
even an “excluded employee”, on ceasing to be so i.e., on ceasing
to be an “excluded employee”, is entitled to, and is required to,
become a member of the Fund from the date of such cessation.
[Para 13] [86-F; 87-A-C]
B 7. In the framework of the Scheme of 1952, exclusion is
provided under clause (i) of Paragraph 2(f) thereof to an employee
who had been a member of the Fund and had withdrawn full amount
of his accumulations in the Fund under clause (a) or (c) of
Paragraph 69(1). Clause (a) of the Paragraph 69(1) of the Scheme
of 1952 refers to a member who would withdraw the full amount
C standing to his credit in the Fund on retirement from service
after attaining the age of 55 years. A comprehensive look at
various clauses of paragraph 69(1) makes it clear that reference
therein is to a member of the Fund who withdraws full amount
standing to his credit for different eventualities like regular
D retirement; retirement for disablement or incapacity; migration
from the country; termination of service; accepting a voluntary
retirement scheme; closure of the factory; transfer from a covered
factory or establishment to another factory or establishment not
covered under the Act etc. [Para 13.1] [87-C-D, E-F]
E 8. In the setup and structure of the Act of 1952, specific
distinction is maintained between the Fund, which is created by
the Central Government under Section 5(1) of the Act and any
other provident fund, which is created by an employer.
Significantly, clause (f) of Paragraph 2 of the Scheme of 1952 refers
to “the Fund” and not to “any Fund”; and Paragraphs 26 and 69
F also refer to “the Fund” and not to “any Fund”. The determiner
“the”, as occurring in Paragraph 2(f) as also Paragraph 69 before
the expression “Fund” makes it clear that the reference therein
is only to the Fund which is created under the Scheme of 1952
and it is not a general reference to any Fund. The requirement of
G joining the Fund under Paragraph 26 is also of joining that Fund
which is created under the Scheme of 1952. In other words,
obviously and undoubtedly, the Fund referred to in Paragraphs
2(f), 26 and 69 of the Scheme of 1952 is that Fund, which is created
under the Scheme of 1952 and the reference is not to any other

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Fund. Thus, to be covered under the expression “excluded A
employee” by virtue of clause (i) of paragraph 2(f) read with clause
(a) of paragraph 69(1), the employee must be such who was a
member of the Fund established under the Scheme of 1952 and
who had withdrawn full amount of his accumulations in the said
Fund on retirement from service after attaining the age of 55
B
years. [Para 14.1] [88-B-E]
9. Therefore, the retired Railway employees, who had
withdrawn their accumulations in General Provident Fund or any
other Fund of which they were members, could not have been
treated as “excluded employees” for the purpose of the Scheme
of 1952 for the reason that such a withdrawal had not been from C
the Fund established under the Scheme of 1952. In fact, there
was no occasion for them to make any withdrawal from the Fund
established under the Scheme of 1952 because they were never
the members of the said Fund. In other words, the employees in
question were not answering to the requirements of clause (i) of D
paragraph 2(f) read with clause (a) of paragraph 69(1) of the
Scheme of 1952 and hence, were not the “excluded employees”.
[Para 14.2] [88-F-H; 89-A]
10. The provisions of the Act and the stipulations of the
Scheme of 1952 are mandatory in character and the application E
thereof could not have been averted by the appellants or the said
employees except on certain eventualities as mentioned in
Section 17 of the Act as also Paragraph 26 of the Scheme of 1952.
Such eventualities are indeed non-existent in the present matter.
So far the aspect relating to age is concerned, the operation and
effect of the Act and the Scheme of 1952 are not restricted with F
reference to any age limit of the employee. Such a suggestion
relating to the age of the employees had been entirely baseless
and has rightly been disapproved. [Para 15] [89-C-D]
11. So far as the plea of the appellants that they had applied
for exemption and no decision was taken on their representation G
is concerned, it is noticed that the appellant had not made any
such submission that they had any better and beneficial scheme
for their employees. In any case, there is no concept of any
holidaying in payment of contribution by the employer by merely
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66 SUPREME COURT REPORTS [2019] 5 S.C.R.

A moving an application for exemption; and when there was no order
of exemption under Section 17 by the competent authority, the
appellant-company was under the liability to make payment of its
contribution. [Para 15.1] [89-E-F]
12. The observations by the Single Judge of High Court
B that clause (i) of Paragraph 2(f) of the Scheme of 1952 has to be
applied in relation to the withdrawal from any Provident Fund
and else, an employee may keep on successively deriving benefits,
remain rather unwarranted because the principle underlying the
enactment and the Scheme of 1952 is to provide financial security
to the employees. The concept of exclusion from the Scheme of
C 1952 is limited to the class/es of employees mentioned in
Paragraph 2(f) only; and the area of operation of this exclusion
clause cannot be expanded by way of an assumption about the
alleged extra advantage likely to be driven home by an employee.
In fact, even the assumption of the Single Judge does not appear
D apt in the framework of the Act and the Scheme of 1952. Whatever
an employee gets by virtue of the Act of 1952 is basically the
accumulation in his provident fund account, where he and his
employer do contribute. The order passed by the Single Judge,
being based on entirely irrelevant considerations, has rightly been
disapproved by the Division Bench of High Court. [Para 16]
E [89-G-H; 90-A-D]
13. The framework and setup of the Scheme of 1952, the
concept remains plain and clear that if a person is member of the
Fund created thereunder i.e., under the Scheme of 1952 and
withdraws all his accumulations therein, he may not be obliged to
F be a member of the same Fund under the Scheme of 1952 over
again and could be treated as an “excluded employees”. However,
such is not the relaxation granted in relation to an employee who
was earlier a member of any other Fund but later on joins such an
establishment where he would be entitled to membership of the
G Fund created under the Scheme of 1952. This framework of the
provisions and stipulations appears to be best serving the interest
of employees, while providing them with continued financial
security. [Para 17] [90-E-G]

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N.K. Jain and Ors. v. C.K. Shah and Ors. (1991) 2 SCC A
495 : [1991] 1 SCR 938 – referred to.
Case Law Reference
[1991] 1 SCR 938 referred to Para 10
CIVIL APPELLATE JURISDICTION: Civil Appeal No.7698 of B
2009.
From the impugned Order dated 07.05.2008 of the High Court at
Calcutta in FMA No.537 of 2007.
Abani Kumar Sahu, Ghanshyam, P. K. Manohar, Advs. for the
Appellants. C
Ms. Vibha Dutta Makhija, Sr. Adv., Amit Sharma, B.K. Satija,
Raj Bahadur Yadav, Arun Yadav (for Mrs. Anil Katiyar), Vishnu Sharma,
Ms.Anupama Sharma, Ms. Rangoli Seth, Varun Agarwal, Chandra
Prakash, Advs. for the Respondents.
D
The Judgment of the Court was delivered by
DINESH MAHESHWARI, J. 1. In this appeal by special leave,
the appellants (writ petitioners) have called in question the judgment and
order dated 07.05.2008 in FMA No. 537 of 2007 whereby, the Division
Bench of High Court at Calcutta has reversed the order dated 07.04.2006,
as passed by the learned Single Judge in W.P. No. 2982(W) of 2005. E

1.1. By the aforesaid order dated 07.04.2006, the learned Single
Judge of High Court allowed the writ petition filed by the appellants
while upholding their contentions that the employees of Railways, who
had withdrawn full amount of provident fund while retiring and who
were engaged by them on lump sum honorarium basis, should be treated F
as “excluded employees” for the purpose of the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to
as ‘the Act’/’the Act of 1952') and the Employees’ Provident Funds
Scheme, 1952 (hereinafter referred to as ‘the Scheme of 1952’).
However, in the Letters Patent appeal preferred by the Central Provident G
Fund Commissioner and the Regional Provident Fund Commissioner,
the Division Bench of High Court totally disagreed with the learned
Single Judge; and dismissed the writ petition while holding that the said
employees, who retired after serving an exempted employer, would not

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68 SUPREME COURT REPORTS [2019] 5 S.C.R.

A fall within the category of excluded employees on re-employment and
would be covered by the Act and the Scheme of 1952.
2. The basic question arising for determination in this appeal is as
to whether the retired employees of Railways, who had withdrawn all
the superannuation benefits, including full amount of accumulations in
B their provident fund accounts, are to be treated as “excluded employees”
in terms of Paragraph 2(f) of the Scheme of 1952? If to be treated as
“excluded employees”, the said retired employees of Railways, on being
re-employed by the appellants, may not be required to join the Fund
created under the said Scheme of 1952 and consequently, the appellants
may not be obliged to make any contribution in that regard.
C
3. The relevant factual aspects leading to the question aforesaid
are not of much controversy and could be briefly summarised as follows:
3.1. The appellant No. 1, a Private Limited Company, had been
engaged in manning the Captive Railway System of the respondent No.
D 4-Damodar Valley Corporation (‘DVC’). The appellant No. 2 is said to
be a Director of the appellant No. 1-company. The appellants would
submit that their only connection with DVC had been a contract to supply
the personnel for manning the cabins and gates on the railway-road; and
they were receiving the remuneration for supplying the aforesaid
personnel, who were retired employees of the Indian Railways and were
E engaged on a lump sum honorarium basis.
3.2. By his letter dated 18.02.2002, the Assistant Provident Fund
Commissioner Circle-IV, Calcutta informed the appellant-company that
the number of employees of its establishment being twenty-eight in the
month of May, 1999, the establishment came within the purview of the
F Act of 1952 with effect from 01.05.1999. In reply, the Director of the
appellant-company stated in his letter dated 05.03.2002 that all the persons
engaged by the company, except two of them, were the retired Railway
employees above 58 years of age; that all of them were working only on
retainer basis; and that they were not covered under the Employees’
G Provident Fund Scheme. The said Assistant Provident Fund
Commissioner, in his letter dated 03.05.2002, refuted the contentions of
the appellants while referring to Paragraph 26 of the Scheme of 1952
and while asserting, inter alia, that on and from 01.11.1990, an employee
is eligible for enrolment as a member of the Scheme of 1952 from the
date of joining an establishment covered under the Act of 1952; that
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there was no age bar for an employee to become a member of the A
Scheme of 1952; and that the employees in question were not excluded
employees in terms of the Scheme of 1952.
3.3. It appears that the appellant-company applied for exemption
under Section 17 of the Act and Paragraph 27 of the Scheme of 1952 on
the ground that the persons concerned were retired Railway employees B
but then, no decision was taken on such representations. On the other
hand, by yet another letter dated 22.05.2002, the appellant-company
elaborated on its contentions that the employees in question, being retired
employees of Railways, did not come within the purview of the Act of
1952 and were to be treated as “excluded employees” under Paragraph
26 of the Scheme of 1952. It was stated that these employees, whilst in C
the service of Railways, were not covered under the Scheme of 1952
but were covered under the General Provident Fund (‘GPF’) Scheme
and had withdrawn all the superannuation benefits including Provident
Fund (‘PF’) and pension and hence, they were not covered under the
Act of 1952. It was also claimed that these employees were in receipt D
of more favourable benefits than those available under the Scheme of
1952 and had expressed their unwillingness to become the members of
the Scheme of 1952. However, the authorities related with the Employees’
Provident Fund Organisation (the contesting respondents herein)
maintained that the employees of an establishment were eligible for
enrolment as members of the Scheme of 1952 irrespective of age; and E
the employees of the appellant company were not “excluded employees”,
as defined in the Scheme of 1952.
3.4. The appellant-company having failed to remit the requisite
contribution in relation to the employees concerned, the competent
authority under the Act of 1952 commenced proceedings under Section F
7A thereof, for determination of the money due from the appellants. By
its order dated 31.12.2004, the competent authority, after having heard
the appellants, determined the amount payable by the appellant-company
under various heads while holding, inter alia, that the provisions of the
Act of 1952 were not repugnant to the GPF Scheme; that a person was G
entitled to draw double or multiple pension/s; and that the retirement of
the employees from Railways would not take them within the definition
of “excluded employees”. Aggrieved, the appellants preferred the writ
petition before the High Court at Calcutta [W.P. No. 2982(W)
of 2005].
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70 SUPREME COURT REPORTS [2019] 5 S.C.R.

A 4. In the impugned order dated 07.04.2006, the learned Single
Judge of High Court, though held that the Act was applicable to the
establishment of appellants but, thereafter, concluded that on
superannuation, the retired employees of the Railways would fall within
the definition of “excluded employees”. The learned Single Judge
observed that an employee, who had withdrawn full amount of his
B
accumulation in the fund, on re-employment with any establishment not
exempted under Section 17 of the Act, would not be again treated as an
employee to be covered under the Act. The learned Single Judge further
observed that accepting the submissions of the authorities would create
a situation where an employee, after being employed in any establishment
C and working for some time, may voluntarily retire from service and join
another establishment and keep on doing so successively and get the
benefit of various provisions of the Act of 1952. According to the learned
Single Judge, even though the Act of 1952 is a piece of social benefit
legislation, and its provisions are intended to protect the employees, who
are considered to be the weaker section of society, yet, the enactment is
D
not intended to create a largesse in favour of the employees at the cost
of the employer. In the opinion of learned Single Judge, the retired
employees of Railways cannot be compelled to become members of the
Fund and else, the object and purpose of the expression “excluded
employees” in the Scheme of 1952 would be rendered nugatory. The
E learned Single Judge also observed that when an employee earning more
than Rs. 6,500/- was treated as an “excluded employee” because of the
scale of pay as per Paragraph 2(f)(ii) of the Scheme of 1952, there was
no reason as to why Paragraph 2(f)(i) would not apply in case of an
employee who had withdrawn the full amount of his accumulations. The
learned Single Judge further observed that in order to decide as to
F
whether the provisions of the Act do not apply in respect of some of the
employees, the provisions contained in Paragraph 2(f) of the Scheme of
1952 must be strictly construed; and having taken the benefit of one
Scheme, the employees cannot compel the employer to comply with the
provisions of the Act. With these observations, the learned Single Judge
G allowed the writ petition and remanded the matter to the authorities for
re-determination of the amount of provident fund payable by the appellants,
after treating the retired employees as “excluded employees”, but after
taking into account those employees who were seeking to be included
under the Act voluntarily.
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5. Aggrieved by the order so passed by the learned Single Judge, A
the Central Provident Fund Commissioner and the Regional Provident
Fund Commissioner preferred the Letters Patent appeal that has been
considered and allowed by the Division Bench of High Court at Calcutta
by way of the impugned judgment and order dated 07.05.2008.
5.1. The Division Bench took note of the meaning assigned to the B
expressions “Fund” and “Scheme” in the Act of 1952 as also the definition
of “excluded employee” in Paragraph 2(f) of the Scheme of 1952 and
rejected the contentions of the writ petitioners that the employees in
question were to be treated as excluded employees while observing as
under:
C
“We are unable to accept the submission of Mr. Sengupta
that the receipt of GPF and the Pension by the retired railway
employees would be as if full payment has been received under
paragraph 69(1). There can be no addition to the term “Fund”
as defined under Section 2(h). It is also not possible to accept
that since the Railway Employees have retired on D
superannuation and are beyond the age of 55 years, they
would be on par with the “excluded employees”. There is no
maximum age limit prescribed in any of the provisions of the
Act or the 1952 Scheme for an employee to become a member
of the Fund or the Scheme. It is claimed that the term “Scheme” E
refers only to the Employees Provident Fund Scheme framed
under Section 5. The term “excluded employee” therefore has
to be co-related to the employee who was a member of the
“fund” as defined under Section 2(h) of the Act. Such an
employee would be an “excluded employee” when the full
amount has been withdrawn by him on retirement from service F
after attaining the age of 55 years i.e., in terms of Paragraph
69(1)(a). The provision being crystal clear does not admit of
any other interpretation. Paragraph 69(1)(c) deals with an
employee who withdraws the full amount standing to his credit
immediately after migration from India for permanent G
settlement abroad and for taking employment abroad.
In our opinion, there can be no dissections of these provisions
as proposed by Mr. Sengupta. Under paragraph 2(f)(i) a
retired employee would be an excluded employee. Under
Paragraph 2(f)(ii) an employee who is otherwise entitled to H
72 SUPREME COURT REPORTS [2019] 5 S.C.R.

A become a Member of the fund becomes an excluded employee
as he is earning beyond the stipulated minimum that is required
for an employee to become a Member of the Scheme. This
provision clearly demonstrates the underlying principle of
the Provident Fund Act is to provide social security for those
employees who otherwise would not be in a position to save
B
any money from their wages. Paragraph 2(f)(iv) again
provides that an apprentice shall be an excluded employee
till he becomes a fullfledged employee. There is a qualitative
difference between Paragraph 2(f)(i) on the one hand and
Paragraph 2(f)(ii) & (iv) on the other. Paragraph 2(f) 1(i)
C provides exclusion only to the employees who have already
received retirement benefits. On the other hand, under Clause
2(f)(ii) and 2(f)(iv) an employee may be an excluded employee
at one point and may not be at a subsequent point. But benefit
of these provisions cannot be extended to any employees who
are not erstwhile members of a fund administered by the
D
Central Board, under Section 5A of the Act
The ‘Fund’ created by the exempted establishment under
Section 17(1)(a) cannot be equated with the Fund which is
established by the Central Board under Section 5(1). Nor can
it be added to the definition of Fund under Section 2(h) of
E the Act. It is for this reason that the appropriate Government
can only exempt an establishment from the operation of the
scheme under Section 17(1) upon forming an opinion that
the employees of such an establishment enjoyed benefits which
are not less favourable to the employee than the benefits
F available under the Act or any Scheme made under the Act.
In fact, the exemption can only be granted on consultation
with the Central Board. This provision is made only to give
supervisory control to the Appropriate Government over
individual employers seeking exemption. But this provision
cannot be put on the same pedestal as Section 5(1) of the Act.
G It is admitted position that employees of the Railways are not
members of the 1952 Scheme. Therefore, these retired
employees cannot be treated as excluded employees covered
under Paragraphs 69(1)(a) and 26 of the 1952 Scheme. There
is a clear distinction between a fund which is created by the
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Central Government and is administered by the Central Board A
under Section 5(1)(a) and a fund created by a private
employer, exempted under Section 17(1) and administered by
Board of Trustees under Section 17(1A) and (b). There can
be no intermingling of the two provisions. “
5.2. In view of the above, the Division Bench concluded on the B
matter in the following:
“In view of the above, we find that the judgment of the
learned Single Judge is not sustainable in law. We are unable
to hold that retired employees of the Railways can be treated
as excluded employees. We are also unable to hold that, not C
including the retired employees in the category of excluded
employees would in any manner contravene the provisions of
the Act or the Scheme. We are unable to accept that bringing
the Railway employees within the purview of the Act and the
Scheme would result in unjust enrichment of the retired
employees. We are of the opinion that an employee who retires D
after serving an exempted employer would not fall within the
category of excluded employees on re-employment and would
be covered by the Act and the 1952 Scheme. We are also
unable to accept that since the employees covered under
Paragraph 2(f)(i) and (ii) are excluded employees, all E
employees who had drawn the full amount from any other
Provident Fund should also be treated as excluded employees.
In view of the above, we allow this appeal and set aside the
order passed by the learned Single Judge.
Consequently, the writ petition being W.P. No. 2982(W) of F
2005 shall be dismissed.”
6. Assailing the judgment aforesaid, learned counsel for the
appellant has strenuously argued that the Division Bench of High Court
has erred in interpreting the term “excluded employee” and in holding
that the retired employees of the Railways, even when they had G
withdrawn the full amount from their provident fund, cannot be treated
as excluded employees. The learned counsel emphasised on the
submissions that the retired Railway employees, who were covered under
GPF Scheme while in service, who had drawn all the superannuation
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74 SUPREME COURT REPORTS [2019] 5 S.C.R.

A benefits including the PF, and who were also receiving pension under
the CPG rules, would fall within the definition of “excluded employees”
as contained in clause (i) of Paragraph 2(f) of the Scheme of 1952.
Learned counsel submitted that as per Paragraph 26 thereof, the Scheme
of 1952 shall apply to all the employees other than excluded employees;
and, as per Paragraph 2(f)(i), an excluded employee is the one who,
B
having been a member of a provident fund, had withdrawn the full amount
of his accumulations in the fund under clause (a) or (c) of sub-paragraph
(1) of Paragraph 69. Therefore, according to the learned counsel, the
employees concerned in the present case ought to be treated as “excluded
employees”, for having withdrawn their PF accumulated with the Indian
C Railways after having reached the age of superannuation. Further,
according to the learned counsel, if these employees are not treated as
“excluded employees”, it would amount to their unjust enrichment, which
has never been the intention of the Act of 1952 or the Scheme thereunder.
The learned counsel contended that the Division Bench of High Court
has erred in holding that Paragraph 69 of the said Scheme does not
D
apply to the case of retired Railway employees and such retired
employees, though not covered under the Act, came to be so covered on
their re-employment in an establishment covered under the said Act.
According to the learned counsel, the Division Bench has erred in
interpreting the definitions of ‘Fund’ and ‘Scheme’ and in restricting the
E definition of ‘Fund’ under Section 2(h) of the Act by holding that even
after retiring from the Railways and receiving the benefits under GPF
Scheme, the said employees are not “excluded employees” as the said
employer is not covered under the Scheme of 1952.
7. Per contra, learned counsel for the contesting respondents
F has referred to the object as also the arrangement of the Act of 1952
and has particularly submitted that two different sets of provident fund
Schemes are envisioned: on one hand is the Scheme contemplated by
Section 5 of the Act, the Scheme of 1952 being that Scheme; and on the
other hand, there could be other Scheme/s, as permissible under Section
17 of the Act of 1952. According to the learned counsel, coverage of the
G employees referable to the Act of 1952 by one of the Schemes of provident

1
The Act was originally enacted on 04.03.1952 as “The Employees’ Provident Funds
Act, 1952" (No. 19 of 1952); its nomenclature was changed to “The Employees’
Provident Funds and Family Pension Fund Act, 1952" w.e.f. 23.04.1971; and its
nomenclature was again changed to the present one i.e., “The Employees’ Provident
H Funds and Miscellaneous Provisions Act, 1952" w.e.f. 01.08.1976
MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 75
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

fund is the rule and generally, such employees would be covered by the A
Scheme of 1952 with the exception that such coverage may not be
necessary when the employees receive the benefits under some other
Scheme, which are not less than those available under the Scheme of
1952. Learned counsel for the respondent submitted that in the framework
of the Scheme of 1952, only some specific classes of employees are
B
treated as “excluded employees”, as defined in Paragraph 2(f) thereof;
and, as per clause (i) of Paragraph 2(f), only such an employee would
be excluded who was earlier the member of the Fund under the Scheme
of 1952 and had withdrawn all the benefits thereunder. According to the
learned counsel, the present appeal is devoid of merits for the reason
that the Railway employees, who were not covered under the Scheme C
of 1952, do not fall within the definition of “excluded employees” as per
Paragraph 2(f) of the Scheme of 1952, even if they had withdrawn the
amount standing to their credit in any provident fund created under any
other Scheme.
8. We have bestowed thoughtful consideration to the rival D
submissions and have examined the record of the case with reference
to the law applicable.
9. For determination of the question involved in this matter,
appropriate it would be to briefly take note of the objects and reasons
behind the Act of 1952 as also the relevant provisions thereof and the E
relevant stipulations in the Scheme framed thereunder i.e., the Scheme
of 1952.
9.1. The background aspects had been that, taking note of the
need to provide for the institution of contributory provident funds for the
purpose of financial security of industrial workers, the Government of F
India promulgated the Employees’ Provident Fund Ordinance with effect
from 15.11.1951, which was later on replaced by the Act of 19521. Thus,
the concept underlying the enactment had been of providing for
compulsory contributory provident funds for safeguarding the future of
industrial workers. Elaborate provisions have been made in the Act for
creation of a Fund, to be settled in accordance with a Scheme to be G
framed by the Central Government. However, the Act also provides for
continuation of such of the other provident funds, which are offering
equal or more advantageous terms to the employees concerned and are
operating efficiently.
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76 SUPREME COURT REPORTS [2019] 5 S.C.R.

A 9.1.1. In the Act of 1952, the expression “employee” is defined in
clause (f) of Section 2 as under:
“(f) “employee” means any person who is employed for wages
in any kind of work, manual or otherwise, in or in connection
with the work of an establishment, and who gets, his wages
B directly or indirectly from the employer, and includes any
person,-
(i) employed by or through a contractor in or in connection
with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice
C engaged under the Apprentices Act, 1961 (52 of 1961), or
under the standing orders of the establishment;”
9.1.2. The concepts of “exempted employee” and “exempted
establishment” are defined in clauses (ff) and (fff) of Section 2 of the
Act of 1952 as under:
D
“(ff) “exempted employee” means an employee to whom a
Scheme or the Insurance Scheme, as the case may be, would,
but for the exemption granted under section 17, have applied;
(fff) “exempted establishment” means an establishment in
respect of which an exemption has been granted under section
E
17 from the operation of all or any of the provisions of any
Scheme or the Insurance Scheme, as the case may be, whether
such exemption has been granted to the establishment as such
or to any person or class of persons employed therein;”
9.1.3. The expression “Fund” is defined in clause (h) of Section
F
2 of the Act of 1952 as under:
“(h) “Fund” means the provident fund established under
a Scheme;”
9.1.4. The expression “Scheme” means the one framed under
G Section 5 of the Act of 1952 and is defined in clause (l) of Section 2 as
under:
“(l) “Scheme” means the Employees Provident Fund Scheme
framed under section 5;”

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MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 77
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

9.1.5. Section 5 of the Act of 1952, providing for the Employees’ A
Provident Fund Scheme, reads as under2:
“5. Employees’ Provident Funds Scheme. – (1) The Central
Government may, by notification in the Official Gazette, frame
a scheme to be called the Employees’ Provident Fund Scheme
for the establishment of provident funds under this Act for B
employees or for any class of employees and specify the
establishments or class of establishments to which the said
Scheme shall apply and there shall be established, as soon as
may be after the framing of the Scheme, a Fund in accordance
with the provisions of this Act and the Scheme.
C
(1A) The Fund shall vest in, and be administered by, the Central
Board constituted under section 5A.
(1B) Subject to the provisions of this Act, a Scheme framed
under sub-section 1 may provide for all or any of the matters
specified in Schedule II. D
(2) A Scheme framed under sub-section 1 may provide that
any of its provisions shall take effect either prospectively or
retrospectively on such date as may be specified in this behalf
in the Scheme.”
9.1.6. For the purpose of the question at hand, sub-section (1) E
and sub-section (1-A) of Section 17 of the Act of 1952, relating to the
powers of the appropriate Government to grant exemption and the
consequence thereof, could also be taken note of as under:
“17. Power to exempt - (1) The appropriate Government may,
by notification in the Official Gazette, and subject to such F
conditions as may be specified in the notification, exempt,
whether prospectively or retrospectively, from the operation
of all or any of the provisions of any Scheme –
2
The original Section 5 has undergone several changes by way of amendments. The
relevant amendments to be noticed for the present purpose are that by Act No. 37 of G
1953, original Section 5 was re-numbered as sub-section (1), the expressions for
establishment of Fund soon after framing of Scheme were added, and sub-section (2)
was also inserted. Moreover, by Act No. 28 of 1963, Sub-section (1A) to Section 5
(providing for vesting and administration of Fund in and by the Central Board) was
inserted. The provisions relating to Central and State Boards and co-related aspects
were also inserted as Sections 5A to 5E by the said Act No. 28 of 1963, which need not
be dilated upon, for being not relevant for present purpose H
78 SUPREME COURT REPORTS [2019] 5 S.C.R.

A (a) any establishment to which this Act applies if, in the opinion
of the appropriate Government, the rules of its provident fund
with respect to the rates of contribution are not less favourable
than those specified in section 6 and the employees are also
in enjoyment of other provident fund benefits which on the
whole are not less favourable to the employees than the
B
benefits provided under this Act or any Scheme in relation to
the employees in any other establishment of a similar character;
or
(b) any establishment if the employees of such establishment
are in enjoyment of benefits in the nature of provident fund,
C pension or gratuity and the appropriate Government is of
opinion that such benefits, separately or jointly, are on the
whole not less favourable to such employees than the benefits
provided under this Act or any Scheme in relation to employees
in any other establishment of a similar character:
D Provided that no such exemption shall be made except after
consultation with the Central Board which on such
consultation shall forward its views on exemption to the
appropriate Government within such time limit as may be
specified in the Scheme.
E (1A) Where an exemption has been granted to an establishment
under clause (a) of sub-section (1),-
(a) the provisions of sections 6, 7A, 8 and 14B shall, so far as
may be, apply to the employer of the exempted establishment
in addition to such other conditions as may be specified in
F the notification granting such exemption, and where such
employer contravenes, or makes default in complying with
any of the said provisions or conditions or any other provision
of this Act, he shall be punishable under section 14 as if the
said establishment had not been exempted under the said
clause (a);
G
(b) the employer shall establish a Board of Trustees for the
administration of the provident fund consisting of such
number of members as may be specified in the Scheme;

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MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 79
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

(c) the terms and conditions of service of members of the Board A
of Trustees shall be such as may be specified in the Scheme;
(d) the Board of Trustees constituted under clause (b) shall–
(i) maintain detailed accounts to show the contributions
credited, withdrawals made and interest accrued in respect
of each employee; B

(ii) submit such returns to the Regional Provident Fund
Commissioner or any other officer as the Central Government
may direct from time to time;
(iii) invest the provident fund monies in accordance with the C
directions issued by the Central Government from time to time;
(iv) transfer, where necessary, the provident fund account of
any employee; and
(v) perform such other duties as may be specified in the
Scheme. D
*** *** *** “
9.2. After having taken note of the relevant provisions of the Act
of 1952, essential it is to take into comprehension the relevant provisions
and stipulations of the Scheme of 1952 that has been, as noticed, framed
by the Central Government under Section 5 of the Act of 1952. E

9.2.1. Noteworthy it is that there is no definition of an “excluded
employee” in the Act of 1952. In fact, this expression comes in operation
for the purpose of exclusion of certain employees from compulsion to
join the Fund created under the Scheme of 1952. Therefore, this expression
is defined only in the Scheme of 1952, in clause (f) of paragraph 2 thereof, F
as under:
“(f) “excluded employee” means—
(i) an employee who, having been a member of the Fund,
withdrew the full amount of his accumulations in the Fund G
under clause (a) or (c) of sub-paragraph (1) of paragraph
69;

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80 SUPREME COURT REPORTS [2019] 5 S.C.R.

A (ii) an employee whose pay at the time he is otherwise entitled
to become a member of the Fund, exceeds fifteen thousand
rupees per month;3
Explanation. —’Pay’ includes basic wages with dearness
allowance, retaining allowance (if any) and cash value of
B food concessions admissible thereon;
(iii) [omitted]4;
(iv) an apprentice.
Explanation.— An apprentice means a person who, according
C to the certified standing orders applicable to the factory or
establishment, is an apprentice, or who is declared to be an
apprentice by the authority specified in this behalf by the
appropriate Government;”
9.2.2. Paragraph 26 of the Scheme of 1952 specifies the classes
D of employees entitled to, and required to, join the Fund as also the co-
related aspects. Useful it shall be to keep in view the fact that the
expression “Fund”, as occurring in Paragraph 26 refers to the Fund
created under the Scheme of 19525. This Paragraph 26 reads as under:
“26. Classes of employees entitled and required to join the
fund.-
E
(1) (a) Every employee employed in or in connection with the
work of a factory or other establishment to which this Scheme
applies, other than an excluded employee, shall be entitled
and required to become a member of the Fund from the day
this paragraph comes into force in such factory or other
F
establishment.
(b) Every employee employed in or in connection with the
work of a factory or other establishment to which this Scheme
applies, other than an excluded employee, shall also be
entitled and required to become a member of the fund from
G
3
At the relevant point of time, in sub-clause (ii) the figures had been ‘six thousand and
five hundred rupees’ in place of the present figures of ‘fifteen thousand rupees
’4 Sub-clause (iii) and explanation thereto were omitted by GSR 1467 dated 02.12.1960
5
The contra-distinction of this “Fund” with a “private provident fund” is noticeable in
sub-paragraph (5), where reference is made to an exempted establishment.
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MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 81
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

the day this paragraph comes into force in such factory or A
other establishment if on the date of such coming into force,
such employee is a subscriber to a provident fund maintained
in respect of the factory or other establishment, or in respect
of any other factory or establishment (to which the Act
applies) under the same employer:
B
Provided that where the Scheme applies to a factory or other
establishment on the expiry or cancellation of an order of
exemption under section 17 of the Act, every employee who
but for the exemption would have become and continued as a
member of the Fund, shall become a member of the fund
forthwith. C

(2) After this paragraph comes into force in a factory or other
establishment, every employee employed in or in connection
with the work or that factory or establishment, other than an
excluded employee, who has not become a member already
shall also be entitled and required to become a member of the D
fund from the date of joining the factory or establishment.
(3) An excluded employee employed in or in connection with
the work of a factory or other establishment to which this
Scheme applies shall, on ceasing to be such an employee, be
entitled and required to become a member of the fund from E
the date he ceased to be such employee.
(4) On re-election of an employee or a class of employees
exempted under paragraph 27 or paragraph 27 A to join the
fund or on the expiry or cancellation of an order under that
paragraph, every employee shall forthwith become a member F
thereof.
(5) Every employee who is a member of a private provident
fund maintained in respect of an exempted factory or other
establishment and who but for exemption would have become
and continued as a member of the fund shall, on joining a G
factory or other establishment to which this Scheme applies,
become a member of the fund forthwith.
(6) Notwithstanding anything contained in this paragraph an
officer not below the rank of an Assistant Provident Fund
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82 SUPREME COURT REPORTS [2019] 5 S.C.R.

A Commissioner may, on the joint request in writing of any
employee of a factory or other establishment to which this
Scheme applies and his employer, enroll such employee as a
member or allow him to contribute more than fifteen thousand
rupees of his pay per month if he is already a member of the
fund and thereupon such employee shall be entitled to the
B
benefits and shall be subject to the conditions of the fund,
provided that the employer gives an undertaking in writing
that he shall pay the administrative charges payable and shall
comply with all statutory provisions in respect of such
employee.”
C 9.2.3. For comprehension of all the relevant provisions and
stipulations, a reference to sub-paragraph (1) of paragraph 69 of the
Scheme of 1952 is also pertinent and the same, as applicable at the
relevant point of time, may be noticed as under6:
“69. Circumstances in which accumulations in the Fund are
D payable to a member.- (1) A member may withdraw the full
amount standing to his credit in the Fund—
(a) on retirement from service after attaining of the age of 55
years:

E Provided that a member, who has not attained the age of 55
years at the time of termination of his service, shall also be
entitled to withdraw the full amount standing to his credit in
the Fund if he attains the age of 55 years before the payment
is authorized;

F (b) on retirement on account of permanent and total incapacity
for work due to bodily or mental infirmity duly certified by
the medical officer of the establishment or where an
establishment has no regular medical officer, by a registered
medical practitioner designated by the establishment;
(c) immediately before migration from India for permanent
G
settlement abroad or for taking employment abroad;
(d) on termination of service in the case of mass or individual
retrenchment;
6
This paragraph 69 and its sub-paragraphs and clauses have also undergone several
amendments from time to time; however, the contents as reproduced herein are more or
H less in the same form, as are applicable to the present case.
MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 83
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

(dd) on termination of service under a voluntary scheme of A
retirement framed by the employer and the employees under
a mutual agreement specifying, inter alia, that notwithstanding
the provisions contained in sub-clause (a) of clause (oo) of
section 2 of the Industrial Disputes Act, 1947, excluding
voluntary retirements from the scope of definition of
B
“retrenchment” such voluntary retirements shall for the
purpose be treated as retrenchments by mutual consent of the
parties;
(e) in any of the following contingencies, provided the actual
payment shall be made only after completing a continuous
period of not less than two months immediately preceding the C
date on which a member makes the application for
withdrawal:—
(i) where a factory or other establishment is closed but certain
employees who are not retrenched, are transferred by the
employer to other factory or establishment, not covered under D
the Act;
(ii) where a member is transferred from a covered factory or
other establishment to another factory or other establishment
not covered under the Act, but is under the same employer;
and E

(iii) where a member is discharged and is given retrenchment
compensation under the Industrial Disputes Act, 1947 (14 of
1947);”
10. Before proceeding further, we may take note of a decision of F
this Court referred to by the learned counsel for the parties, being that in
the case of N.K. Jain and Ors. v. C.K. Shah and Ors.: (1991) 2 SCC
495. The relevant background aspect of the said case had been that the
establishment in question was governed by the provisions of the Act of
1952 but was exempted under Section 17; and had its own trust in respect
of the provident fund contributions. However, the establishment failed to G
pay such contributions for some period during the year 1974 and there
was a default. The question was as to whether such default would entail
prosecution also, or only the exemption was to be cancelled ? The said

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84 SUPREME COURT REPORTS [2019] 5 S.C.R.

A case, being related to a different fact situation and different controversy
may not have a direct bearing on the present matter but, the observations
of this Court, illuminative on the setup and framework of the Act and
the Scheme of 1952, could be usefully reproduced as under:
“7. On a perusal of the above extracted provisions of the Act
B the following aspects to the extent relevant to the present case
can be spelt out. The management of an establishment has to
contribute to the provident fund and the government under
Section 5 can frame a Scheme called Employees’ Provident
Fund Scheme and such a Scheme was framed in the year 1952.
The Scheme provides for the establishment of provident fund
C under the Act for employees of the establishments specified
therein. Section 6 is the material provision and deals with
contributions which may be provided under the Scheme and
also prescribes the rate of contribution to the fund and that
the employees’ contribution should be equal to the contribution
D payable by the employer. Section 14 deals with the penalties
and Section 14(1-A) lays down that an employer who
contravenes, or makes default in complying with the
provisions of Section 6 shall be punishable with imprisonment
for a term which may extend to six months but shall not be
less than three months in case of default in payment of the
E employees’ contribution which has been deducted by the
employer from the employees’ wages. But for adequate reasons
it can be less. Paragraph 76 of the Scheme also provides for
punishment for failure to pay such contributions to the fund.
Then we have Section 17 which provides for the exemption.
F As per the said section the appropriate government may by
notification and subject to such conditions, as may be
specified in the notification, exempt from the operation of all
or any of the provisions of any Scheme (in the present case
1952 Scheme) if the appropriate government is satisfied that
the rules of the provident fund which a particular
G establishment is following in the matter of contribution to the
provident fund are not less favourable than those specified
in Section 6 and that the employees are also in enjoyment of
other provident fund benefits. In other words the exemption
from the operation of the Scheme is granted provided the
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MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 85
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

particular establishment makes contribution as per its own A
rules governing the contribution to the fund, which in other
words, can be called a provident fund scheme of its own are
not less favourable than those specified in Section 6.
Accordingly the exempted establishment has to provide for its
employees the benefits which are in no way less favourable
B
than the ones provided under the Act and the Scheme.”
10.1. In the said case, this Court finally held that the failure to
make the contributions by an exempted establishment to the provident
fund as per its own rules may also attract the penalties under sub-sections
(1-A) and (2-A) of Section 14 of the Act of 1952.
C
11. In the scheme and structure of the Act of 1952, it is but clear
that for the specified establishments or class of establishments, the
Central Government was to frame a Scheme, to be called “the
Employees’ Provident Fund Scheme”; and soon after framing of such
Scheme, a Fund was to be established, which was to vest in, and
administered by, the Board constituted under Section 5A. As noticed, D
the expression “Fund” is defined in the Act of 1952 to mean the provident
fund established under a Scheme; and the expression “Scheme” is defined
to mean the Employees Provident Fund Scheme framed under Section
5. Indisputably, the Scheme of 1952 is the one framed by the Central
Government in exercise of the powers conferred by Section 5 ibid. We E
shall examine the provisions of the Scheme of 1952 a little later. At this
juncture, apposite it would be to take note of another feature of the Act
of 1952 emanating from the provisions relating to exemption, as contained
in Section 17 thereof.
12. By virtue of sub-section (1) of Section 17, an establishment F
could be exempted from the operation of all or any of the provisions of
any Scheme if: (a) in regard to the establishment to which the Act applies,
the appropriate Government is of opinion that the rules of its provident
fund, with respect to the rates of contributions, are not less favourable
for the employees than those specified in Section 6 and the employees
are in enjoyment of other provident fund benefits which, on the whole, G
are not less favourable than the benefits available under the Act or under
the Scheme in relation to any other establishment of similar character;
and (b) in regard to any other establishment, the appropriate Government
is of opinion that benefits in the nature of provident fund, pension or
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86 SUPREME COURT REPORTS [2019] 5 S.C.R.

A gratuity, as available to the employees of such establishment are, on the
whole, not less favourable than the benefits provided under the Act or
any Scheme in any other establishment of similar character.
12.1. When an exemption is granted to an establishment under
clause (a) of sub-section (1) of Section 17 of the Act of 1952, several
B duties are cast upon the employer as specified in sub-section (1-A)
thereof, with penal provisions in the event of default. We need not elaborate
on various other provisions contained in Section 17. Suffice would be to
notice for the present purpose that coverage of the employees like the
one engaged in the establishment of appellants is the rule; and ordinarily,
the employees are expected to be covered by the Scheme framed under
C Section 5 of the Act of 1952 with the exception being that in case of
availability of equivalent or more favourable benefits in an establishment,
the appropriate Government could grant exemption. As per sub-section
(2) of Section 17, even the Scheme may make a provision for exemption
but the basic requirement being again that the persons or the class of
D persons to be exempted are entitled to such benefits which are, on the
whole, not less favourable than the benefits provided under the Act and
the Scheme thereunder i.e., the Scheme of 19527. All the requirements
of Section 17 make the position undoubtedly clear that the provisions are
intended to ensure optimum benefits for the employees and even the
exemption is granted only on the satisfaction of appropriate Government
E about existence of equivalent or more favourable provident fund Scheme
for the employees concerned.
13. The Scheme of 1952 was framed by the Central Government
on 02.09.1952 i.e., within 6 months of the enactment of the Act of 1952.
The provisions of the Scheme are generally made applicable, subject to
F the provisions of Sections 16 and 17 of the Act, to all the factories and
other establishments to which the Act applies or is applied under sub-
7
Sub-section (2) of Section 17 reads as under:
(2) Any Scheme may make provision for exemption of any person or class of persons
employed in any establishment to which the Scheme applies from the operation of all
or any of the provisions of the Scheme, if such person or class of persons is entitled to
G
benefits in the nature of provident fund, gratuity or old age pension and such benefits,
separately or jointly, are on the whole not less favourable than the benefits provided
under this Act or the Scheme:
Provided that no such exemption shall be granted in respect of a class of persons unless
the appropriate Government is of opinion that the majority of persons constituting
such class desire to continue to be entitled to such benefits.
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sections (3) and (4) of Section 1 or under Section 3 of the Act. The A
provisions of the Scheme of 1952 have been extended to various
establishments from time to time under clause (b) of sub-paragraph (3)
of Paragraph 1 thereof. As per Paragraph 26 of the Scheme of 1952,
every employee employed in or in connection with the work of the factory
or other establishment to which this Scheme applies, is entitled to, and is
B
obliged to, become a member of the Fund from the date the Scheme
would come into force for such factory or establishment, except the
“excluded employees”. Significantly, even an “excluded employee”, on
ceasing to be so i.e., on ceasing to be an “excluded employee”, is entitled
to, and is required to, become a member of the Fund from the date of
such cessation. C
13.1.In the framework of the Scheme of 1952, exclusion is provided
under clause (i) of Paragraph 2(f) thereof to an employee who had been
a member of the Fund and had withdrawn full amount of his accumulations
in the Fund under clause (a) or (c) of Paragraph 69(1). Now, clause (a)
of the said Paragraph 69(1) of the Scheme of 1952 refers to a member D
who would withdraw the full amount standing to his credit in the Fund on
retirement from service after attaining the age of 55 years. Clause (c) is
not relevant for the present purpose as the same relates to a member
who withdraws the amount before migration from India for permanent
settlement or taking employment abroad but then, a comprehensive look
at various clauses of paragraph 69(1) makes it clear that reference therein E
is to a member of the Fund who withdraws full amount standing to his
credit for different eventualities like regular retirement; retirement for
disablement or incapacity; migration from the country; termination of
service; accepting a voluntary retirement scheme; closure of the factory;
transfer from a covered factory or establishment to another factory or F
establishment not covered under the Act etc.
14. It is not a matter of much debate in this case that the appellants
otherwise answer to the description of “employer” under the Act of
1952 and their establishment is covered thereunder. The basic contention
urged in this matter on behalf of the appellants is that the persons engaged G
by them had been the members of General Provident Fund while working
as the employees of Railways and had withdrawn the full amount of
accumulations in GPF and are, therefore, to be treated as “excluded
employees”. This contention has fundamental shortcomings as pointed
out infra.
H
88 SUPREME COURT REPORTS [2019] 5 S.C.R.

A 14.1. The crucial aspect to be considered in this matter is as to
whether the definition of “excluded employees” in Paragraph 2(f) as
also the stipulation in Paragraphs 26 and 69 of the Scheme of 1952 refer
to any provident fund or only to the Fund under the Scheme of 1952? As
noticed above, in the setup and structure of the Act of 1952, specific
distinction is maintained between the Fund, which is created by the Central
B
Government under Section 5(1) of the Act and any other provident fund,
which is created by an employer. Significantly, clause (f) of Paragraph 2
of the Scheme of 1952 refers to “the Fund” and not to “any Fund”; and
Paragraphs 26 and 69 also refer to “the Fund” and not to “any Fund”.
The determiner “the”, as occurring in Paragraph 2(f) as also Paragraph
C 69 before the expression “Fund” makes it clear that the reference therein
is only to the Fund which is created under the Scheme of 1952 and it is
not a general reference to any Fund. The requirement of joining the
Fund under Paragraph 26 ibid. is also of joining that Fund which is
created under the Scheme of 1952. In other words, obviously and
undoubtedly, the Fund referred to in Paragraphs 2(f), 26 and 69 of the
D
Scheme of 1952 is that Fund, which is created under the Scheme of
1952 and the reference is not to any other Fund. Thus, to be covered
under the expression “excluded employee” by virtue of clause (i) of
paragraph 2(f) read with clause (a) of paragraph 69(1) ibid., the employee
must be such who was a member of the Fund established under the
E Scheme of 1952 and who had withdrawn full amount of his accumulations
in the said Fund on retirement from service after attaining the age of 55
years.
14.2. On the plain interpretation aforesaid, we have not an iota of
doubt that the retired Railway employees, who had withdrawn their
F accumulations in General Provident Fund or any other Fund of which
they were members, could not have been treated as “excluded employees”
for the purpose of the Scheme of 1952 for the reason that such a
withdrawal had not been from the Fund established under the Scheme
of 1952. In fact, there was no occasion for them to make any withdrawal
from the Fund established under the Scheme of 1952 because they were
G never the members of the said Fund. In other words, the employees in
question were not answering to the requirements of clause (i) of
paragraph 2(f) read with clause (a) of paragraph 69(1) of the Scheme
of 1952 and hence, were not the “excluded employees”. The Division
Bench of the High Court has rightly rejected the contention of appellants
H that every employee, who had withdrawn full amount from any provident
MODERN TRANSPORTATION CONSULTATION SERVICES PVT. 89
LTD. v. C.P.F. COMMNR. E.P.F.O. [DINESH MAHESHWARI, J.]

fund, should be treated as an “excluded employee”. In our view, the A
answer by the Division Bench of the High Court is in accord with law
and deserves to be approved.
15. We may also take note of and deal with a few ancillary aspects.
The appellants, in their initial response to the proposition for coverage of
the employees in question under the Scheme of 1952, attempted to state B
that most of the said employees were above 58 years of age and that
they had expressed unwillingness to join the Fund under the said Scheme.
It does not appear from the record if the concerned employees
categorically made any such expression of unwillingness. Even otherwise,
as noticed, the provisions of the Act and the stipulations of the Scheme
of 1952 are mandatory in character and the application thereof could not C
have been averted by the appellants or the said employees except on
certain eventualities as mentioned in Section 17 of the Act as also
Paragraph 26 of the Scheme of 1952. Such eventualities are indeed
non-existent in the present matter. So far the aspect relating to age is
concerned, the operation and effect of the Act and the Scheme of 1952 D
are not restricted with reference to any age limit of the employee. Such
a suggestion relating to the age of the employees had been entirely
baseless and has rightly been disapproved.
15.1. Apart from the above, the appellants also alleged that they
had applied for exemption and no decision was taken on their E
representation. In this regard, it is noticed that the appellant had not
made any such submission that they had any better and beneficial scheme
for their employees. In any case, there is no concept of any holidaying
in payment of contribution by the employer by merely moving an
application for exemption; and when there was no order of exemption
under Section 17 by the competent authority, the appellant-company was F
under the liability to make payment of its contribution.
16. Before concluding, we may also point out that the observations
by the learned Single Judge of High Court in this matter, that clause (i)
of Paragraph 2(f) of the Scheme of 1952 has to be applied in relation to
the withdrawal from any provident fund and else, an employee may G
keep on successively deriving benefits, remain rather unwarranted
because the principle underlying the enactment and the Scheme of 1952
is to provide financial security to the employees. The concept of exclusion
from the Scheme of 1952 is limited to the class/es of employees mentioned
in Paragraph 2(f) only; and the area of operation of this exclusion clause H
90 SUPREME COURT REPORTS [2019] 5 S.C.R.

A cannot be expanded by way of an assumption about the alleged extra
advantage likely to be driven home by an employee. In fact, even the
assumption of the learned Single Judge does not appear apt in the
framework of the Act and the Scheme of 1952. Whatever an employee
gets by virtue of the Act of 1952 is basically the accumulation in his
provident fund account, where he and his employer do contribute. The
B
learned Single Judge had gone to the extent of observing that when the
employees earning more than the particular amount (Rs. 6,500/- per
month at the relevant time) were excluded under clause (ii) of Paragraph
2(f) of the Scheme of 1952, the retired employees who had received
their accumulations could also be excluded under clause (i) of Paragraph
C 2(f). With respect, we are unable to find any logic in these observations
because the stipulation in clause (ii) of Paragraph 2(f) relates to an entirely
different class of employees with reference to the quantum of their pay;
and exclusion of such class of employees as per clause (ii) cannot lead
to any corollary that clause (i) be also expanded beyond its plain language.
The order passed by the learned Single Judge, being based on entirely
D
irrelevant considerations, has rightly been disapproved by the Division
Bench of High Court.
17. To summarise, in the framework and setup of the Scheme of
1952, the concept remains plain and clear that if a person is member of
the Fund created thereunder i.e., under the Scheme of 1952 and withdraws
E all his accumulations therein, he may not be obliged to be a member of
the same Fund under the Scheme of 1952 over again and could be treated
as an “excluded employees”. However, such is not the relaxation granted
in relation to an employee who was earlier a member of any other Fund
but later on joins such an establishment where he would be entitled to
F membership of the Fund created under the Scheme of 1952. This
framework of the provisions and stipulations appears to be best serving
the interest of employees, while providing them with continued financial
security. Therefore, we find no reason to take any view different than
the one taken by the Division Bench of the High Court in this case.
G 18. For what has been discussed hereinabove, this appeal fails
and is, therefore, dismissed.

Kalpana K. Tripathy Appeal dismissed.

H