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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 721 OF 2013

M/s Yeshwant Gramin                   …Appellant Shikshan Sanstha

Versus

The Assistant Provident  Fund Commissioner & Ors.  …Respondents

JUDGMENT

A.M. KHANWILKAR, J

1. The present civil  appeal arises from the judgment and final

order passed by the High Court of Judicature at Bombay, Nagpur

Bench dated 17th January, 2012 in Writ Petition No. 4013 of 2011.

The High Court has dismissed the aforesaid writ petition filed by

the  appellant,  which  had  assailed  the  order  of  the  Employees

Provident Fund Appellate Tribunal (for  short ‘Tribunal’)  dated 8th

April,  2011 whereby it  was held that the appellant is deemed to

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have defaulted in depositing the provident fund contributions of 16

(sixteen) of its part-time employees.

2. Before dealing with the legal submissions and issues, it would

be apposite to set out the factual matrix leading to the filing of the

present appeal:

a) The  appellant  is  a  registered  society  under  the  Societies

Registration Act,  1860 and Bombay Public Trusts Act,  1950 and

runs 29 (twenty nine) schools and junior colleges in the Wardha

District,  Nagpur.  Out  of  which,  28  (twenty  eight)  schools  and

colleges  purportedly  received  100%  grant-in  aid  from  the  State

Government.

b) Between  1996  and  1997,  due  to  administrative  exigency  16

part-time  librarians  were  appointed  to  some  of  the  appellant’s

colleges,  with  the  permission/approval  of  the  State  Government.

These librarians worked for lesser hours as opposed to the working

hours  put  in  by  regular,  full-time  employees.  The  appellant

contends that the entire process of appointment and approval was

monitored and supervised by the State Government. Further, the

appellant did not possess any direct control over the payment of or

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deductions to the salaries of its employees. It is done by the State

Authorities.

c) On  5th May,  1998,  the  appellant  forwarded  a  bill  of  one  of  the

part-time  librarians  to  the  Education  Officer,  with  a  request  to

deduct the provident fund. This request was declined vide a letter

dated 19th November, 1998, with a direction not to deduct provident

fund contributions of such part-time employees. Subsequently, on

5th March, 2004, the Director of Education issued a letter clarifying

that the contributory provident fund scheme was not applicable to

such part-time employees. In view of the aforesaid communications,

the appellant  had reason to believe that  it  was not  supposed to

deduct  and/or  deposit  provident  fund  contributions  of  its  16

part-time employees.

d) On 6th October, 2005, the officers of Respondent No.1 visited one of

the schools of  the appellant and sought details of the employees

and  payments  made  on  their  behalf  vis-à-vis  provident  fund

contributions.  

e) The appellant submitted its response to the aforesaid query vide its

letter dated 18th October, 2005, wherein the appellant mentioned

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that as per the law, it was not required to deduct provident fund

contributions of the concerned part-time employees.

f) The appellant, however, received a summons from Respondent No.1

dated 23rd May, 2006, to appear in connection with failure to remit

provident fund dues of  its  employees. Further correspondence in

that  regard  ensued  between  the  parties  and  adjournments  were

taken in the matter.

g) Ultimately, Respondent No.1 heard the matter and passed an order

dated 1st August, 2007, holding that the appellant was liable to pay

a  sum  of  Rs.16,89,796/-  as  outstanding  provident  fund

contributions.

h) The appellant then filed a review application dated 14th September,

2007 against the aforesaid order, on the ground that Respondent

No.1  had  failed  to  appreciate  certain  material  submissions  and

objections raised at the time of hearing. Respondent No.1 dismissed

the said review with a one-page order, without granting a hearing.

i) During  the  abovementioned  proceedings,  3  (three)  out  of  16

part-time  librarians  of  the  appellant  were  regularized  w.e.f  29th

September,  2007.  Another  librarian  was  regularized  w.e.f.  29th

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September, 2009.  This was done with the approval of  the State

Authorities.

j) Aggrieved by the aforesaid order passed by Respondent No.1, the

appellant  filed  an  appeal  before  the  Appellate  Tribunal,  which

rejected the appeal vide its order dated 8th April, 2011 inter alia on

the  ground  that  there  was  no  difference  between  full-time  and

part-time  employees  and  thus  the  appellant  was  bound  to

deduct/pay  the  provident  fund  contributions  in  respect  of  the

part-time employees.

k) Respondent No.1 thereafter issued a demand notice dated 10th May,

2011 to one of the schools of the appellant for payment of the due

amount  by  25th May,  2011.  That  was followed by a  show cause

notice as to why a warrant of arrest be not issued by Respondent

No.1, dated 23rd June, 2011. The appellant replied to the said show

cause notice vide its letter dated 8th July, 2007, asking for one week

time to pay the amount as demanded.

l) In the meanwhile, the appellant also filed Writ Petition No.4013 of

2011 before the High Court, challenging the order dated 8th April,

2011 passed by the Appellate Tribunal. The High Court stayed the

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order and directed the appellant to deposit Rs.4 lacs in court, which

it duly complied with.

m)Ultimately, on 17th January, 2012, the High Court was pleased to

dismiss the said writ petition.

3. In light of the above factual matrix, the present appeal raises

the  question  of  interpretation  of  Rule  20  of  the  Maharashtra

Employees of Private Schools (Conditions of Service) Rules, 1981, as

framed  under  the  Maharashtra  Employees  of  Private  Schools

(Conditions of  Service)  Regulation Act,  1977 (for  short  ‘the State

Rules’ and ‘the State Act’ respectively); as also of Section 16 of the

Employees’  Provident  Funds  and  Miscellaneous  Provisions  Act,

1952 (for short ‘the Central Act’). The primary issue is: Whether in

the present case, the provisions of the Central Act will apply to the

part-time employees in the schools/colleges of the appellant, whose

service conditions are governed by the provisions of the State Act

and  State  Rules.  The  relevant  provisions  are  reproduced

hereinbelow:

Section 16 of the Central Act reads as:

“(1) This Act shall not apply-

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a) to  any  establishment  registered  under  the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in  any State  relating  to  co-operative  societies, employing less than fifty persons and working without the aid of power; or

b) to  any  other  establishment  belonging  to  or under the 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

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;

[(2) If the Central Government is of opinion that having regard to the financial position of any class of {establishments} or other  circumstances  of  the  case,  it  is  necessary  or expedient so to do, it  may, by notification in the Official Gazette,  any  subject  to  such  conditions  as  may  be 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.]”

Section 20 of the State Rules reads as:  

“20. Provident Fund (1) Every employee (not being an employee who has opted for

pension) of an aided or unaided school working on a full time basis or every employee employed on part-time basis in more than one school  run by the same Management and

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doing full-time load of work in these schools, shall subscribe to the Contributory Provident Fund under the Contributory Provident Fund Rules (Bombay) as in force from time to time.

(2) Every  employee  of  an  aided  private  secondary  school working on a full time basis who was appointed before the 1st April 1966 and who had exercised in writing his option for a Contributory Provident Fund Scheme shall subscribed to that Fund as per rules made by Government and are in force in this behalf.”

4. Mr. Satyajit  Desai,  Ld. Counsel appearing for the appellant,

first submits that the schools of the appellant are receiving grant-in

aid  from  the  State  Government.  The  appellant  receives  100%

grant-in aid and has no separate source of income. Further, the 16

part-time  employees  in  question  were  appointed  with  the

permission and approval  of  the State Government. The appellant

does  not  even  have  direct  control  over  the  payment  of  and

deduction from its employees’ salaries. In fact, even the salary of

the concerned employees is directly issued by the State Education

Officer and deposited in their respective bank accounts.  

5. Mr. Desai then submits that in terms of Section 16(1)(b) of the

Central Act, the said Act has no application to an establishment

which  inter  alia is  under  the  control  of  the  State  Government,

which,  as  submitted  above,  is  clearly  the  case.  The  appellant’s

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schools  are  governed  by  the  State  Act  (and,  by  extension,  State

Rules) which over-rides the Central Act by virtue of being a special

statute. Further, the appellant which had employed the part-time

employees  is  an  establishment  registered  under  the  State

Co-operative  Societies  Act.  The  schools  in  which  the  part-time

employees were employed, have engaged less than 50 (fifty) persons

who  were  working  without  the  aid  of  power.  Consequently,  the

Central Act has no application to such establishment even in terms

of Section 16(1) (a) of that Act.

6. With regard to the status of the employees, Mr. Desai submits

that regardless of whether the appellant’s employees are full time or

part time, to be eligible for provident fund as set out in Rule 20 of

the  State  Rules,  they must be doing full  time load work.  In the

present case, the 16 part-time employees were assigned work only

for  around  18  hours  a  week  i.e.  from  10:30AM  to  2:00PM,  as

against the normal work load of 30 hours per week for full time or

regular employees. In other words, they were not doing full  time

work load and thus  not  covered by  the  Provident  Fund Scheme

operated  under  the  State  Act.  Consequently,  the  part  time

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employees are not  eligible  to receive  the benefit  of  the  provident

fund scheme framed by the State.

7. Mr. Desai then submits that the State Government resolution

dated 3rd August, 2006, directed that all part-time librarians who

had completed 5 (five) years in private schools, such as that of the

appellant, were to be upgraded and made full time employees. This

was further reiterated by the letter of the Education Officer dated

30th March, 2007, whereby the appellant was directed to implement

the aforesaid resolution. The fact that now the full-time employees

were given provident fund benefits by virtue of being regularised,

itself  shows  that  the  part-time  employees  were  not  entitled  to

provident fund benefits.  The State Government therefore, did not

make any deductions from their  salaries  towards provident  fund

employees’ contribution.  

8. Without  prejudice  to  any  of  the  aforesaid  arguments,  Mr.

Desai also submits that the appellant was always willing to deduct

the provident fund contributions from the salary of  its part time

employees and had even written to the concerned authority about

the same but was categorically asked to refrain from doing so by the

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Education  Officer  (Middle)  Zilla  Parishad,  Wardha  vide  its  letter

dated 19th November, 1998.

9. In  reply,  Mr.  Vijay  Prakash,  learned  counsel  appearing  for

Respondent  No.1,  submits  that  the  scheme  of  contributory

provident funds (CPF) under the provisions of the State Act and the

State  Rules  is  not  applicable  to  the  part-time  employees  of  the

appellant. Rather, it is the employees’ provident funds (EPF) scheme

framed  under  the  Central  Act  which  is  applicable.  Mr.  Prakash

buttresses his argument by submitting first  that the Central  Act

prevails over the State Act by virtue of the 1982 notification which

clearly brings educational institutions and, by extension, the benefit

of provident fund to the employees in such institutions, under the

ambit  of  the  Central  Act.  Secondly,  an  establishment  can  be

excluded from the purview of the Central Act only if it belongs to/is

under  the  control  of  the  State  or  Central  Government  and if  its

employees  are  entitled  to  CPF/pension  benefits.  Even  if  it  is

accepted that the appellant is controlled by the State Government,

the fact remains that the 16 part-time employees of the appellant

were not entitled to CPF/pension benefits by virtue of Rule 20 of the

State Rules itself, which clearly excludes them from receiving such

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benefits.  Admittedly,  the  employees  in  question  are  part-time

employees.  The  Rule  relied  upon  by  the  appellant  in  its  favour

actually  goes against  it.  Thus,  the appellant’s  schools cannot be

excluded from the purview of the Central Act.  

10. Mr.  Vijay  Prakash  would  then  submit  that  the  Central  Act

does not distinguish between part-time and full-time employees of

an establishment. An employee of such an establishment has to fit

into the definition of an employee as per the Central Act and not

any  other  Act.  The  appellant’s  argument  that  it  has  part-time

employees,  who  are  not  liable  to  have  their  provident  fund

deducted,  will  hold  no  ground  as  the  Central  Act  makes  no

distinction between such so-called part time employees and regular

employees.  

11. Mr. Vijay Prakash submits that the appellant’s stance, that it

was willing to extend the provident fund benefits to its employees

but was restrained by the State Education Officer, is without merit.

The State Education Officer is only concerned with CPF scheme and

not  with  EPF  scheme.   Admittedly,  CPF  is  inapplicable  to  the

part-time employees of the appellant, and thus there is no question

of  the  State  Education  Officer  preventing  the  appellant  from

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deducting  EPF from its  part-time employees’  salaries.  Infact,  the

High  Court  in  the  Impugned  Judgment  clearly  records  that  the

appellant ought to have taken steps to resolve the issue with the

State Education Officer by resorting to appropriate remedies, which

it has failed to do.

12. Mr. Kunal Cheema, learned counsel appearing on behalf of the

State of Maharashtra, submits that Rule 20 of the State Rules is

not  applicable  to  part-time employees  unless  they  work in more

than one school run by the same management and are doing full

time load of work in those schools. If a school is fully aided and if

Rule 20 is applicable to such part-time employees, only then will

the provident fund be deducted by the State Government as per the

State Scheme.

13. Mr. Cheema then submits that as per Government Resolution

No.CCPS-1005/126/SER-4  dated  31st October,  2005,  the

Government  has  introduced  a  new  scheme  titled  ‘Defined

Contribution  Pension  Scheme’,  to  replace  the  existing  pension

scheme applicable to government servants recruited on or after 1st

November, 2005. As per the resolution, the Government has  inter

alia decided  that  the  present  pension  scheme  and  the  existing

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General  Provident  Fund  Scheme  will  not  be  applicable  to

government servants recruited on or after 1st November, 2005 in the

State Government.

14. Mr. Cheema finally submits that as regards the 16 part-time

employees of the appellant, the said employees cannot be employed

in a permanent post by virtue of being part-time employees. Thus,

the State Government cannot deduct/pay the provident fund dues

of such employees as they are not permanent employees.

15. After hearing the submissions advanced by the counsel for the

respective parties, we deem it necessary to examine the purport and

interplay of the provisions of the Central Act and State Act, in order

to get clarity on the issue of applicability of the relevant Act.  First,

we may advert  to the Central  Act.   Section 1 of  the Central  Act

elucidates  the  application  of  the  said  Act  to  the  establishments

referred to therein.   The same reads thus:  

“1.Short title, extent and application–

(1)  This  Act  may  be  called  the  Employees’  Provident Funds and Miscellaneous Provisions Act, 1952. (2)  It  extends to the whole of India except the State of Jammu and Kashmir. (3)  Subject to the provisions contained in section 16, it applies-

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(a) to every establishment which is a factory engaged in any industry specified in Schedule I and in 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: “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 specified in the notification] (4) Notwithstanding anything contained in sub-section (3) of this section or sub-section (1) of section 16, where it appears  to  the  Central  Provident  Fund  commissioner, whether on an application made to him in this behalf or otherwise,  that  the  employer  and  the  majority  of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to  the  establishment,  he  may,  by  notification  in  the Official Gazette, apply the provisions of this Act to that establishment on and from the date of such agreement or from any subsequent date specified in such agreement. (5) An establishment  to  which this  Act  applies  shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty:”

(emphasis supplied)

16. On a  plain  reading  of  this  provision,  it  is  evident  that  the

Central Act applies to the establishments referred to therein. In the

present  case,  the  appellant’s  establishment  may  fall  within  the

purview of  “other  establishment”  referred  to  in  sub-clause  (b)  of

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Section 1(3).   It  is  indisputable  that  the  Central  Government  in

exercise of the powers conferred by clause (b) of sub-Section (3) of

Section  1  of  the  Central  Act  has  published  a  Notification  being

No.S.O.-986, dated 19.02.1982 on 06.03.1982, so as to include all

the  educational  institutions  in  the  category  of  “any  other

establishment”,  namely; University;  College  (Whether  or  not

affiliated  to  a  University);  School  (Whether  or  not  recognized  or

aided  by  the  Central  or  a  State  Government);  any  scientific

institution;  any  institution  in  which  research  in  respect  of  any

matter is carried on; and any other institution in which the activity

of imparting knowledge or training is systematically carried on.  

17. A conjoint  reading of  Section 1 of  the Central  Act  with the

aforesaid  notification,  makes it  clear  that  the  Central  Act  would

apply to all the colleges and schools, subject to the provisions of

Section 16 of that Act.

18. The question then arises is: whether the appellant school is an

establishment covered by any one of the excepted category specified

in Section 16 of the Central Act. The appellant has invoked clause

(a)  as well  as clause (b)  of  Section 16 (1)  of  the Central  Act.  As

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regards  the  argument  hinging  on  clause  (a),  it  proceeds  on  the

premise  that  the  appellant’s  school  (in  which  16  part-time

employees were working), had employed less than fifty persons and

working without the aid of power. This argument, in our opinion,

cannot come to the aid of the appellant. Inasmuch as, the appellant

is  running  29  schools/colleges  and  has  employed  around  1151

permanent employees. Section 2A of the Central Act predicates that

where an establishment consists  of  different  departments or has

branches, whether situate in the same place or in different places,

all such departments or branches shall be treated as part of the

same establishment. In other words, the fact that the appellant has

employed less than 50 permanent employees and who are working

without the aid of power in the school in which the 16 part-time

employees were also working, will not take the matter any further.

We find that the appellant has neither pleaded the material facts

nor adduced any proof, so as to rebut the presumption stipulated in

Section 2A of the Central Act - that all the schools and colleges run

by the appellant were part of the same establishment. The fact that

the appellant is a Co-operative Society registered under the State

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Co-operative Societies Act by itself will not extricate the appellant

from the application of the Central Act.  

19. The fact that the appellant is not falling within the ambit of

clause (a) of Section 16(1), however, can be no impediment for the

appellant to peruse the argument regarding exemption by relying on

clause (b) of Section 16(1) thereof. We say so because, the excepted

categories specified in Section 16 are mutually exclusive.  They are

separated by the word “or”. Sub-clause (b) of Section 16(1) is an

independent  excepted  category.  It  is  attracted  to  any  other

establishment  belonging  to  or  under  the  control  of  the  Central

Government  or  a  State  Government  “and”  whose  employees  are

entitled to the benefits  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. These twin conditions are required to be satisfied by the

concerned establishment, seeking exemption from the provisions of

the Central Act. In the present case, the employees working in the

concerned  schools/colleges  of  the  appellant  are  covered  by  the

contributory  provident  fund  scheme  framed  by  the  State

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Government, subject to eligibility. The second condition required for

seeking exemption under the Central Act is thus fulfilled.  

20. The moot question is:  whether the schools in which the 16

part-time  employees  were  working,  can  be  said  to  be  an

establishment  belonging  to  or  under  the  control  of  the  Central

Government or a State Government. This question is no more  res

integra.  This  Court  in  the  case  of  Regional  Provident  Fund

Commissioner Vs. Sanatan Dharam Girls Secondary School &

Ors1 has considered a similar argument.  In paragraphs 29 to 35,

the Court analysed the issue in the following words:       

“29. In respect to the contention of the respondent that the establishment belonging to or under the control of the Central  Government  or  a  State  Government,  it  was submitted  that  the  establishments  must  either  be  (a) belonging  to,  or  (b)  under  the  control  of  the  Central Government or the State Government.  In our view, the two  words  used  in  the  said  section  have  different connotations.   The  words  “belonging  to”  signify ownership i.e. the Government-owned institutions would be covered under the said part and the words “under the control  of”  signify  control  other  than  ownership  since ownership  has already been covered under  the words “belonging to”.  It must also be noted that the two words

1

(2007) 1 SCC 268

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are separated by the word “OR” and therefore these two words  refer  to  two  mutually  exclusive  categories  of institutions.   While  the  institutions  “belonging”  to  the Central or the State Government would imply the control of the State but the privately-owned institutions can be “under the control of” the Government in various way.  

30.Under the State Act itself, the “control” by the State is in the following ways:

(a) Under Section 3 of the State Act, the State Government grants  recognition  to  the  “non-government  educational institutions”. It was submitted that recognition by the State is of prime importance  for  running  and  operating  an  educational institution.   The said recognition can be withdrawn on the failure of the institution to abide by the terms and the conditions of the grant of recognition.

(b) Under Section 7 of the State Act, the State Government grants  aid  to  only  recognised  educational  institutions. The  aid  given  by  the  State  can  be  used  only  for  the purpose for which the aid has been given.  Under Section 8,  the  institutions  are  thereafter  required  to  keep accounts in the manner prescribed by the State.  It was submitted  that  in  such  manner,  the  State  exercises financial control over the institutions.

(c)  Under  Section  9,  it  has  been  prescribed  that  the institutions shall be governed by a managing committee and Section 10 of  the Act  empowers the State to take over  management  of  the  institutions  “whenever  it appears to the State that the Managing Committee has neglected to perform the duties assigned to it by or under the Act or the rules made thereunder.

(d)  Chapter  V  of  the  Act  relates  to  properties  of  the institutions and the manner in which the institutions can

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manage the properties of the institution. It was submitted that under Section 13 of the Act, the institutions have to apply and get the approval of the competent authority set up  under  the  said  Act  before  transferring  the management  of  the  institution.   Under  Section  15, restrictions  have  been  placed  on  the  transfer  of immovable properties of the institutions.  

(e)  Section  14  of  the  Act  prohibits  closure  of  any institution  or  its  class  or  the  teaching  of  any  subject therein  without  notice  in  writing  to  the  competent authority.   It  was submitted that  the Government thus has functional control over the institution.

(f) Chapter VI of the State Act deals with recruitment and removal, etc.  of employees.  Their salary, conditions of service, provident fund, code of conduct are all prescribed under the Act. The Act further prescribes setting up of a tribunal for resolution of the disputes whose decision is final and binding on the parties.

31. The State Government also exercises administrative control  over  the institution.   Section  17 deals  with  the manner  of  recruitment  and  Section  18  deals  with  the procedure by which the employees may be removed or dismissed or reduced in rank.  Section 28 permits the State Government to prescribe the code of conduct of the employees and Section 29 enjoins upon the institutions not to give to its employees a pay lesser than the scales of pay and the allowances paid to similar categories of the State Government.

32. In  our  view,  the  State  Act  is  a  complete  code  in itself with regard to the educational institutions and the State Government exercises substantive control over the institutions even though the institutions are not “owned” by it.  The word “control” has not been defined under the EPF Act, 1952.

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33.  However,  this  Court  in  Shamrao  Vithal  Coop. Bank Ltd. v. Kasargod Pandhuranga Mallya, SCC at P. 604, para 6 has cited with approval the meaning of the word  “control”  as  it  appears  at  p.  442  of  Words  & Phrases, Vol. 9, Permanent Edition as under: “The word ‘control’ is synonymous with superintendence, management or authority to direct, restrict or regulate.”

34. In State of Mysore V. Allum Karibasappa, SCC at p. 501, para 16 this Court defined the word “control” as under: “The word ‘control’ suggests check, restraint or influence. Control  is  intended to  regulate  and hold in check and restraint from action.”

35. We further observe that the State Government has the power of superintendence or the authority to direct, restrict  or  regulate  the  working  of  the  educational institutions.   It  was,  therefore,  submitted  that  the institutions  had  satisfied  both  Conditions  (1)  and  (2) mentioned above and as such they would fall within the exception contained under Section 16(1)(b) of the EPF Act, 1952.”

21. The question is  whether  there are  similar  provisions in the

subject State Act and Rules framed threunder, so as to infer that

the  State  Government  exercises  substantive  control  over  the

establishments  such  as  that  of  the  appellant.  On  analyzing  the

provisions of the State Act and Rules framed thereunder, similar

inference can be drawn as in the case of Sanatan Dharam (Supra).

In the present case, the State Act which has received assent of the

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President of India on 16th March, 1978, contains several provisions

elucidating the extent to which the State Government has control

over the private schools:  

n) Section 2(19), 2(20) and Section 2(21) of the State Act, are indicative

of  the  fact  that  the  State  Government  grants  recognition  to  the

Primary Schools and Private Schools in the State.

o) Section  4  (4)  of  the  State  Act  inter  alia  empowers  the  State

government to withdraw the recognition granted to the concerned

school on its failure to comply with directions issued by the Director

of Education, who is appointed by the State Government;

p) Under Section 4 of the State Act, the State Government also has the

power to make Rules governing the terms and conditions of service

of employees, including minimum qualification for recruitment and

the  procedure  to  be  followed  thereof,  duties,  pay,  allowances,

post-retirement  and other  benefits,  other  conditions of  service  of

employees  of  private  schools  and  for  reservation  of  adequate

number  of  posts  for  backward  classes.  Additionally,  the  State

Authorities  are  empowered  to  continually  monitor  that  the

management  of  the  school  is  fulfilling  the  prescribed  terms and

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conditions  of  service  of  its  employees  and  including  to  issue

directions to the Management for that purpose.  

q) Under Section 4A of the State Act, the Director Education has been

empowered to issue directions in relation to the inquiries against

the employees regarding alleged misconduct, misbehavior or moral

turpitude of an employee.  

r) Section 5 postulates the obligations of the management of private

schools such as to fill in the permanent vacancy in a private school

in the manner, as may be prescribed by the Competent Authority.  

s) Under Section 16 of the State Act, the State Government has the

power to make rules governing the duties of employees of private

schools and about their Code of Conduct and disciplinary matters.

This is a form of administrative control.

t) The  State  Rules  deal  with  gamut  of  matters  relating  to  service

conditions of the employees and the manner in which it is to be

adhered  to  by  the  management,  in  respect  of  which  the

management is accountable to the Competent Authority of the State

to  report  compliance  and  including  to  adhere  to  the  directions

issued by the authority in that regard.

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u) The Rules also specifically deal with the facility of Pension Provident

Fund and other matters to be extended to every employee working

on a full time basis or on a part-time basis but doing full time load

of work.  

v) Besides  the  provisions  of  the  State  Act  and  the  Rules  framed

thereunder, the schools recognized and receiving grant-in aid from

the State Government have to fulfill additional conditions, as are

specified  in  the  grant-in  aid  scheme  and  the  Maharashtra

Secondary School Code applicable to such schools.  As the grant in

aid can be used by the school only for the purpose for which it has

been  granted  and  that  the  school  is  required  to  maintain  and

submit proper accounts in the manner prescribed by the State, is

also  indicative  of  financial  control  of  the  State  over  such

schools/colleges.  

w) The  provisions  in  the  Secondary  School  Code  also  empower  the

State Government to take over or transfer the management of the

institution.

x) Besides the State Authorities have to oversee that the management

is making payment of proper salary and allowances as specified.

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y) The  Secondary  School  Code,  which  is  a  compendium  of  the

executive  instructions  and  orders,  also  deals  with  matters

concerning recognition, organization and management of  schools;

staff service conditions, records and inspection; records, registers

and inspection of schools and hostels;  and grant in aid etc.  The

provisions regarding grant in aid deal with matters of salary/non

salary  grant;  building  grant;  and  other  grants.  Stipulations  in

respect of these matters are indicative of financial control exercised

by the State  over  such institutions.   Similarly,  Chapter  III  deals

with staff  service  conditions,  records and inspection provides for

matters  relating  to  maintenance  of  adequate  staff;  conditions  of

service  of  employees;  and  rules  of  discipline  and  leave.   These

provisions are also indicative of administrative control exercised by

the  State  over  the  institutions.    All  this  is  in  addition  to  the

incipient requirement of obtaining recognition from the State before

starting any school within the State or for that matter commencing

additional sections and increasing the intake capacity of students,

as the case may be.

22.  Suffice  it  to  observe  that  the  State  Act,  the  Rules  made

thereunder and the provisions of the Secondary Schools Code are a

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complete  code  in  themselves  with  regard  to  the  educational

institutions and indicative of the extent of exercise of substantive

control  by the State  Government over such institutions,  whether

owned  by  it.  The  State  Government  has  the  power  of

superintendence  and  the  authority  to  direct,  restrict  or  regulate

working of the educational institutions. It necessarily follows that

the  establishment  of  the  appellant,  which  in  this  case  is  100%

grant-in aid schools in which 16 part-time employees were working,

is under the control of the State Government and thus would fulfill

even the first condition of Section 16(1) (b) of the Central Act.   

23. As we have held that the establishment of the appellant fulfills

the twin conditions specified in Section 16 (1) (b), it must follow that

the same is exempted from the application of the provisions of the

Central Act. In the present case, however, it has been found by the

authority  concerned  and  the  Tribunal,  that  the  16  part-time

employees working in the establishment of the appellant were not

covered by the State CPF Scheme applicable to the other permanent

employees  of  the  establishment.  Inasmuch as,  Rule  20 does  not

cover the part-time employees working in the school, in case they

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are not doing full time load of work. True it is that the said finding

of fact cannot be over turned. Even so, is it possible to uphold the

decision of the authority as confirmed by the Tribunal and the High

Court - that the appellant is liable to pay towards the Provident

Fund under the Central Act in respect of its part-time employees?

Intrinsic in that direction, is that the provisions of the Central Act

are  invoked  against  the  establishment  of  the  appellant.  That  is

impermissible. As aforesaid, Section 16 of the Central Act makes it

abundantly clear that the provisions of the Central Act will have no

application to the establishment, if covered by one of the excepted

category  provided  therein.  Notably,  the  exemption  is  for  the

establishment as a whole and for all purposes, from the application

of  the  Central  Act.  Once  the  establishment  is  covered  by  the

excepted category specified in Section 16,  to get exemption,  it  is

incomprehensible  that  the  provisions  of  the  Central  Act  can  be

invoked against such establishment on the specious reasoning that

few (16 in this case) part-time employees working thereat were not

covered by the CPF Scheme of the State Government, as applicable

to rest of its employees.

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24. It is not possible to countenance a situation that although the

establishment enjoys exemption from application of the provisions

of the Central Act, is still liable to be proceeded in respect of its few

(16)  part-time  employees.  That  would  lead  to  an  incongruous

approach, not envisaged by the Central Act. Taking  any  other

view would result in rewriting of the provisions of the Central Act to

mean  that  although  the  establishment  is  exempted  from  the

application of the provisions of the Central Act, yet it would be open

to the central authorities to proceed against such establishment in

certain situations.  In our opinion, once the establishment qualifies

for exemption of application of the provisions of  the Central  Act,

there  is  no  way  that  the  authorities  under  the  Central  Act  can

exercise authority over it or call upon the establishment to comply

with the provisions of the Central Act, unless the exemption of the

establishment  is  withdrawn  or  lifted  de  jure.  Section  16  of  the

Central  Act  does  not  envisage  a  concept  of  partial  exemption of

application  of  the  provisions  of  the  Central  Act  in  respect  of

employees, but the exemption operates qua the establishment for

all purposes.

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25. In  the  present  case,  the  appellant  is  running  29

schools/colleges and is receiving 100% grant-in aid from the State

Government  in  respect  of  28  schools/colleges.  The  employees

working in the said schools of the appellant have been employed

with the permission and approval of the State Government and are

governed  by  the  State  CPF  Scheme.  The  entire  process  of

appointment has been strictly monitored by the State Government.

Additionally,  the  appellant  has  been  submitting  pay  bills  of  its

employees to the Education Department which directly deposits the

salaries of such employees into their bank accounts. At the relevant

time, the appellant had employed around 1151 employees who were

covered by the Contributory Provident Fund Scheme framed by the

State Government for the employees of the private schools (except

the 16 part-time employees who were not doing full  time load of

work).  The  appellant  had engaged those  16  part-time  employees

with the permission and approval of the State Government.  It can

be safely presumed that the State Government was fully conscious

of the fact that those part-time employees will not be entitled for the

benefits of CPF Scheme of the State. In other words, the substantial

number of  employees of  the appellant if  not all  of  them, around

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1151 employees, were covered by the contributory provident fund

scheme  of  the  State  Government  applicable  to  private  schools

governed by the provisions of  the State Act and the Rules made

thereunder. Just because the 16 part-time employees working in

the appellant’s school were not eligible for the benefits of the State

CPF  Scheme,  the  exemption  status  of  the  establishment  of  the

appellant  acquired under  Section 16 of  the Central  Act,  will  not

cease or stand withdrawn automatically.

26. Once  an  establishment  is  covered  under  any  one  of  the

excepted category under Section 16 of the Central Act, the officials

empowered by the Central  Act will  have no authority to proceed

against  such  establishment;  and  more  so  on  the  ground  that  a

miniscule number of employees (16 part-time employees) working in

the establishment were not eligible for the benefits under the State

Contributory  Provident  Fund  Scheme  governing  the  rest  of  the

regular employees of the establishment.  

27. Having  said  this,  we  must  hold  that  initiation  of  action  of

recovery  by  the  official(s)  of  Respondent  No.1  against  the

establishment of the appellant, which was otherwise exempted from

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application of the provisions of the Central Act is wholly without

authority of law. The appellant had placed reliance on the case of

Sanatan Dharam (supra), before the Tribunal. But neither has the

Tribunal nor the High Court considered the same. The Tribunal,

however, chose to rely on the decision in the case of The Shamrao

Vithal  Co-operative  Bank  Ltd.  Vs.  Kasargod  Pandhuranga

Mallya2. This decision has been duly considered and distinguished

in the case of Sanatan Dharam (supra), as can be discerned from

paragraph 33 of the reported decision.  

28. Be that as it may, for the reasons alluded hitherto we have no

hesitation in allowing this appeal and set aside the decision of the

High Court; and also the entire action of the authorities under the

Central  enactment  for  having  initiated  recovery  against  the

concerned school run by the appellant by invoking the provisions of

the Central Act, which had no application.

2

(1972) 4 SCC 600

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29. Accordingly, the appeal is allowed in the above terms with no

order as to costs.      

………………………………….J. (Dipak Misra)

………………………………….J. (A.M.Khanwilkar)

………………………………….J. (Mohan M. Shantanagoudar)

New Delhi, Dated: March 9, 2017