hi all, working in an architecture firm handling accounts & administration. recently EPF enforcement officer came to our organisation & inform us that we should pay EPF for the employee of our consultants i.e. structure, hvac, electrical, plumbing & landscape consultants. These consultants are having their own offices & working for other architecture firm too. I had refer the judgement of delhi high court which is as foloows. Please reply. Bhupendra
Outsourcing units can’t be clubbed under EPF Act: HC
New Delhi, October 28
The Delhi High Court has ruled that outsourcing units cannot be clubbed with each other or the company outsourcing work to them for the purpose of taking the benefit of Employees Provident Fund (EPF).
Holding that inter-dependence between them could not be a ground for clubbing under the EPF Act, Mr Justice S.N. Dhingra said, "two independent establishments cannot be clubbed together to show a unity of functions only because they are inter-dependent on each other at a particular time".
Taking into account that outsourcing was one of the mode of doing business where several ancillary units would be exclusively doing work for big companies, the court said such small units perform independent business for big automobiles companies and engineering companies.
"These ancillary units (outsourcing units) are independent business entities despite the fact that they are dependent on automobile company or engineering firm. These units cannot be clubbed with each other or with main company for purpose of the EPF Act on the ground of inter-dependence," the court said.
While outlining the condition, in which the two companies could be clubbed together for getting benefits under the EPF Act, the Bench said this could be done under the circumstance when an establishment was bifurcated to deprive the workmen of the benefits of labour law.
"Where two establishments are in fact one, but they have been artificially bifurcated only to deprive the workmen of the benefits of labour laws, then only the two establishments can be clubbed together and their joint employees strength can be counted for purpose of Section 7A of the Act."
The verdict was delivered on a petition filed by Regional Provident Fund Commissioner challenging the order of the EPF Appellate Tribunal's treating two companies as a separate entity.
The Commissioner had covered Golden Masala Company under the EPF Act by clubbing six employees of the firm Molu Ram Suraj Mal on the ground that both were inter-dependent on each other and in absence of one, the other will not exist.
Molu Ram Suraj Mal was doing grinding of spices exclusively for Golden Masala Company.
The Commissioner held that Molu Ram Suraj Mal was nothing but contractor of Golden Masala Company and hence employees of Molu Ram must be treated as employees of the latter.
However, the Appellate Tribunal held both companies as two different identities, which was also upheld by the high court.
The high court in its order said the Fund Commissioner had covered both the companies on the ground of inter-dependency but it failed to provide the basis as to how this conclusion had been arrived at.
