By: Shruti Sharma


In a layman’s language, the Provident Fund (PF) is a savings fund of the salaried employees for the benefits after retirement. This is a compulsory retirement savings fund to be maintained for the employees by the employer. There is tax benefit on this fund. The statutory mandatory fund is kept and regulated under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 for the employees of Government, Public and Private Organisations. The regulatory body of management and operations of the provident fund is under the supervision of the Ministry of Labour and Employment, known as the Employees Provident Fund Organisation. This organisation monitors three schemes, namely, employees’ provident fund, employees’ pension scheme and employees deposit linked insurance scheme. The provisions of the Act are applicable to those employers who employ more than 20 employees. The employer has to adopt the three schemes under the Act. This may be understood as a contributory scheme because the employee contributes from the part of his salary and the employer contributes another half. This contribution is deposited from both the parties every month. The interest rate on the provident fund is fixed very year. At the time of the retirement, the employee receives the amount of the provident fund in addition with the interest of all the years of service.



In the case of Pawan Hans Limited & Ors vs Aviation Karmchari Sanghatana (Supreme Court), it was argued whether the Contractual Employees of an establishment are entitled to the benefit of the provident fund schemes under the Act. The appellant company had constituted the Pawan Hans Employees Fund Trust Regulations (PF Trust Regulations) for giving the benefit of the provident fund schemes to its employees. The Respondent Union had been employed in the company for a long period of time in a continuous employment. They had been entitled to wages/salaries which were provided to them directly by the company without any involvement of the contractor. Earlier the High Court had ordered for the members of the Union to be granted the benefits of the provident fund schemes under the PF Trust Regulations of the company. The company had extended the PF Trust Regulations benefits to its regular employees and left out the contractual employees. Even though the Regulations provided the meaning of Employee as any person who is directly or indirectly in the company, the contractual employees were excluded from the schemes of provident funds of the company. The High Court had ordered and issue directions to the company to extend and enroll all the eligible contractual employees as a part of the provident fund schemes.
The appellant company appealed before the Apex Court challenging the decision by the High Court citing the error as several members from the Union had superannuated or resigned or passed away, thus their employment with the company had ceased to exist. Such an extension of the provident fund scheme was arbitrary and was argued to be set aside. The other contention being that the members of the Union and other contractual employees had already been given their monthly financial benefits in full and doing the procedure all over again would be burdening on the company.
This indeed required the better understanding of the terms ‘under the control of’ and ‘belonging to the’ central or state government. The former means under the authority and supervision of the central or state government, on the other hand, the latter means the ownership of company by the central or state government. The reliance was placed on the judgment of Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School.


The bench could not find the valid grounds in the arguments put forward by the appellant company regarding the exclusion of such contractual employees from the provident fund schemes of the company, although they had the long term and continuous employment. The observation was made by the court that the contractual employees in the continuous service working the company were not getting the contributory benefits of the PF Trust Regulations of the company. Relying on the provisions of the Act, the meaning of employee also included the workers in a contractual employment. They were also entitled to the benefits of the provident fund schemes along with the regular employees of the company. Because they had been in a continuous service for a long period of time, their work being perennial in nature, they cannot be termed as mere contractual employees and hold the same foot as the regular employees of the company. Thus, the benefit of the contributory provident fund schemes under the PF Trust Regulations of the company must be extended towards these employees as well. The company was made liable for a 12% p.a. on the amount that is payable towards the employees of the Union in the company as the contribution for the provident fund scheme.


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