Marathwada Gramin Bank Karamchari Sangathan and Ors. v. Management of
Marathwada Gramin Bank and Ors
Citation: AIR 2011 SC 3567
Date Of Judgement: 09.09.2011
Name Of The Judges
Before Hon'ble Justice Dalveer Bhandari and Hon'ble Justice Deepak Verma
- Marathwada Gramin Bank est. in 1976, followed the provisions of the
Employees Provident Fund Scheme, 1952. But in 1981, the bank framed its own
scheme under which, the bank employees received excess Provident Fund (PF)
as compared to what they received under the Employees Provident Fund Scheme,
- The Regional Provident Fund Commissioner had permitted the bank to do
so. However, this permission was later withdrawn in the year 1991 and the
bank was directed to implement the provisions of the Statutory Scheme.
- The bank complied and under Section 9A of the Industrial Disputes Act,
1947 issued a 'notice of change'. Basically, the bank stopped the payment of
PF in excess of its statutory liability ceiling and continued to pay PF
according to Statutory Scheme.
- The employees of the bank referred the matter to the Central Government
Industrial Tribunal. The Tribunal relied on Section 12 of the Employees
Provident Fund and the Miscellaneous Provisions Act, 1952 and held that
employers cannot reduce the wages of employees to whom the scheme applies.
It also held that the reduction of contribution of PF by the bank was not
- The respondent bank, aggrieved by the said award passed by the Tribunal,
preferred a writ petition before High Court of Bombay.
- Whether Sec. 12 of the Employee Provident Fund and Miscellaneous
Provisions Act, 1952 creates bar for imposing the ceiling in accordance with
the Provident Fund Act? If yes, does the instant matter attract the
application of Sec. 12?
- Whether the application of Sec. 17(3)(b) of the act be attracted in
the present matter thereby complying with the ratio given in the Madura
- Can an employer be compelled to pay Provident Fund in excess of its
statutory liability celling? Can such amount, if paid in excess by the
employer, be claimed as a matter of right by the employees?
- Section 9A of the Industrial Disputes Act, 1947 - A 'notice of change'
in the prescribed manner to be given to the workmen regarding changes in the
conditions of service.
- Section 12 of the Employees Provident Fund and Miscellaneous Provisions
Act, 1952 - Employer not permitted to reduce wages, directly or indirectly,
of any employee to whom the scheme applies.
- Section 17(3)(b) of the Employees Provident Fund and Miscellaneous
Provisions Act, 1952 - An establishment shall not reduce the benefits in the
nature of PF, pension, gratuity, without the leave of the Central
- Article 136 Constitution of India - Special leave to appeal by the
- Employees Provident Fund Scheme, 1952 - An employment benefit scheme
established and regulated under Employees Provident Fund Organization.
It was submitted by the respondent bank that the impugned award as well as the
communication issued by the Regional Provident Fund Commissioner is contrary to
law as the same is based on the assumption that Section 12 of the 1952 Act
creates bar for imposing the ceiling in accordance with the Provident Fund Act.
This was assumed because this section does not allow the employer to reduce the
employee's provident fund amount if they are so covered under the employee
provident scheme of 1952
- The respondent's contended that it was their legal obligation to adhere
to the statutory requirements imposed under the act and they had been doing
so since the beginning. Thus, there was no escaping of any legal
- The terms of the employment contract as expressly accepted by the
employees had a clear mention under Regulation No.56 of the Marathwada
Gramin Bank (Staff) Service Regulations, 1980, that the contribution to the
provident fund shall be in accordance with the provisions of the 1952 Act.
- The respondents by quoting the ratio in the case of Committee for
Protection of Rights of ONGC Employees v. Oil and Natural Gas Commission and
Another argued that since the terms of employment contract did not
mention anything about provident fund payment in excess of the statutory
ceiling, the matter does not attract the application of Sec. 12 which
applies only if an employee is being paid less than the statutory limits.
It was observed that in the instant case it is the express term of employment
that the contribution of the bank shall be in accordance with the provisions of
the 1952 Act, thus Sec. 12 will not be applicable.
- The appellants, aggrieved by the judgment of the learned Single Judge,
preferred Letters Patent Appeals before the Division Bench of the High Court
of Judicature at Bombay, Nagpur Bench and contended that under Section
17(3)(b) of the 1952 Act once the exemption is granted by the Appropriate
Government, it shall not, without the leave of the Central Government reduce
the total quantum of benefits in the nature of provident fund.
- In the instant case, the respondent bank did not obtain leave of the
Central Government before acting on the communication dated 14.10.1991 by
issuing notice of change.
- The appellants relied on the case of Madura Coats Employees Union v.
Regional Provident Fund Commissioner and Others where the Court observed
that the benefit cannot be taken away by the employer without prior
permission of the Central Government.
The learned Single Judge observed that under Section 17(3)(b) of the 1952 Act,
the said permission would be required in case an exemption from the operation of
the provisions of the 1952 Act has been obtained. In the instant case, the
exemption was already cancelled on 14.10.1991 and consequently this provision
and Madura coats case has no application to the facts of this case.
The respondent bank relied on the case of Vijayan v. Secretary to Government
wherein it was held that an employer cannot be compelled to pay in excess of the
statutory ceiling because "it shall always be in the discretion of the employer
to make contributions in excess of the minimum as mentioned in the statute."
It was held that the respondent bank cannot be compelled to pay the amount in
excess of its statutory liability for all times to come just because the
respondent bank formed its own trust and started paying provident fund in excess
of its statutory liability for some time. The provisions of Sec. 12 and Sec. 17
(3) (b) shall not be attracted.
This case involved the determination of a substantial question of law since the
legislative interpretation of Sec. 12 of the Employee Provident Act, 1952 was to
be deduced. The entire case was made out by the applicants based on a
misinterpretation of the provision whereby they thought that no matter what, any
kind of deductions for that matter were not allowed.
The court, by placing reliance on the ONGC and Vijayan case, solved this issue
by merely stating what the provision really meant and what was the intention of
the drafters. The purpose of that act was to ensure that the employees are not
exploited by being paid less than what they deserve. So was not being done by
the respondent bank.
In a desperate attempt to prove their case right, the applicants even brought
Art. 17(3)(b) into the picture, the application of which was not even remotely
related to the case because the exemption itself was cancelled. In a nutshell,
an analysis of the judgement says that if an employer, in good faith has been
paying provident fund to its employees in excess of the statutory limit ceiling,
he cannot be compelled to keep doing so and it was upon him if he wanted to
withdraw that excess payment anytime, if the terms of the employment contract
did not state otherwise.
This case, though did not involve much judicial reasoning and application, and
simply revolved around the correct interpretation of a provision, is still
considered landmark because it cleared out the standing relationship between an
employer and his employee in terms of payment of Provident Fund. In a way, It
shows the judiciary's attempt to balance the interest of both the employers and
the employees, so as to enable smooth functioning of the economy.
- (1990) 2 SCC 472
- (1999) ILLJ 928 Bombay
- 2006 (3) KLT 291