Contractual employees engaged by a company entitled to Provident Fund benefit as per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

The Supreme Court in the matter of M/s Pawan Hans Limited & Ors. vs. Aviation Karamchari Sangathan & Ors. (Civil Appeal No. 353 of 2020) has observed that contractual employees engaged by a Company who draw their wages/salary directly or indirectly from the Company are entitled to the benefit of provident fund under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Facts
The Government of India holds 51% shareholding in Pawan Hans Limited and the remaining 49% is held by Oil and Natural Gas Company Ltd. (ONGC). Allowing a writ petition filed by a Trade Union, the High court held that the benefits under the EPF Act be extended to the members of the Union, and other similarly situated employees. It was held that a liberal view must be taken in extending social security benefits to the contractual employees.
Issue
Whether the Company (M/s Pawan Hans Limited) is excluded from the applicability of the provisions of the EPF Act and the EPF Scheme framed thereunder?
Ratio
The Apex Court observed that there applies a twin test which needs to be satisfied by an establishment/ company to seek exemption from the provisions of the EPF Act, 1952.
First, the establishment must be either “belonging to” or “under the control of” the Central or the State Government. The phrase “belonging to” would signify “ownership” of the Government, whereas the phrase “under the control of” would imply superintendence, management or authority to direct, restrict or regulate.
Second, the employees of such an establishment should be 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.
It was then further observed that if both tests are satisfied, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act.
Applying the above test, the Bench held that the Company has failed to make out a case of exclusion from the applicability of the provisions of the EPF Act, since it does not satisfy the second test observing that the contractual workers were not getting the benefits of contributory provident fund under the PF Trust Regulations framed by the Company, or under any Scheme or any rule framed by the Central Government or the State Government.