2019 INSC 0600
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5821 OF 2019
(Arising out of SLP (Civil) No. 22243 of 2015)
The Officer In­Charge, Sub­Regional  …Appellants
Provident Fund Office & Anr.
versus
M/s Godavari Garments Limited               …Respondent
J U D G M E N T
INDU MALHOTRA, J.
Delay condoned.
Leave granted. 
1. The present Civil Appeal has been filed to challenge the Order
dated   27.04.2012   passed   in   W.P.   No.   1615   of   1993   by   the
Bombay High Court, Aurangabad Bench.
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2. The   background   facts   in   which   the   present   Civil   Appeal   has
been filed are briefly stated as under:
2.1. The   Respondent   Company   is   a   subsidiary   of   the
Marathwada   Development   Corporation,   which   is   an
undertaking   of   the   Government   of   Maharashtra.   It   was
covered   under   the   provisions   of   the   Employees’
Provident Fund and Miscellaneous Provisions Act, 1952
(hereinafter referred to as “the EPF Act”) with effect from
01.01.1979.
2.2. The main objective of the Respondent Company, as per
its   Memorandum   of   Association,   was   to   encourage,
promote,   develop,   set­up   or   cause   to   be   set­up   a
readymade   garments   industry   in   the   Marathwada
Region,   with   a   view   to   provide   gainful   employment   to
people possessing skills in stitching, tailoring, and allied
activities,   especially   to   women   from   the   economically
weaker sections of the Society.
2.3. The Respondent Company engaged women workers who
were provided with cut fabric, thread, buttons, etc. to be
made   into   garments   at   their   own   homes.   The   sewing
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machines   used   by   the   women   workers   were   owned   by
them, and not provided by the Respondent Company.
2.4. On   12.03.1991,   Appellant   No.   1   –   Officer   In­Charge,
Sub­Regional   Provident   Fund   Office,   issued   a   Show
Cause Notice to the  Respondent  Company  calling  upon
it   to   pay   the   Provident   Fund   contributions   for   the
women   workers.   The   Balance   Sheet   of   the   Respondent
Company   for   the   year   1988   –   89,   revealed   large   debits
towards   salary   and   wages   for   direct   and   indirect
workers,   but   the   Respondent   Company   made   a   false
statement that it had only 41 employees.
2.5. On 30.11.1992, Appellant No. 1 issued summons to the
Respondent   Company   for   personal   hearing   under
Section 7­A of the EPF Act.
2.6. The   representative   of   the   Respondent   Company
appeared   before   Appellant   No.   1,   and   contended   that
the   women   workers   who   were   fabricating   garments   for
the   Respondent   Company,   were   not   their   employees,
and   hence   not   covered   by   Section   2(f)   of   the   EPF   Act.
Therefore, even though wages were paid to those women
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workers, the Respondent Company was not liable to pay
Provident Fund contribution in respect of them.
2.7. The Provident Fund Officer – Appellant No. 1  vide  Order
dated 19.04.1993 held that the women workers engaged
for stitching garments were covered by the definition of
“employee”   under   Section   2(f)   of   the   EPF   Act.   An
amount   of   Rs.   15,97,087/­   was   assessed   towards
Provident   Fund   dues   of   the   Respondent   Company   for
the period from November, 1979 to February, 1991. The
Respondent   Company   was   directed   to   pay   the   said
amount within 7 days.
2.8. The   Respondent   Company   challenged   the   aforesaid
Order   by   filing   W.P.   No.   1615   of   1993   before   the
Bombay High Court.
      The   Bombay   High   Court,   Aurangabad   bench   vide
Final   Judgment   and   Order   dated   27.04.2012   allowed
the Writ Petition filed by the Respondent Company, and
set   aside   the   Order   dated   19.04.1993   passed   by   the
Appellant   No.   1.   It   was   held   that   the   Respondent
Company   had   no   direct   or   indirect   control   over   the
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women   workers.   The   conversion   of   cloth   into   garment
could   be   done   by   any   person   on   behalf   of   the   women
workers.   Hence,   the   Respondent   Company   did   not
exercise   any   supervisory   control   over   the   women
workers.
2.9. Aggrieved   by   the   aforesaid   Judgment,   the   present   Civil
Appeal has been filed by the Provident Fund Office.
3. We   have   heard   the   learned   Counsel   for   the   parties,   and
perused   the   pleadings   and   written   submissions   filed   by   the
parties.
4. Mr. R.R. Rajesh, learned Counsel appearing  on  behalf of the
Appellants,   submitted   that   the   women   workers   employed   by
the   Respondent   Company   fall   within   the   definition   of
“employee” under Section 2(f) of the EPF Act.
      Reliance   was   placed   on   this   Court’s   decision   in   M/s   P.M.
Patel & Sons and  Ors.   v.   Union of India and  Ors. 1
  to contend
that   the   women   workers   employed   by   the   Respondent
Company were covered by the definition of “employee” under
Section 2(f) of the EPF Act. Hence, the Respondent Company
1  (1986) 1 SCC 32.
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is   liable   to   pay   Provident   Fund   contribution   in   respect   of
those women workers.
5. Mr.   Anoop   Kandari,   learned   Counsel   appearing   on   behalf   of
the   Respondent   Company,   submitted   that   there   was   no
employer­employee   relationship   between   the   Respondent
Company and the women workers. The women workers were
not   employees   under   Section   2(f)   of   the   EPF   Act.   They   were
independent contractors.
   It was further submitted that the sewing machines used by
the women workers were owned by them, and not provided by
the   Respondent   Company.   The   women   workers   worked   from
their   homes,   and   not   at   the   production   centers   of   the
Respondent   Company.   Hence,   the   work   performed   by   them,
could be done by their relatives, or any other person on their
behalf.   Furthermore,   the   women   workers   were   not   bound   to
report   to   the   production   centers   regularly,   nor   were   they
required   to   work   at   the   production   centers.   The   Respondent
Company   exercised   no   supervisory   control   over   the   women
workers.
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6. The short issue which arises for consideration is whether the
women   workers   employed   by   the   Respondent   Company   are
covered   by   the   definition   of   “employee”   under   Section   2(f)   of
the EPF Act or not.
     Section 2(f) of the EPF Act is set­out hereinbelow for ready
reference:
“(f)   “employee”   means   any   person   who   is
employed   for   wages   in   any   kind   of   work,
manual or otherwise, in or in connection with the
work   of   an   establishment,   and   who   gets,   his
wages   directly   or   indirectly   from   the   employer ,
and includes any person,­­
(i)   employed   by   or   through   a   contractor   in   or   in
connection with the work of the establishment;
(ii)   engaged   as   an   apprentice,   not   being   an
apprentice   engaged   under   the   Apprentices   Act,
1961 (52 of 1961), or under the standing orders
of the establishment;”
(emphasis supplied)
6.1. The   definition   of   “employee”   under   Section   2(f)   of   the
EPF Act is an inclusive definition, and is widely worded
to   include   any   person   engaged   either   directly   or
indirectly   in   connection   with   the   work   of   an
establishment.
6.2. In   the   present   case,   the   women   workers   employed   by
the   Respondent   Company   were   provided   all   the   raw
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materials, such as the fabric, thread, buttons, etc. from
the   Respondent   –   Employer.   With   this   material,   the
women workers were required to stitch the garments as
per   the   specifications   given   by   the   Respondent
Company.   The   women   workers   could   stitch   the
garments   at   their   homes,   and   provide   them   to   the
Respondent   Company.   The   Respondent   Company   had
the absolute right to reject the finished product i.e. the
garments, in case of any defects.
6.3. The   mere   fact   that   the   women   workers   stitched   the
garments   at   home,   would   make   no   difference.   It   is   the
admitted   position   that   the   women   workers   were   paid
wages   directly   by   the   Respondent   Company   on   a   per­
piece basis for every garment stitched.
6.4. The issue in the present case is squarely covered by the
decision   of   this   Court   in   Silver   Jubilee   Tailoring   House
and Ors.  v.  Chief Inspector of Shops and Establishments
and   Ors. 2
  The   appellants   therein   were   engaged   in   the
business   of   producing   garments.   They   employed
2  (1974) 3 SCC 498.
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workers   who   were   provided   with   the   cloth,   and   were
instructed   by   the   appellants   how   to   stitch   it.   The
workers were paid on piece­rate basis. If a worker failed
to   stitch   a   garment   as   per   the   instructions,   the
appellants   rejected   the   work,   and   asked   the   worker   to
re­stitch   the   garment.   This   Court   held   that   such
workers   fell   within   the   definition   of   “person   employed”
under   Section   2(14)   of   the   Andhra   Pradesh   (Telangana
Area) Shops and Establishments Act, 1956. It was held
that:
“35.  Quite apart from all these circumstances, as
the   employer   has   the   right   to   reject   the   end
product if it does not conform to the instruction of
the employer and direct the worker to restitch it,
the   element   of   control   and   supervision   as
formulated   in   the   decisions   of   this   Court   is   also
present. ”
(emphasis supplied)
6.5. On   the   issue   where   payment   is   made   by   piece­rate   to
the workers, would they be covered by  the definition of
“employee”,   this   Court   in   Shining   Tailors   v.   Industrial
Tribunal II, U.P., Lucknow and Ors. , 3
 held that:
“5.   We   have   gone   through   the   record   and
especially the evidence recorded by the Tribunal.
The   Tribunal   has   committed   a   glaring   error
apparent   on   record   that   whenever   payment   is
3  (1983) 4 SCC 464.
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made   by   piece   rate,   there   is   no   relationship   of
master   and   the   servant   and   that   such
relationship   can   only   be   as   between   principal
and   principal   and   therefore,   the   respondents
were independent contractors. Frankly, we must
say that the Tribunal has not clearly grasped the
meaning of what is the piece rate, If every piece
rated   workmen   is   an   independent   contractor,
lakhs   and   lakhs   of   workmen   in   various
industries   where   payment   is   correlated   to
production would be carved out of the expression
‘workmen’   as   defined   in   the   Industrial   Disputes
Act.   In   the   past   the   test   to   determine   the
relationship   of   employer   and   the   workmen   was
the   test   of   control   and   not   the   method   of
payment.   Piece   rate   payment   meaning   thereby
payment   correlated   to   production   is   a   well­
recognised   mode   of   payment   to   industrial
workmen. In fact, wherever possible that method
of payment has to be encouraged so that there is
utmost   sincerity,   efficiency   and   single   minded
devotion   to   increase   production   which   would   be
beneficial   both   to   the   employer,   the   workmen
and the nation at large. But the test employed in
the   past   was   one   of   determining   the   degree   of
control   that   the   employer   wielded   over   the
workmen.   However,   in   the   identical   situation   in
Silver   Jubilee   Tailoring   House   and   Ors.   v.   Chief
Inspector of Shops and Establishments and Anr.
(1973) IILLJ 495 SC Methew, J. speaking for the
Court   observed   that   the   control   idea   was   more
suited   to   the   agricultural   society   prior   to
Industrial   Revolution   and   during   the   last   two
decades the emphasis in the field is shifted from
and  no  longer rests exclusively or strongly upon
the   question   of   control.   It   was   further   observed
that   a   search   for   a   formula   in   the   nature   of   a
single test will not serve the useful purpose, and
all factors that have been referred to in the cases
on topics, should be considered to tell a contract
of   service.   Approaching   the   matter   from   this
angle,   the   Court   observed   that   the   employer's
right   to   reject   the   end   product   if   it   does   not
conform   to   the   instructions   of   the   employer
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speaks   for   the   element   of   control   and
supervision.   So   also   the   right   of   removal   of   the
workman or not to give the work has the element
of   control   and   supervision.   If   these   aspects   are
considered   decisive,   they   are   amply   satisfied   in
the   facts   of   this   case.   The   Tribunal   ignored   the
well  laid test  in law and  completely misdirected
itself by showing that piece rate itself indicates a
relationship   of   independent   contractor   and   error
apparent  on the  record  disclosing a total  lack of
knowledge   of   the   method   of   payment   in  various
occupations   in   different   industries.   The   right   of
rejection   coupled   with   the   right   to   refuse   work
would   certainly   establish   master   servant
relationship   and   both   these   tests   are   amply
satisfied   in   the   facts   of   this   case.   Viewed   from
this angle, the respondents were the workmen of
the   employer   and   the   preliminary   objection
therefore,   raised   on   behalf   of   the   appellant­
employer was untenable and ought to have been
overruled and we hereby overrule it. ”
(emphasis supplied)
6.6. In  M/s P.M. Patel & Sons and Ors.  v.  Union of India and
Ors. , 4
  the   appellants   therein   were   engaged   in   the
manufacture   and   sale   of   bidis .   The   appellants   engaged
contractors,   and   the   contractors   engaged   workers   who
rolled   the   bidis   at   their   own   homes   after   obtaining   the
raw   materials   either   directly   from   the   appellants,   or
through the contractors. The appellants contended that
those   workers   were   not   covered   by   the   definition   of
“employee” under Section 2(f) of the EPF Act. This Court
4  (1986) 1 SCC 32.
11

rejected   the   contentions   raised   by   the   appellants
therein, and held that:
“8.   …   Clause   (f)   of   Section   2   of   that   Act   defines
an   “employee”   to   mean   “any   person   who   is
employed   for   wages   in   any   kind   of   work,
manual or otherwise, in or in connection with the
work   of   an   establishment,   and   who   gets   his
wages   directly   or   indirectly   from   the   employer,
and   includes   any   person   employed   by   or
through a contractor in or in connection with the
work   of   the   establishment.”   It   will   be   noticed
that   the   terms   of   the   definition   are   wide.   They
include   not   only   persons   employed   directly   by
the employer but also persons employed through
a   contractor.   Moreover,   they   include   not   only
persons   employed   in   the   factory   but   also
persons employed in connection with the work of
the   factory.   It   seems   to   us   that   a   home   worker,
by   virtue   of   the   fact   that   he   rolls   beedis,   is
involved   in   an   activity   connected   with   the   work
of   the   factory.   We   are   unable   to   accept   the
narrow   construction   sought   by   the   petitioners
that   the   words   “in   connection   with”   in   the
definition   of   “employee”   must   be   confined   to
work performed in the  factory itself  as  a part of
the total process of the manufacture.
…
10.   In   the   context   of   the   conditions   and   the
circumstances  set   out   earlier  in  which   the   home
workers  of  a single  manufacturer go  about  their
work,   including   the   receiving   of   raw   material,
rolling the beedis at home and delivering them to
the manufacturer subject to the right of rejection
there   is   sufficient   evidence   of   the   requisite
degree   of   control   and   supervision   for
establishing   the   relationship   of   master   and
servant between the manufacturer and the home
worker.   It must be remembered that the work of
rolling   beedis   is   not   of   a   sophisticated   nature,
requiring   control   and   supervision   at   the   time
when   the   work   is   done.   It   is   a   simple   operation
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which,   as   practice   has   shown,   has   been
performed   satisfactorily   by   thousands   of
illiterate   workers.   It   is   a   task   which   can   be
performed   by   young   and   old,   men   and   women,
with equal facility and it does not require a high
order   of   skill.   In   the   circumstances,   the   right   of
rejection   can   constitute   in   itself   an   effective
degree of supervision and control.   We may point
out   that   there   is   evidence   to   show   that   the
rejection takes place in the presence of the home
worker.   That   factor,   however,   plays   a   merely
supportive   role   in   determining   the   existence   of
the   relationship   of   the   master   and   servant.   The
petitioners   point   out   that   there   is   no   element   of
personal   service   in   beedi   rolling   and   that   it   is
open  to  a home  worker to  get  the  work done  by
one   or   the   other   member   of   his   family   at   home.
The   element   of   personal   service,   it   seems   to   us,
is   of   little   significance   when   the   test   of   control
and supervision lies in the right of rejection. ”
(emphasis supplied)
6.7. The aforesaid judgments make it abundantly clear that
the   women   workers   employed   by   the   Respondent
Company   are   covered   by   the   definition   of   “employee”
under Section 2(f) of the EPF Act.
6.8. The   EPF   Act   is   a   beneficial   social   welfare   legislation
which  was  enacted  by   the  Legislature  for   the  benefit   of
the   workmen. 5
  This   Court   in   The   Daily   Partap   v.   The
Regional   Provident   Fund   Commissioner,   Punjab,
5   Regional Provident Fund Commissioner  v.   The Hooghly Mills Company Ltd. and Ors. , 2012
(1) SCALE 422.
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Haryana,   Himachal   Pradesh   and   Union   Territory,
Chandigarh , 6
 held that: 
“9.   …   It   has   to   be   kept   in   view   that   the   Act   in
question, is a beneficial social welfare legislation
meant   for   the   protection   of   weaker   sections   of
society,   namely,   workmen   who   had   to   eke   out
their   livelihood   from   the   meagre   wages   they
receive after toiling hard for the same.”
      Hence,   the   provisions   under   the   EPF   Act   have   to   be
interpreted   in   a   manner   which   is   beneficial   to   the
workmen.
6.9. In   the   present   case,   the   women   workers   were   certainly
employed   for   wages   in   connection  with   the   work   of   the
Respondent   Company.   The   definition   of   “employee”
under   Section   2(f)   is   an   inclusive   definition,   and
includes   workers   who   are   engaged   either   directly   or
indirectly   in   connection   with   the   work   of   the
establishment, and are paid wages.
    In the present case, the women workers were directly
engaged   by   the   Management   in   connection   with   the
6  (1998) 8 SCC 90.
14

work of the Respondent Company, which was set up as
a   ready­made   garments   industry   in   Marathwada.   The
women  workers  were paid  wages on  per­piece  basis  for
the   services   rendered.   Merely   because   the   women
workers   were   permitted   to   do   the   work   off   site,   would
not   take   away   their   status   as   employees   of   the
Respondent Company.
7. The   Respondent   Company   placed   reliance   on   this   Court’s
decision   in   C.E.S.C.   Limited   and   Ors.   v.   Subhash   Chandra
Bose and Ors. , 7
  wherein it was   held that:
“14.   …   In   the   textual   sense   ‘supervision’   of   the
principal   employer   or   his   agent   is   on   ‘work’   at
the   places   envisaged   and   the   word   ‘work’   can
neither   he   construed   so   broadly   to   be   the   final
act   of   acceptance   or   rejection   of   work,   nor   so
narrowly so as to be supervision at all limes and
at   each   and   every   step   of   the   work.   A
harmonious  construction alone  would help carry
out   the   purpose   of   the   Act,   which   would   mean
moderating   the   two   extremes.   When   the
employee is put to work under the eye and gaze
of the principal employer, or his agent, where he
can   be   watched   secretly,   accidentally,   or
occasionally, while the work is in progress, so as
to   scrutinise   the   quality   thereof   and   to   detect
faults   therein,   as   also   put   to   timely   remedial
measures   by   directions   given,   finally   leading   to
the   satisfactory   completion   and   acceptance   of
the work, that  would in our view be supervision
for the purposes of Section 2(9) of the Act.”
7  (1992) 1 SCC 441.
15

      The   decision   in   C.E.S.C.   Limited   (supra)   however,   is   not
applicable to the facts of the present  case. In that  case, this
Court   interpreted   the   meaning   of   the   term   “supervision”   as
used   in   the   definition   of   “employee”   Section   2(9)   of   the
Employees’   State   Insurance   Act,   1948.   However,   the   term
“supervision” is nowhere used in the definition of “employee”
under  Section   2(f)  of  the  EPF   Act.  The   decision   in   P.M.   Patel
(supra)   could not be used to interpret the word “supervision”
under the Employees’ State Insurance Act, 1948 because the
said word has not been used in Section 2(f) of the EPF Act. 
8. In   view   of   the   aforesaid   discussion,   the   judgment   passed   by
the   Bombay   High   Court   vide   the   Impugned   Order   dated
27.04.2012, being contrary to settled law, is set aside.
    The Order dated 19.04.1993 passed by the Appellant No. 1
is   restored.   The   Respondent   Company   is   directed   to   deposit
the   amount   assessed   by   Appellant   No.   1   towards   Provident
Fund   dues   of   the   women   workers   within   1   month   from   the
date of this Judgment.
16

The   Civil   Appeal   is   allowed   in   the   aforesaid   terms.   All
pending Applications, if any, are accordingly disposed of.
Ordered accordingly.
.....................................J.
(ABHAY MANOHAR SAPRE)
.…...............………………J.
(INDU MALHOTRA)
New Delhi,
July 24, 2019
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