The division bench of the Supreme Court presided by Justice Uday Umesh Lalit and Justice Indu Malhotra in the case of M/S. Pawan Hans Limited & Ors. Vs. Aviation Karamchari Sanghatana & Ors. stated that employees that have been employed on contractual basis are entitled to Provident Fund.

In the present case, the Appellant­ Company is registered as a Government of India company with the Registrar of Companies, Delhi. The Government   of   India   holds   51%   shareholding   in   the Appellant­Company and the remaining 49% is held by Oil and Natural Gas Company Ltd. (ONGC). The Appellant-Company has framed its own rules regarding the Provident Fund. The company regulation stated that, “these regulation shall apply to all of the employees and employee will not include anyone that is employed on a contractual basis directly or indirectly through a contractor.” The counsel for the Appellant-company raised the contention that they are exempt from the application of the EPF Act and EPF Scheme under Section 16 of the EPF Act that states that a company that is owned/controlled by the Central Government EPF Act would not apply. The High Court stated that, “a liberal view must be taken in extending social security benefits to the contractual employees.” The High Court directed the Company to enrol all eligible contractual employees under the EPF Scheme, and deposit their   contribution. Aggrieved by this judgement, the appeal was filed to the Supreme Court.

The Supreme Court in the present case has referred to the judgement that was given in the case of Regional Provident Fund Commissioner v. Sanatan Dharam Girls Secondary School. This Judgement has laid down a twin test   for   an   establishment   to   seek   exemption   from   the provisions of the EPF Act, 1952. The twin conditions are: “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. If both tests are satisfied, an establishment can claim exemption/exclusion under Section 16(1)(b) of the EPF Act.” After applying the abovementioned test, the Supreme Court was of the opinion that although the Appellant-Company has satisfied the first condition, it fails to satisfy the second one as the court found that these employees were not receiving any benefits from any of the central or state governed schemes. And, although they are contractual employees they were appointed by the company itself and not by a contractor and therefore they fall under the definition of employee.

Therefore, the Supreme Court stated that, “we find that the members of the Respondent­ Union and all other similarly situated contractual employees, are entitled to the benefit of provident fund under the PF Trust Regulations or the EPF Act. Since, the PF Trust Regulations are in force and are applicable to all employees of the Company, it would be preferable to direct that the members of the Respondent -Union and other similarly situated contractual employees are granted the benefit of provident fund under the PF Trust Regulations so that there is uniformity   in the service conditions of all the employees of the Company.”

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Link of judgment: Pawan Hans Ltd. v. Aviation Karmachari Sanghatana