Venkatarama Aiyar, J. - (1.) The first petitioner is a company carrying on business in the manufacture of cement in the State of Orissa and petitioners Nos. 2 and 3 are two of its Directors. They have filed the present petition under Art. 32, challenging the validity of two notifications dated January 15, 1958 and December 2, 1960 issued by the Central Government under S. 7 (1) of the Employees' Provident Funds Act, 1952 hereinafter referred to as "the Act". It will be convenient to first set out the relevant statutory provisions bearing on the question. The Act was passed for the purpose of providing for the institution of Provident Funds for the employees in factories and other establishments. Section 5 of the Act, which deals with this matter is as follows: "5. Employees' Provident Fund Schemes. (1) The Central Government may, by notification in the Official Gazette, frame a Scheme to be called the Employees' Provident Fund Scheme for the establishment of provident funds under this Act for employees or for any class of employees and specify the establishments or class of establishments to which the said Scheme shall apply and there shall be established, as soon as may be after the framing of the Scheme, a Fund in accordance with the provisions of this Act and the Scheme. (2) A Scheme framed under sub-see. (1) may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified in this behalf in the Scheme." Section 6 (1) which provides for the employer making contribution to the Fund runs as follows:- 6 (1) The contribution which shall be paid by the employer to the Fund shall be six and a quarter per cent, of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees, and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires and if the Scheme makes provision therefor, be an amount not exceeding eight and one third per cent, of his basic wages dearness allowance and retaining allowance (if any): Provided that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for the rounding off of such fraction to the nearest rupee, half of a rupee or quarter of a rupee." Under S. 7 the Central Government may by notification in the Official Gazette, add to, amend or vary any, Scheme framed under this Act. Section 14 prescribes penalties for any contravention of the Provisions of the Act or default in compliance with them.
(2.) In exercise of the Powers conferred by S. 5 of the Act, the Central Government published on September 2, 1952, what is called the Employees' Provident Funds Scheme, 1952, para 2 (f) (iii) of the Scheme defines "Excluded Employees" as meaning the employees employed by or through a contractor. Under Para 3 the provident fund standing to the credit of an employee vests in the authorities constituted thereunder. Para 26 provides that every employee employed in a factory or establishment other than an excluded employee shall be required to become a member of the fund if he has completed one year's continuous service, in the factory or establishment, and there is a proviso that if the employee has actually worked in the factory or establishment for not less than 240 days, he shall be deemed to have completed one year's continuous service. Paras 30 to 32 deal with contributions to be made by the employer and they are as follows: "30. The employer shall, in the first instance pay both the contribution payable by himself (in this Scheme referred to as the employer's contribution) and also, on behalf of the member employed by him, the contribution payable by the member (in this Scheme referred to as the member's contribution)". "31. Notwithstanding any contract to the contrary the employer shall not be entitled to deduct the employer's contribution from the wage of a member or otherwise to recover it from him." "32. (1) The amount of a member's contribution paid by the employer shall, notwithstanding the provisions in this Scheme or any law for the time being in force or any contract to the contrary be recoverable by means of deduction from the wages of the member and not otherwise: Provided that no such deduction may be made from any wage other than that which is paid in respect of the period or part of the period in respect of which the contribution is payable: Provided further that the employer shall be entitled to recover the employee's share from a wage other than that which is paid in respect of the period for which the contribution has been paid or is payable where the employee has in writing given a false declaration at the time of joining service with the said employer that he was not already a member of the Fund ; Provided further that where no such deduction has been made on account of an accidental mistake or a clerical error, such deduction may, with the consent in writing of the Inspector, be made from the subsequent wages (2) Deduction made from the wages of a member paid on daily, weekly or fortnightly basis should be totalled up to indicate the monthly deductions. (3 Any sum deducted by an employer from the wage of an employee under this Scheme shall be deemed to have been entrusted to him for the purpose of paying the contribution in respect of which it was deducted."
(3.) The combined effect of S. 6 and Paras 30 to 32 of the Scheme is that the contribution to the Provident Fund is to be 12 1/2 per cent of the basic wages, and dearness allowance, that it is to be borne equally by the employer and the employee, and that the employer is to pay the whole of it, half on his account, and the other half on account . of the employee, and he is to recoup himself ' by deducting it from the wages of the employee. Such deduction would be possible only when the employer is the person who has to pay wages to the employee and that is why employees employed by or through a contractor were included in the definition of "excluded persons" to whom under Para 26 the Scheme had no application. These employees would be paid by the contractor and the question of deduction of wages by the principal employer, i-e- the person who is in charge of the factory or establishment, will not arise.;