SUPREME COURT HOLDS THAT EMPLOYEES PROVIDENT FUND ACT APPLIES TO PRIVATE SECURITY AGENCIES

The provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF’ Act) are applicable to establishments employing 20 or more persons or class of such establishments, which the Central Government may notify.

Recently, two Judges Bench of Supreme Court of India in the case of Panther Security Services Pvt. Ltd. v. Employees’ Provident Fund Organisation, [(2020) SCC Online SC 981], vide its Judgment dated 02.12.2020 held that the provisions of the EPF Act are applicable to a private security agency engaged in the expert services of providing personnel to its Client, if it meets the requirement of the EPF Act.

Background: Panther Security Services Pvt. Ltd. (‘Appellant’, herein) is registered under the Private Security Agencies (Regulation) Act, 2005 (‘PSA’ Act) and engaged in the business of providing Private Security Guards to its Clients on contract basis since 2001.

A Notification, vide G.S.R. No. 805 dated 17.05.1971 issued under Section 1(3)(b) of the EPF Act and published in the Gazette on 25.09.1971 states that the provisions of the EPF Act are applicable to every establishment employing twenty or more persons that is rendering expert services such as supply of personnel, advice on domestic or departmental enquiries, etc.

A team from the EPF Organisation raided the Appellant’s establishment on 29.12.2005 and seized certain records. On 07.03.2006, the Assistant Provident Fund Commissioner on the basis of seized documents opined that the Appellant had 79 employees as on 03.04.2001 and issued a Demand Notice dated 15.04.2009 to make the necessary contribution under the EPF Act.

Being aggrieved, the Appellant challenged the Demand Notice dated 15.04.2009 and proceedings were initiated under Section 7A of the EPF Act with due opportunity of defence to the Appellant. During the proceedings the Appellant failed to submit the attendance register, wage register etc. The Assistant Provident Fund Commissioner, Kanpur on the basis of balance sheets seized during raid opined that the Appellant had more than 20 employees on its rolls and was therefore covered by the term ‘expert services’ such as providing of personnel under the Notification dated 17.05.1971.

The Commissioner, vide Order dated 28.07.2008 held the Appellant liable for compliance with the Provisions of the EPF Act with directions to deposit the necessary contributions under the EPF Act to the tune of Rs. 72,46,165/­ within 15 days.

The Appellant filed a Writ Petition challenging the Order dated 28.07.2008 before the High Court, which affirmed the said Order and dismissed the said Writ Petition.

As a result thereof, the present Appeal was filed by the Appellant before the Supreme Court against the High Court Order upholding the Order dated 28.07.2008 passed by the Assistant Provident Fund Commissioner, Kanpur under Section 7A of the EPF Act.

In this regard, the Supreme Court noticed that wages were not paid directly by the Clients to the Security Guards provided by the Appellant. The payments were made directly to the Appellant, who thereafter disbursed wages to the Security Guards.

The Supreme Court further observed that merely because the Client pays money to the Appellant and in turn the Appellant pays the wages of such Security Guards from such amount received by it, it does not make the Client the employer of the Security Guard. Further the Security Guards do not constitute employees of the Client. Rather the Appellant becomes the employer of the Security Guards. Therefore, the Supreme Court held that the Appellant is covered by the Notification dated 17.05.1971 as it is rendering the specialised and expert services of providing trained and efficient Security Guards to its Clients on contractual payment basis.

Thus, a bare reading of the PSA Act of 2005 also makes it manifest that the Appellant is the employer of such Security Guards and are paid wages by the Appellant. In this view, the Supreme Court enforced the Demand Notice dated 15.04.2009 and dismissed the Appeal.

Lakshmi Vishwakarma

Associate

The Indian Lawyer & Allied Services