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Supreme Court: Private Security Agents Are Bound by EPF & MP Act, 1952

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This case discussed the eligibility of an organization to be governed under provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.

Brief Facts of the Case

The Appellant was involved in the business of providing private security to its clients on a payment basis. The Appellant was registered under the Private Security Agencies (Regulation) Act, 2005. This appeal was filed against the High Court order, affirming the order dated 28.07.2008 of the Assistant Provident Fund Commissioner, Kanpur under Sec. 7A of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (the EPF Act), holding the appellant liable for complying with the provisions of the EPF Act and deposit the statutory dues within 15 days. The dues of the appellant as quantified by the order dated 15.04.2009 are ₹ 42,01,94/- and statutory interest under Sec. 7Q at ₹ 30,44,224/-. 

Appellant’s Argument

The Appellant was not within the ambit of G.S.R. No. 805 dated 17.05.1971 issued under Sec. 1(3)(B) of the EPF Act, as it was not engaged in providing expert services. The appellant only provided chowkidars to its clients at the request of the latter and charged service charges from them for facilitation. The appellant had only 5 members on its roll. The EPF Act did not apply to it. Relying on Sec. 2(e)(ii) and (f) of the EPF Act, it was submitted that the salary was paid by the clients themselves and they have ultimate control over the security guards deployed with them. The appellant was not the employer and security guards are not the employees of the appellant. 

Respondent’s Argument 

The Respondent contended that the appellant rendered expert services by providing trained personnel as security guards. It is entirely within the ambit of the notification dated 17.05.1971. The appellant did not furnish wage and salary registers, despite repeated notices. During the raids, the balance sheets seized for the year 2003-04, 2004-05, 2005-06 and 2006-07 showed that the amount paid for the salaries was running into lacs which cannot be the wage bill of 5 employees. A letter dated 03.04.2001 was written by the appellant to the New India Assurance Company Limited seeking Group Janta Personnel Accident Insurance Policy of one lac each for 79 security personnel.

The appellant did not approach the tribunal under Sec. 7I of the Act against the order passed under Sec. 7A, where all relevant material facts could have been examined, instead directly a writ petition was filed. The writ petition and review of the application of the appellant were dismissed.

Observation of the Court 

The Court agreed to the findings that the appellant was engaged in expert services and the contention that the appellant merely provided chowkidars was not countenanced. The Act of 2005 makes it manifest that the appellant was the employer to the security guards, who are its employees, and wages were paid by the appellant. The mere service charges being paid by the clients to the appellant and in turn appellant pays the wages to the security guards, did not make the clients employer of the security guards nor the security guards the employees of the client. The appellant, thus, is squarely covered by the Notification dated 17.05.1971.  

The statutory registers were never made available by the appellant under the Act of 2005, thus, it was held that the appellant withheld the relevant papers. The letter dated 03.04.2001 and the balance sheets seized during the raids, led us to the conclusion that the appellant has more than 20 employees. Therefore, the provisions of the Act necessarily apply to it.

Decision of the Court

The appeals were dismissed, and the interim order dated 12.05.2009 restraining coercive steps for enforcement of demand notice dated 15.04.2009 was vacated. 

Click here to read M/s Panther Security Services vs. The EPFO.


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