Sanchayita Lahkar

The High Court of Jammu and Kashmir and Ladakh at Jammu Single Bench of Justice Sanjay Dhar has quashed an order refusing to exempt a cooperative housing society from the application of the Jammu and Kashmir Employees’ Provident Funds and Miscellaneous Provisions Act, 1961. The Court determined that voluntary registration under the Act, in the absence of a Government Gazette notification as required under Section 1(4), is legally ineffective.

The Court directed that the petitioner-society be de-covered from the Act, stating, "in the absence of a notification issued in terms of Subsection (4) of Section 1 of the Act of 1961 in the Official Gazette, the respondents cannot claim that the petitioner-society is covered under the provisions of the said Act."

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The petitioner, Jammu Cooperative House Building Society, registered under the Jammu and Kashmir Cooperative Societies Act since 1975, approached the Court challenging the rejection of its de-coverage request under the Jammu and Kashmir Employees’ Provident Funds and Miscellaneous Provisions Act, 1961. The impugned order No.Addl.PFC/J/10 of 2023 dated 25.07.2023 denied the society's claim for exemption.

According to the petitioner, the society initially had four employees, and subsequently, only two remained, with only one employed at the time of filing the writ petition. Despite this, the society had continued to deposit provident fund contributions voluntarily.

The petitioner argued that under Section 18 of the Act, cooperative societies employing fewer than five persons and not using power are excluded from the Act’s coverage. Earlier, a writ petition bearing OWP No. 1208/2014 was filed by the petitioner against a communication dated 22.07.2014 from the respondent’s refusing exemption. This petition was disposed of on 05.04.2023, directing the respondents to reconsider the matter.

Upon reconsideration, the respondents again rejected the claim, citing an inspection note from 1992 indicating that the society had eight employees. The petitioner disputed this and maintained that the employee count never exceeded four.

The respondents submitted that the society voluntarily came under the Act by contributing provident funds for three employees and was allotted Code No. JK/J-844. They argued that under Section 1(5) of the Act, once covered, an establishment remains so, even if the number of employees falls below five.

However, the respondents admitted that the society was not covered mandatorily and that its inclusion was based on voluntary application. They failed to produce any Government Gazette notification required under Section 1(4) of the Act for voluntary coverage.

Justice Sanjay Dhar stated that the dispute regarding the number of employees employed in 1992 was not substantiated by actions taken by the respondents. "If at all, the petitioner had employed eight employees as is depicted in the inspection note 11.05.1992, then the respondents should have made an order against the petitioner-society calling upon it to deposit contributions in respect of those employees whose names were not found in the returns."

The Court noted that the society had been filing returns consistently from 1992 to 2014, reflecting an employee count of two to four, and no objection was raised by the respondents during that time.

Referring to Section 1(3) and Section 18 of the Act, the Court held, "because the petitioner-society had less than five employees working with it, the provisions of the Act of 1961 could not have been applied to it."

The Court stated the necessity of a Gazette notification under Section 1(4) for voluntary application: "The applicability of the provisions of the Act to an establishment, which is otherwise not covered under the said Act, would become final only after a notification to this effect is published in the Official Gazette."

Citing Tech Movers Systems (India) Pvt. Ltd. v. Regional Provident Fund Commissioner, 1995 (2) LLN 938, and Harish Sakharam Savardekar vs Union of India, 1991 (1) MHLJ 289, the Court reiterated that the absence of such a notification renders the proceedings under the Act invalid.

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"Till such time a notification is issued in the Official Gazette, any of the parties can at any time opt out of the agreement to apply the provisions of the Provident Fund Act to their establishment."

Setting aside the impugned order dated 25.07.2023, the Court held: "The impugned order passed by respondent No.3 is set aside and a direction is issued to said respondent to issue an order for de-coverage of the petitioner-society from the applicability of the provisions contained in the Act of 1961."

The Court further ordered that the record be returned to the concerned authority.

Advocates Representing the Parties

For the Petitioner: Mr. Rahul Pant, Senior Advocate with Mr. Dhruv Pant, Advocate

For the Respondents: Mr. Rajesh Kumar Thappa, AAG

Case Title: Jammu Cooperative House Building Society vs UT of Jammu and Kashmir and Others

Case Number: WP(C) No. 2493/2023

Bench: Justice Sanjay Dhar

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