Case Study: Bombay High Court Rules EPF Act Not Applicable to Cooperative Housing Society

Case

Central Board of Trustees v. Nutan Pushpak Premises Co-op. Society Ltd.
C.A.J. W.P. No. 4173/2015 with C.A. No. 541/2016

Court and Date

Hon’ble Mr. Justice S.C. Gupte
Bombay High Court
Date of Order: 29 April 2016

Relevant Law

• Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  • Section 1(3)(b): Applicability to notified establishments.
  • Section 16(1): Exemption to establishments registered as cooperative societies employing less than fifty workers and working without the aid of power.

Background

The Nutan Pushpak Premises Co-operative Society Ltd. is a registered cooperative society under the Maharashtra Co-operative Societies Act, 1960. It primarily consists of owners of commercial premises and employed less than 30 workers (watchmen and sweepers) who worked without the aid of power.

The Assistant Provident Fund Commissioner initially held that the society was covered by the EPF Act, reasoning that it fell under Item 34 of Appendix I as a society rendering services to its members.

The Appellate Tribunal, however, allowed the society’s appeal, holding that:

• The society was not rendering any direct services to members as contemplated under Item 34.
• It was excluded under Section 16(1) because it employed less than 50 workers and worked without the aid of power.

Aggrieved, the EPF Authority challenged the Tribunal’s order before the Bombay High Court.

Legal Issue

Whether a cooperative society employing less than fifty workers and working without the aid of power is covered under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Key Legal Findings

• Not Covered Under Item 34 of Appendix I:
  A housing/premises co-operative society does not render any particular service to its members within the meaning of Item 34, which applies to clubs, associations, or societies rendering specific services.
• Exempted Under Section 16(1):
  • The society is registered under the Co-operative Societies Act.
  • It employs less than 50 workers.
  • It works without the aid of power.
  • Merely using electricity for lights or fans does not constitute “working with the aid of power”. Power must be used directly and proximately in carrying out work or processes.
• Backbay Premises Co-op. Society Ltd. v. Union of India (1997) was relied upon to support that housing societies do not render “services” as contemplated in Appendix I.

Judgment

• The Bombay High Court upheld the Appellate Tribunal’s order and dismissed the writ petition filed by the EPF Authority.
• It held that:
  • The society is not covered under the EPF Act.
  • The amount of ₹10,58,000 recovered by the EPF Authorities must be refunded to the society.

Conclusion

The judgment clarifies that cooperative housing societies that employ less than fifty workers and work without the aid of power are not covered by the EPF Act. The mere use of electricity for lighting or basic amenities does not qualify as “working with the aid of power”. Also, housing societies do not render services to their members in the sense contemplated by the Act.

Key Learning

• EPF Act coverage requires direct service to members or business-like activity.
• Housing/premises co-operative societies are not automatically covered by Item 34 of Appendix I.
• Section 16(1) exempts cooperative societies if:
  • They are registered under the Co-op Societies Act,
  • Employ less than 50 workers, and
  • Work without the aid of power.
• Use of electricity for lighting or fans ≠ working with power.
• Refunds must be made if contributions were wrongfully collected from exempted societies.

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