P. Govindan Nair, J.
1. The prayers in this writ application are:
to declare that
(1) the Employees' Provident Funds Act (19 of 1952) is ultra vires of the Constitution ;
(2) to quash the order passed by respondent 1 marked as Ex. P. 4;
(3) to Issue a writ of mandamus against respondent 2 restraining him from enforcing the provisions of the Employees' Provident Funds Act to the petitioner;
(4) such other reliefs which the Court may deem fit and proper In the circumstances of the case.
2. There has been for some time a controversy as to whether the establishment of the partnership-firm of which the petitioner is the managing partner is an establishment that will be governed by the Employees' Provident Funds Act, 1952 (hereinafter referred to as the Act). Section 1(3)(a) of the Act states that the Act will apply to every establishment which is a factory engaged In any Industry specified In Sen. I and In which twenty or more persona are employed.
3. It is admitted that the firm of which the petitioner is a managing partner is engaged In an Industry which has been Included In the schedule to the Act, But It is disputed that the petitioner is employing more than twenty persons. In fact It is the case of the petitioner that he is employing only a very few people, much less than twenty. His case la that those who are working In the establishment are Independent contractors and between them and the petitioner there is no employer-and-employee relationship. The contention la that those working In the establishment are not workmen of the petitioner-firm of which the petitioner la the managing partner within the meaning of Section 2(e) of the Act. Sections 2(e) and 2(f) of the Act define employer and employee and ran thus:
2 (e) 'employer' means:
(i) In relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under Clause (f) of Sub-section (1) of Section 7 of the Factories Act, 1948, the person so named; and
(ii) in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent;(f) 'employee' means any person who is employed for wages In any kind of work, manual or otherwise, In or In connexion with the work of an establishment, and who gets his wages directly or indirectly from the employer, and includes any person employed by or through a contractor In or in connexion with the work of the establishment.
4. The question that has to be determined on the dispute raised la whether the persona working In the establishment are employees within the meaning of the Act and whether the petitioner is an employer with reference to them. That of course cannot be determined in these proceedings. The only points arising in this writ application are:
(a) whether the statute or any part of It la liable to be struck down, and
(b) whether the order Ex. F. 4 has to be set aside.
5. Regarding the first of these points, counsel on behalf of the petitioner has urged that the question as to whether the Act would apply to a particular factory la an important one and a decision thereon will affect substantially persona engaged In business and therefore there must be a machinery provided by the Act for the determination of this question. According to counsel, the only provision to resolve this question when there is a dispute regarding the applicability of the Act to a particular factory, is that contained In Section 19A of the Act. That election is in these terms:
19A. If any difficulty arises In giving effect to the provisions of this Act, and In particular, If any doubt arises as to-
(i) whether an establishment, which is a factory, is engaged In any Industry specified In Section 1;
(ii) whether any particular establish meet is an establishment, falling within the class of establishment to which this Act applies by virtue of a notification under Clause (b) of Sub-section (3) of Section 1;
(iii) the number of persons employed In an establishment; or
(iv) the number of years which have elapsed from the date on which an establishment has been set up; or
(v) whether the total quantum of benefits to which an employee is entitled has been reduced by the employer;the Central Government may, by order, make such provision or give such direction, not Inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for the removal of the doubt or difficulty; and -the order of the Central Government, In such cases, shall be final.
6. That there is no other provision la admitted.
7. It is urged that Section 19A gives arbitrary power to the Central Government and the decision under the section has been made final. So It is urged that the section is liable to be, set aside.
8. Section 19A does not indicate the procedure that should be adopted before a conclusion is reached under the section. Even so I am Inclined to take the view that the enquiry that should be conducted, or the Investigation that should be made before a decision is taken is In the nature of a quasi-Judicial enquiry. The grounds on which It has to be decided whether the enquiry is a quasi-judicial one or not have been stated by the Supreme Court in more than one ease.
I may refer to some of them. In Gullapalli Nageswara Rao and Ors. v. Andhra Pradesh State Rood Transport Corporation and Anr. A.I.R 1969 S.C. 308 their lordships observed as follows:
The criteria to ascertain whether a particular act is a judicial act or an administrative one, have been laid down with clarity by Lord Justice At kin in Rex v. Electricity Commissioners, Ex-parte London Electricity Joint Committee Co. (1924) 1 KB. 171 elaborated by Lord Justice Serutton in Rex v. London County Council, Ex parte Entertainments Protection Association, Ltd. (1931) 2 KB. 215, and authoritatively restated by this Court in Province of Bombay v. Khushaldas S. Adwant A.I.R. 1960 S.C. 222. They laid down the following conditions:
(a) the body of persons must have legal authority ;
(b) the authority should be given to determine questions affecting the rights of subjects; and
(c) they should have a duty to act judicially.
9. In the last of the oases cited supra, Das, J., as he then was, analysed the scope of the third condition thus at A I.R. 1960 S.C. 222 at 260 (vide supra):
(i) that If a statute empowers an authority not being a Court in the ordinary sense, to decide disputes arising out of a claim made by one party under the statute which claim is opposed by another party and to determine the respective right of the center sting parties who are opposed to each other, there is a Us and prima facie and, in the absence of any thing In the statute to the contrary, it is the duty of the authority to act judicially and the decision of the authority is a quasi-judicial act; and
(ii) that If a statutory authority baa power to do any act which will prejudicially affect the subject, then, although there are not two parties apart from the authority and the contest is between the authority proposing to do the act and the subject opposing It, the final determination of the authority will yet be a qnasi-Judical act provided the authority is required by the statute to act Judicially.
10. In the case In re Banwarilal Roy 48 C.W.N. 766, Das, J., as he then was, said much to the same effect at p. 800:
A judicial or quasi-judicial act, on the other hand, Implies more than mere application of the mind of the formation of the opinion. It has reference to the mode or manner In which that opinion la formed. It implies 'proposal and an opposition,' and a decision on the Issue. It vaguely connotes 'hearing evidence and opposition' as Sorutton, L.J., expressed It. The degree of formality of the procedure as to receiving or hearing evidence may be more or less according to the requirements of the particular statute, but there is an Indefinable, yet an appreciable, difference between the method of doing an administrative or executive act and a judicial or quasi-judicial act.
11. This statement is practically in accordance with the first proposition extracted above this Court again In Nagendra Nath Bora v. Commissioner of Hills Division A.I.E. 1958 S.C. 890 In the context of the povisions of Eastern Bengal and Assam Excise Act, 1910 (1 of 1910), considered the scope of the concept of ' judicial act.' Sinha, J., who delivered the judgment of the Court, made the following observations at p. 408;
Whether or not an administrative body or authority functions as a purely administrative one or in a quasi-judicial capacity must be determined In each case, on an examination of the relevant statute and the rules framed thereunder.
12. In Express Newspapers, Ltd. v. Union of India 1961-I L.L.J. 339 this Court again reviewed the law on the subject to ascertain whether the wage board functioning under the Working Journalists (Conditions of Service and Miscellaneous Provisions) Act, 1955 (45 of 1055), was only discharging administrative functions or quasi-judicial functions. Bhagwati, J., made the following observation at p. 879:
If the functions performed by the wage board would thus consist of the determination of the Issues as between a proposition and an opposition on data and material gathered by the board in answer to the questionnaire issued to all parties Interested and the evidence led before it, there is no doubt that there would be Imported In the proceedings of the wage board a duty to act judicially and the functions performed by the wage board would be quasi-judicial In character.
The aforesaid three decisions lay down that whether an administrative tribunal has a duty to act judicially should be gathered from the provisions of the particular Statute and the rules made thereunder, and they clearly express the view that If an authority is called upon to decide respective rights of contesting parties or. to put it in other words, if there IB a Hi ordinarily there will be a duty on the part of the said authority to act judicially.
13. To the same effect is the observation of the Supreme Court in Dwarka Nath v. Incometax Officer, Special Circle, D Ward, Kanpur, and Anr. (1965) 2 8. C.W.R. 391, There is one more decision in Associated Cement Companies, Ltd. v. P. N. Sharma and Anr. 1965-I L.L.J. 433 and at p. 434 of the report the same principle has been reiterated.
14. It is clear from these pronouncements that the statement of the law by the learned Judge, Das, J., that
If a statute empowers an authority not being a Court in the ordinary sense, to decide disputes arising out of a claim made by one party under the statute which claim is opposed by another party and to determine the respective rights of the contesting parties who are opposed to each other, there is a us and prima facie and, In the absence of anything in the statute to the contrary, it is the duty of the authority to act judicially and the decision of the authority is a quasi-judicial act;
lays down the correct principle.
15. There is nothing In the Act to indicate that the prima facie Inference that should be drawn that the authority functioning under Section 19A should act Judicially la Intended to be negatived. The question to be determined is an Important one. The right of the contenting parties will be substantially affected by the decision and there is a us. So I have come to the conclusion, notwithstanding the absence of any positive Indication in the statute, that the enquiry before a decision is taken under Section 19A is a quasi-Judicial enquiry and I some to such a conclusion. In the light of the above, it is Idle to contend that the provision is arbitrary and/or the statute or any part of it is liable to be struck down.
16. The only remaining question therefore is whether the order Ex. P. 4 is liable to be quashed. The answer to this question will depend upon the further question whether the procedure that should be followed by a quasi-Judicial authority before making a decision has been followed before passing the order Ex. P. 4. One of the essentials of such procedure Is that the party affected by the decision should be afforded an opportunity to state his case and to explain any circumstances that may appear against him and which may enable the authority to come to a conclusion.
17. Exhibit P. 1 is the notice that has been Issued to the petitioner by respondent 1. The relevant part of that notice IB in Paras. 3 and 4 which are in these terms:
3. It has been reported by the Regional Provident Fund Commissioner, Kerala, that the relationship of master and servant exists between the management and the weavers concerned In your establishment for the following reasons:
(1) The establishment Is registered as a factory under the Factories Act, 1848.
(2) The persons are working In the establishment during fixed hours. If any person wants to go early, he gets the permission of the employer or the maistry.
(3) Muster-rolls are maintained In the establishment wherein attendance of employee during pre-Interval and post-Interval periods is noted. If an employee la considerably late during any session he is marked absent for that session.
(4) The persons get leave with wages annually. They have to take leave generally when they want to absent themselves.
(5) The persons have to work under the direct supervision of the maistry. The management has the right to direct these persons how they should do the work. Discipline is maintained by the malstrles In the establishment.
18. The Regional Provident Fund Commissioner, Kerala, is, therefore, of the view that the weavers concerned can be deemed to be employees 'within the meaning of the Act and that your establishment can be deemed to be employing twenty or more persons and accordingly coverable under the Act.
4. In the light of the report of the Regional Provident Fund Commissioner, Kerala, there are reasonable grounds to believe that your establishment Is ooverable under the Employees' Provident Funds Act. I am to say that the Central Government would like to have your views, if any, before passing appropriate orders under Section 19A of the said Act. I am, therefore, to request yon to kindly Intimate your views, if any, to this Ministry within thirty days of the receipt of this letter.
19. The grounds on which it is said that the weavers are employees within the meaning of the Act are seen from Para. 3. Those grounds, It is mentioned in Ex, P. 1, are gatherable from the report of the Regional Provident Fund Commissioner and in Para. 4 It is reiterated:
In the light of the report of the Regional Provident Fund Commissioner, Kerala, there are reasonable grounds to believe that your establishment is ooverable under the Employees' Provident Funds Act.
20. The petitioner replied to Ex. P. 1 by Ex. P. 2. It is clear from Ex. P. 2 that he denied the existence of most if not all of the grounds relied on in Ex. P. 1. The relevant paragraphs of Ex. P. 2 read thus;
It is true that the establishment is registered as a factory but that will not conclude the matter. The handloom factory will not come within the Factories Act because the workers they employ will not be more than three or four and the rest are weavers who are not at all workmen. That apart, the factory has been registered as factory under the Factories Act only due to the compulsion and threat of prosecution by the Factory Inspectors.
The statement In the memorandum that the weavers are In the establishment for fixed hours s Incorrect and no person is required to obtain permission to leave early. The report of the Commissioner that If the person wants to go early he gets the permission of the employer or the maistry is untrue and denied. It is true that master rolls are maintained but it la only to show who are all working on a particular day and it IB also necessary for accounting. Keeping a muster-roll will not also show that the persons working In the factory are ' workers' or ' persons employed.' The weavers never take leave and they will not get annual leave. The workers absent from work without leave and they even work for other establishments. No supervision or control exists and only supervision is to see the yarns supplied to them are not stolen away. The management has no right to direct these persons how they should work. Discipline is not at all maintained by the maistries.. the Central Government has very carefully considered the facts, circumstances and arguments mentioned in your statement and also the reports of the Investigating Inspector and the Regional Provident Fund Commissioner and finds the following facts as established:
(i) The weavers and dyers work in the factories and not outside.
(ii) The establishments concerned are registered under the Factories Act, 1948, and have fixed hours of work. The weavers, etc, work during factory hours and if any one of them wants to go early, he gets the permission of the employer or the maistry.
(iii) The attendance of the weavers is noted both for the pre-interval and post-interval periods. If a weaver is late, he la marked absent for that session.
(iv) A weaver generally takes leave when he wants to absent himself.
(v) The management direct the workers how the work is to be done, The work is supervised by maistries,
(vi) The weavers get leave with wages.
2. The facts stated above Indicate degree of control by the management over the manner In which the work is done by the weavers. The Judgment of the Supreme Court in Birdhichandi Sharma, v. Pint Civil Judge, Nagpur 1961-II L.L.J. 86, would seen to be more in paint. The decision referred to by yon does not apply to tht facts that this case is distinguishable.
3. Considering all the circumstances and in particular those mentioned in the preceding paragraph, Central Government is satisfied that the weavers are employees within the meaning of Section 2(f) of the Employees' Provident Funds Act and accordingly makes a direction under Section 19A of the said Act that twenty or more persons are employed in your factory and that it has been rightly covered under the Act.
21. The question to be decided rested on the existence or otherwise of the grounds enumerated as Items (q) to (vi) In Ex. P. 4 order. Regarding these grounds, whatever materials the respondents had, were not made available to the petitioner. Though Ex. P. 1 referred to certain reports, those reports were not sent to the petitioner. What was the enquiry that was made, what statements, if any, were recorded, and what were the materials on the basis of which the report was drawn up, are not seen from Exs. p. 1, P, 2 and P. 4. Counsel for the respondents, Sri P. Balagangadhar a Menon, assures me that there have been copious reports that there were materials and that the reports that have been called for after the explanation Ex. P. 2 were only for the purpose of explaining the stand taken by the petitioner In Ex. P. 2 and there was no need to go on furnishing further materials to the petitioner every time he objected to a notice which itself has stated the grounds of the decision. That proposition is not open to question. But the principle can be applied only in cases where in the first instance at least materials on the basis of which It was assumed that the grounds mentioned In Ex P. 1 existed, were made available to the petitioner. This had not been done. It is necessary that such materials must be made known to the persona Bought to be affected by the decision, for the enquiry under Section 19A is a Quasi-Judicial one. I am not satisfied that this has been done In this case. I am therefore constrained to set aside Ex. P. 4 order and I do so.
22. All the materials that were and are available will be made known to the petitioner and he will be given an opportunity to explain the circumstances, If any, appearing against him. He must also be given an opportunity to adduce his own evidence re lacing to these matters in the form of affidavits or otherwise before a conclusion is reached on the question whether the persons working In the establishment are the employees of the firm managed by the petitioner.
23. This writ application is ordered on the above terms. There will be no order ai to costs.