INTRODUCTION

The Supreme Court of India issued a ruling for the case District Exhibitors Association Muzaffarnagar and Ors. vs Union of India and Ors. on April 25, 1991 concerning the matter of the retrospective operation of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 against cine workers and cinema theatre workers. This appeal arose from the prior rejection of petitions against the ruling of the Allahabad High Court dismissing petitions against a notification by the Central Government dated 30 April, 1986 which amended the Employees’ Provident Funds Scheme, 1952 dated retrospectively from October 1, 1984, which also operated retroactively from the date of the coming into operation of the Cine-workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981. The question in contention was whether or not this retrospective operation, in particular consequent to the burden of the contribution of the employers’ share on behalf of the employees for the past period, was legal and fair in law having regard to the wages the employers had previously paid to the employees without deducting such, particularly having regard to the lack of mechanism for recovery. The Supreme Court ruling would also have implications of unimaginable and vast proportions for the social security benefits for the film industry.

FACTS

The Employees’ Provident Funds Act, 1952, was initially extended to the factories and large concerns. It came to be brought into force with respect to cinema theatres having twenty or more workers in the year 1961. The Cine-workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981, which was brought into force from October 1, 1984, also made provisions in its Section 24 to the effect that the Provident Funds Act would be brought into force with respect to all cinema theatres having five or more workers as if they were notified establishments under the Provident Funds Act.
Thereafter, the Central Government issued a notification on April 30, 1986, amending the Employees’ Provident Funds Scheme, 1952. The amendment was effective as regards cinema theatres having five or more workers with retrospective effect from October 1, 1984, the same date on which the Cine-workers Act became operative.
The District Exhibitors Association and a few other theatre owners protested against this notice in the Allahabad High Court. The main objection they had was that the retrospective operation of the Scheme, i.e., mandatory contribution of the employees’ share of the provident fund for the pre-notification period, was legally unjustifiable and economically onerous. They filed that they had already disbursed wages for this duration without offsetting these amount and had no way of recovering it from their workmen. Their writ petitions, however, were rejected by the Allahabad High Court, and therefore, they felt forced to pursue the matter further to the Supreme Court. In substance, this was a discussion about the legal and justiciable appropriateness of this retrograde extension of the Provident Funds Scheme.

ISSUE RAISED

1. Whether the “Provident Funds Act” was extendable to cinema theatres having five or more employees in the absence of a special notification made under the “proviso to Section 1(3)(b) of the Act”.
2. Whether an express notification under Section 5 of the Provident Funds Act was necessary to bring the Employees’ Provident Funds Scheme, 1952, into force in these establishments, even assuming “Section 24 of the Cine-workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981”, to be a notification under “Section 1(3)(b)”.
3. Whether the liability under “section 6 of the Provident Funds Act” was only for the employer’s contribution towards the provident fund, and whether employers had a duty to pay the share of employees before the Notification dated April 30, 1986.
4. Whether the retroactive application of the Scheme mandating employers to deduct the workers’ portion of the provident fund contribution since October 1, 1984, with no right thereto to refund this amount out of the salaries already received by the employees during this period, was severe and unjust.

APPELLANT’S ARGUMENTS

The appellants contended that the Provident Funds Act called for a notification under Section 1(3)(b) to extend to cinema theatres with less than twenty employees, which was not specifically issued. Even if “Section 24 of the Cine Workers Act” could be regarded as such a notification, an additional notification under “Section 5 of the Provident Funds Act” had to be made in order to extend the Employees’ Provident Funds Scheme.
In addition, they argued that “Section 6 of the Provident Funds Act” merely established the employer’s liability, and not the employee’s contribution. The employee’s share had to be paid only because of paragraph 30 of the Scheme, which was not enforced until the April 30, 1986 notification.
Lastly, the appellants contended that the retrospective operation of the Scheme, requiring the employee’s contribution from October 1, 1984, was unreasonable and unjust. They had already remitted full wages for this period without deducting the employee’s contribution and had no legal recourse to recover this amount, resulting in an unjust financial burden.

RESPONDENT’S ARGUMENTS

The respondents maintained that “Section 24 of the Cine-workers Act” acted as the requisite notification under “Section 1(3)(b) of the Provident Funds Act”, and an independent notification was not required. The respondents maintained that the April 30, 1986, notification retrospectively bringing into operation the Scheme from October 1, 1984, was a valid exercise of power under “Sections 5(2) and 7(1) of the Provident Funds Act”, which allow for retrospective operation.

As far as the contribution of the employees is concerned, the respondents referred to paragraph “32(1) of the Scheme”, which provides for the recovery of this amount by the employers from the wages of the employees. They also indicated that the third proviso to this paragraph could permit deductions from future wages with the consent of the Inspector in specific situations. Finally, the respondents underlined the positive aspect of the Provident Funds Act as a social security program for workers, making it justifiable to extend its coverage to cine workers and cinema theatre workers, even retrospectively, as being consistent with the legislative intent.

JUDGEMENT

The Court explained that for the period October 1, 1984 to April 30, 1986, employers had already remitted the full wages to their employees as the Scheme was not specifically applicable to them at the time. The Court ruled that by imposing the Scheme retrospectively, the employers were not to be requested to make the employees’ contribution for this prior period since they did not have a right to deduct this from wages already issued. The Court determined that neither the Act nor the Scheme had the provision of making such a payment or deduction under these circumstances. Hence, the Court held that “the employer could not be burdened with the obligation to pay the employees’ contribution for the past period, since they did not have the corresponding right to deduct it from future salaries”.

Lastly, the Court evaluated and held that the “relevance of the third proviso to paragraph 32(1) of the Provident Funds Scheme permitting deduction from future wages subject to the approval of the Inspector in the event of accidental error or clerical miscalculation”. The Court held this proviso “not applicable to the case at hand since the employer was not able to make the deduction before the notice dated April 30, 1986, as the Scheme was not then applicable.” The retrospective effect accorded to the Scheme did not place the employer in a situation falling under this proviso.

CONCLUSION

The Supreme Court’s decision in “District Exhibitors Association Muzaffarnagar and Ors. vs Union of India and Ors.” was a mixed result that finally weighed the legislative purpose of providing social security benefits against the concepts of equity and pragmatism for employers. The Court approved the retrospective extension of the “Employees’ Provident Funds Act, 1952”, and “Employees’ Provident Funds Scheme, 1952”, to cinemas employing five or more employees as from October 1, 1984. This confirmed the extension of such vital provident fund benefits to cine workers and cinema theatre employees in accordance with the purposes of the “Cine-workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981”.
But the Court gave considerable relief to the appellant employers by ruling them not liable for deducting the employees’ portion of the provident fund contribution in the period between October 1, 1984, and April 30, 1986. The Court ruled on the grounds that for this retrospective period, the employers had already disbursed full wages to their employees and did not have any legal provision through which they could recover the employees’ portion of the contribution from these already disbursed wages. Imposing this retrospective liability without a right to recovery would have placed an unfair financial burden on the employers.
The judgment reflects the judiciary’s function to interpret social security laws in ways that enhance the welfare of workers while being mindful of fair treatment for employers. It is with the understanding of the practical ramifications of retrospective application of the law that it should be considered, most importantly, in relation to financial obligations. The Court’s ruling is a careful weighing of the particular provisions of the Provident Funds Act and the Scheme and the principles of natural justice and equity. Finally, the case ensured that cinema workers and workers in cinema theatres would benefit from provident funds, yet safeguarded employers against an unforeseen and unrecoverable expense for a period in the past when the scheme was not so clearly applicable. This balanced result is a significant precedent in the application of social security and labor legislation in India.