Holding

An apprentice engaged under the Standing Orders is excluded from the definition of "employee" under Section 2(f) of the Employees Provident Fund & Misc. Provisions Act, 1952.

Summary

The Regional Provident Fund Commissioner issued a notice under the Employees Provident Fund & Misc. Provisions Act, 1952, claiming that 45 trainees selected for a stipend‑based training programme at a chocolate factory were "employees" liable to contribute to the provident fund. The trainees were paid a monthly allowance, had no right to permanent appointment, and were required to refund the stipend if they left within a year. The High Court held that the trainees were apprentices governed by the model standing orders, not employees under the Act, and dismissed the notice. On appeal, the Supreme Court examined whether an apprentice engaged under the Standing Orders falls within the definition of "employee" in Section 2(f) of the EPF Act. Relying on Section 12‑A of the Industrial Employment (Standing Orders) Act and the definition of apprentice in the model standing orders, the Court concluded that such apprentices are expressly excluded from the employee definition. Consequently, the trainees are not covered by the EPF Act and the appeal was dismissed.

Issues considered

Whether an apprentice engaged under the model standing orders is deemed to be an "employee" within the meaning of Section 2(f) of the Employees Provident Fund & Misc. Provisions Act, 1952.

Legislation cited

Apprentices Act, 1961s. 2(aa)
Industrial Employment (Standing Orders) Act, 1946s. 12-A

Subjects

employee definitionprovident fundapprenticeshipstanding ordersindustrial lawexclusion clausetraining stipend

Judgment

A THE REGIONAL PROVIDENT FUND COMMISSIONER, MANGALORE
v. "
MIS. CENTRAL AERCANUT AND COCA MARKETING AND
PROCESSING CO-OP LTD., MAN GALORE .
JANUARY 30, 2006
B
[ARIJIT PASAYA':' AND R.V. RA VEENDRAN, JJ.] ,
i
labour laws:

c Employees Pr, vident Fund & Misc. Provisions Act, 1952--Section
2(/)-'Employee'-Definition of-Apprentice engaged under the Apprentices
Act or under the Standing Orders excluded from the definition--Concerned
trainees were paid monthly stipend during training and had no right to
employment, nor any obligation to accept employment, if offered by employer-
Therefore, they were 'apprentices' engaged under the 'Standing Orders' of the
D
establishment and not employee in terms of S.2(/) of the Act- Hence not
entitled to provident fund-Apprentices Act, 196/-Section 2(au)- Industrial
Employment (Standing Orders) Act, 1946-Section I 2A -Industrial
Employment (Standing Orders) Central Rules, 1946-Standing Order No. 2,
clause (g).
E
Industrial Employment (Standing Orders) Act, I 946-Section I 2-A-
Standing Orders not certified in the concerned establishment-Hence, model
Standing Orders prescribed under the Rules deemed applicable--lndustrial ..
Employment (Standing Orders) Central Rules, 1946-Rule f(l) and Schedule
I to the Rules.
F
45 persons were selected to undergo training at the Chocolate factory
of the Respondent on a monthly stipend. It was clearly stipulated that the said
45 trainees were not entitled to claim any right of appointment after
completion of training period and that any trainee leaving the factory within
one year was required to refund the amount received by him as stipend. High
G
Court held that the said 45 trainees were not covered by the Employees
Provident Fund & Misc. Provisions Act, 1952 as they cannot be called -.....
"employees" as defined under Section 2(1) of that Act.

In appeal to this Court the question which arose for consideration is
H 892
REG. PROVI. FLl~llCOMMR " CENT. ,\ERC,l~UT &COCA MARKET AND PRO. CO-OP. LTO 893
>
whether an apprentice can be dee.med to be an employee within the meaning A
)
of Section 2(1) of the Employees Provident Fund and Misc. Provisions Act,
1952.

Dismissing the appeal, the Court

HELD: 1.1. From a bare reading of Section 12~A of the Industrial B
Employment (Standing Orders) Act, 1946 it is manifestly clear that until the
Standing Orders are finally certified and come into operation, the prescribed
model standing orders shall be deemed to be adopted in the concerned
establishment. The Model Standing Orders prescribed under Rule 3(1) of the
Industrial Employment (Standing Orders) Central Rules, 1946 are contained C
in Schedule I to the said Rules. 'Apprentice' is defined in clause (g) of
Standing Order No.2. (896-B, El

1.2. In the present case, the Standing Orders were not at the relevant
point of time certified. Therefore, in terms of Section 12-A of the Standing
Orders Act, the Model Standing Orders are deemed to be applicable. 1896-Fl D

2.1. Section 2(1) of the Employees Provident Fund & Misc. Provisions
Act defines an employee to include an apprentice, but at the same time makes
an exclusion in the case of an apprentice engaged under the Apprentices Act
or under the Standing Orders. Under the Model Standing Orders an
apprentice is described as a learner who is paid allowance during the period E
of training. [896-G I

2.2. In the case at hand, trainees were paid stipend during the period of
training. They had no r'ight to employment, nor any obligation to accept any
employment, if offered by the employer. Therefore, the trainees were
'apprentices' engaged under the 'Standing Orders' of the establishment. F
(896-H; 897-A)

2.3. Hence, it cannot be said that the concerned 45 trainees were
employee in terms of Section 2(1) of the Employees Provident Fund & Misc.
Provisions Act. In other words, an apprentice engaged under the Apprentices G
Act or under the Standing Orders is excluded from the definition of an
'employee' as per Section 2(1) of the Employees Provident Fund & Misc.
Provisions Act. (897-B)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 978 of2000.

From the Judgment and Order dated 12.8.1999 of the Karnataka High H
894 SUPREME COURT REPORTS j2006j I S.C.R.

A Court in Writ Appeal No. 6143 of 1998.
Harish Chandra, Ms. Anita Sahani and Shail Kumar Dwivedi for the
Appellant.

Devender Singh and Sushi! Balwada for the Respondent.
B
The Judgment of the Court was delivered by

ARIJIT PASA YAT, J. Challenge in this appeal is to the judgment of a
Division Bench of the Karnataka High Court affirming the judgment of the
learned Single Judge. Both the learned Single Judge and the Division Bench
C held that 45 persons who were selected as trainees were not covered by
Employees Provident Fund & Misc. Provisions Act, 1952 (in short the' Act')
as they cannot be called as "employees" as defined under Section 2(f) of the
Act.

Background facts in a nutshell are as follows:
D
The respondent invited applications from the intending applicants for
undergoing training at its Chocolate Factory, Puttur on a stipend of Rs.600/
- per month which may be increased to Rs.800/- per month after six months.
It was also provided that the successful candidates may be considered for
E regular posting in the factory. By its resolution dated 21.1.1990 after
interviewing 270 applicants, 45 persons were selected. By a combined order
dated 3.2.1990, Managing Director notified the 45 persons who were selected.
It was clearly indicated therein that the training in the factory does not entitle
any trainee to claim right of appointment after completion of training period.
It was also stipulated that if any trainee leaves the factory within one year,
F he was required to refund the amount received by him as stipend. Notice was
issued by the appellant purportedly under Section 7-A of the Act in respect
of the said 45 trainees. By order dated 15.5.1991 tl;e appellant held that the
trainees were employees '.or the purpose of the Act and the respondent is
liable to pay the quantified amount.
G Writ application was filed· by the respondent questioning the
determination. A learned Single Judge with reference to various provisions of
Industrial Employment (Standing Orders) Act, 1946 (in short 'Standing Orders
Act') and The Apprentices Act, 1961 (in short the 'Apprentices Act') held
that the demand was unsustainable. A writ appeal was filed before the Division
H Bench which as noticed above dismissed the same.
.-
REG. PROV! FlJNDC0\1"R ,. CENT AERCANUT & COCA MARKET. AND PRO. co.op. LTD. [PASAYAT,J.] 895

In support of the appeal Mr. Harish Chandra, learned senior counsel A
)· submitted that both the learned Single Judge and the Division Bench have
failed to notice the true import of Section 2(f) and have erroneously held that
the 45 trainees were not covered by the Act. It was also submitted that the
Act is a beneficial legislation and a wider meaning has to be given to the
expression 'employee'.
B
In response, learned counsel for the respondent supported the judgments
\.\ of the learned Single Judge and the Division Bench .

.\ Undisputedly, the respondents are trainees, The question as rightly
noted by the Division Bench is whether an apprentice can be deemed to be C
an employee within the meaning of Section 2(f) of the Act in the case at hand.

For this purpose it is necessary to take note of the definition of
'employee' as given in Section 2(f) of the Act. It reads as under:

"Section 2 (j) 'employee' means any person who is employed for D
j
wages in any kind of work, manual or otherwise, in or in connection
with the work of an establishment and who gets his wages directly
or indirectly from the employer, and includes any perso.n
employed by or through a contractor in or in connection with the
work of the establishment.
E
(ii) Engaged as an apprentice, not being an apprentice engaged under
the Apprentices Act, 196 I (52 of 1961) or under the Standing
· Orders of the establishment."

Section 12-A of the Standing Orders Act, inter-alia provides as follows:
F
"12A. Temporary application of model standing orders. (1)
Notwithstanding anything contained in Sections 3 to 12, for the period
commencing on the date on which this Act becomes applicable to an
industrial establishment and ending with the date on which the standing
orders as finally certified under this Act come into operation under
Section 7 in that establishment, the prescribed model standing orders G
shall be deemed to be adopted in that establishment, and the provisions
of section 9, sub-section (2) of section 13 and section 13-A shall
apply to such model standing orders as they apply to the standing
orders so certified.
H
896 SUPREME COURT REPORTS [2006) I S.C. R.

A (2) Nothing contained in sub-section (I) shall apply to an industrial
establishment in respect of which the appropriate Government is the
Government of the State of Gujarat or the Government of the State of
Maharashtra."

From a bare reading of Section 12-A it is manifestly clear that until the
B Standing Orders are finally certified and come into operation, the prescribed
model standing orders shall be deemed to be adopted in the concerned
establishment. The Model Standing Orders prescribed under Rule 3( I) of the ,,
Industrial Employment (Standing Orders) Central Rules, 1946 (in short the ~
'Central Rules') are contained in Schedule I to the said Rules. Standing Order
c No.2 thereof classified workmen as follows:

(I) Permanent
(2) Probationers
(3) bad Iis
D (4) te·mporary
(5) casual
(6) apprentices.

'Apprentice' is defined in clause (g) of Standing Order No.2 as follows:
E
"An 'apprentice' is a learner who is paid an allowance during the
period of his training."

The Apprentices Act defines an 'apprentice' as follows: 1

F "2(aa): 'apprentice' means a person who is undergoing apprenticeship
training in pursuance of a contract of apprenticeship."

In the present case, admittedly the Standing Orders were not at the
relevant point of time certified. Therefore, in terms of Section 12-A of the
Standing Orders Act, the Model Standing Orders are deemed to be applicable.
G Section 2(t) of the Act defines an employee to include an apprentice, but at
the same time makes an exclusion in the case of an apprentice engaged under
the Apprentices Act or under the Standing Orders. Under the Model Standing
Orders an apprentice is described as a learner who is paid allowance during
the period of training.
H In the case at hand, trainees were paid stipend during the period of
(

!
REG. PROV!. f~~O COM\IR. >'.CENT. AERCANUT &COCAMARKET. AND PRO. CO-QP. LTD. [PASAYAT. J) 897

training. They had no right to employment, nor any obligation to accept any A
> employment, if offered by the employer. Therefore, the trainees were
) . 'apprentices' engaged under the 'Standing Orders' of the. establishment.

Above being the position, it cannot be said that the concerned 45
trainees were employee in terms of Section 2(f) of the Act. In other words,
an apprentice engaged under the Apprentices Act or under the Standing B
Orders is excluded from the definition of an 'employee' as per Section 2(•) of
the Act.

That being so, the view of the learned Single Judge as affirmed by the
Division Bench of the High Court cannot be faulted.
c
The appeal fails and is dismissed. No costs.

B.B.B. Appeal dismissed.

-\