Madras HC Upholds EPF Liability On Beedi Company For Workers Engaged Through Intermediary [Read Order]

Chennai: The Madras High Court has dismissed writ petitions filed by a beedi manufacturing company challenging orders holding that beedi rollers engaged through an intermediary were employees entitled to provident fund benefits under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Justice K. Surender delivered the judgment on February 13, 2026, in W.P.(MD) Nos. 1900 and 3279 of 2026 filed by M/s. Seyadu Beedi Company, challenging an order dated July 1, 2003, passed under Para 26B of the EPF Scheme read with Section 7A of the EPF Act, and a consequential assessment order dated August 17, 2004, claiming ₹2,09,23,293 towards EPF contributions.

The petitioner company was procuring unbranded beedis from M/s. Rajan Traders and, after affixing its own brand label, selling them in the market. On July 16, 2001, the District Beedi Employees Union submitted a complaint alleging that provident fund benefits were not being extended to nearly 800 beedi workers engaged by the petitioner company through M/s. Rajan Traders.

Upon inquiry, the Regional Provident Fund Commissioner passed an order dated July 1, 2003, holding that all beedi rollers who supplied beedis to M/s. Rajan Traders were, in fact, employees of the petitioner company and were liable to be enrolled as PF members. The Assistant Provident Fund Commissioner subsequently passed an order dated August 17, 2004, assessing ₹2,09,23,806 towards EPF contributions for 700 beedi rollers.

The petitioner challenged the July 2003 order before the Appellate Tribunal at New Delhi, which set it aside. However, when this was challenged before the Madras High Court, a Division Bench held that the Appellate Tribunal lacked jurisdiction to entertain appeals against orders passed under Para 26B read with Section 7A of the EPF Act. This rendered the Tribunal’s order setting aside the EPF Commissioner’s decision ineffective, prompting the present writ petitions.

Counsel for the petitioner contended that there was no nexus between the beedi rollers and the petitioner company. The beedi rollers were associated only with M/s. Rajan Traders, which purchased beedis from self-employed workers and supplied them to the petitioner. The petitioner merely purchased beedis from M/s. Rajan Traders and sold them under its brand name.

It was further argued that the Central Excise Department had found that beedi rollers had no connection with M/s. Rajan Traders, and a Judicial Magistrate found no evidence showing that the beedi workers were on the rolls of M/s. Rajan Traders. This exoneration, it was argued, established that the beedi rollers were independent workers and that the EPF Act would not apply.

The Standing Counsel for EPF submitted that the inquiry revealed the beedi rollers were employees of the petitioner company. There was ample documentary and oral evidence establishing that, given the manner in which the business was carried out, the beedi rollers fell within the definition of “employee” under the EPF Act.

The Court noted that in proceedings under Article 226, courts would not reappreciate evidence unless the findings were based on no evidence, involved misapplication of law, or suffered from violation of principles of natural justice.

The Court examined the detailed findings recorded by the Regional Provident Fund Commissioner. These included that M/s. Rajan Traders was not a registered partnership firm and lacked CGST/GST registration; that it purchased beedis from beedi rollers after supplying tobacco from a shop adjacent to its premises; that the beedis were unbranded when purchased and thereafter supplied to the petitioner company; that M/s. Rajan Traders carried on business exclusively with the petitioner company; and that documents revealed M/s. Rajan Traders was merely a benami unit devised to circumvent the provisions of the EPF Act.

The Court observed that under Section 2(f) of the EPF Act, an “employee” includes a person employed directly or indirectly. The case involved indirect engagement of labour through M/s. Rajan Traders. The inquiry revealed that the petitioner exercised control over M/s. Rajan Traders and the manner in which beedis were rolled. Specifications were given regarding the rolling of beedis, which were then purchased through M/s. Rajan Traders, branded as the petitioner’s product, and sold in the market.

The Court held that the beedi rollers were producing beedis and rendering services to the petitioner company through M/s. Rajan Traders. The presence of M/s. Rajan Traders as an intermediary did not alter the relationship between the beedi workers and the petitioner company. The sustenance of the beedi rollers was wholly dependent on the petitioner company. The arrangement was adopted to project an absence of nexus between the beedi rollers and the petitioner.

The Court further observed that the Regional Provident Fund Commissioner had given adequate and convincing reasons establishing that the beedi rollers were employees of the petitioner company. The EPF Act is beneficial legislation intended to safeguard employees’ welfare. Though a dubious method was adopted by the petitioner in engaging beedi rollers, on close scrutiny, it could not be held that the beedi rollers were not employees or not entitled to provident fund benefits.

The Court noted that even if two views were possible, it could not take a different view when the authority’s view was probable, reasonable, plausible, and convincing.

The Madras High Court held that the order dated July 1, 2003, and the consequential order dated August 17, 2004, were liable to be sustained. Both writ petitions were dismissed as devoid of merit, with no order as to costs.

Appearances:
For the Petitioner: M/s. C. Karthikeyan, Advocate
For the Respondents: Mr. I. Robert Chandra Kumar and Mr. T. Aswin Raja Simman, Standing Counsel for EPF

Case Title:
M/s. Seyadu Beedi Company v. The Regional Provident Fund Commissioner & Anr.

[Read Order]