Page 103 - DMGT306_MERCANTILE_LAWS_II

Mercantile Laws – II

Notes endorsed by the Conference of Provincial Labour Ministers’ held in January 1951. On 15th
November 1951, the Government of India promulgated the Employees’ Provident Funds
Ordinance which came into force on that date. It was subsequently replaced by the Employees’
Provident Funds Act passed on 4th March 1952.

6.1.1 Object of the Act

The Act was passed with a view to making some provision for the future of the industrial
worker after his retirement or for his dependents in case of his early death and inculcating the
habit of saving among the workers. The object of the Act is to provide substantial security and
timely monetary assistance to industrial employees and their families when they are in distress
and/or unable to meet family and social obligations and to protect them in old age, disablement,
early death of the bread-winner and in some other contingencies.
The Act provides for a scheme for the institution of provident fund for specified classes of
employees. Accordingly, the Employees’ Provident Fund Scheme was framed under Section 5 of
the Act, which came into force on 1st November 1952.

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Caution On a review of the working of the scheme over the years, it was found that
provident fund was no doubt an effective old age and survivorship benefit; but in the
event of the premature death of an employee, the accumulations in the fund were not
adequate enough to render long-term financial protection to his family.
This lacuna led to the introduction of the Employees’ Family Pension Scheme with effect from
1st March 1971.

Did u know? The Act was further amended in 1976 with a view to introducing Employees’
Deposit Linked Insurance Scheme, a measure to provide an insurance cover to the members
of the provident fund in covered establishments without the payment of any premium by
these members. Thus, three schemes have been framed under the Employees’ Provident
Funds and Miscellaneous Provisions Act.

6.1.2 Applicability of the Act

The Employees’ Provident Funds Act, 1952 is applicable from the date of functioning or date of
set-up of establishments provided the factory/establishment employed twenty or more persons.
The Act, however, does not apply to cooperative societies employing less than 50 persons and
working without the aid of power. The Central Government is empowered to apply the
provisions of this Act to any establishments employing less than 20 persons after giving not less
than two months’ notice of its intention to do so by a notification in the Official Gazette. Once the
Act is applied, it does not cease to be applicable even if the number of employees falls below 20.
An establishment/factory, which is not otherwise coverable under the Act, can be covered
voluntarily with the mutual consent of the Act.

6.1.3 Administration

The Employees’ Provident Fund Organisation is in charge of all the three schemes. These schemes
are administered by the Central Board of Trustees, a tripartite body consisting of the chairman,
nominees of the Central and State Governments and employees’ and employers’ organizations
The Central Provident Fund Commissioner is the chief executive officer of the organisation and

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