EPF Act Applies Even Through Intermediary: Madras High Court Confirms Beedi Company’s Liability for 700 Workers

The Madras High Court, Madurai Bench, has upheld proceedings initiated by the Employees’ Provident Fund Organisation (EPFO) against M/s. Seyadu Beedi Company, confirming that around 700 beedi rollers engaged through an intermediary were employees within the meaning of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act) and entitled to provident fund benefits.

The bench of Justice K. Surender dismissed two writ petitions filed by the company challenging an order dated 01 July 2003 passed under Para 26B of the EPF Scheme read with Section 7A of the EPF Act, as well as a consequential assessment order dated 17 August 2004 determining EPF dues of over Rs. 2.09 crore.

The case traces back to a complaint dated 16 July 2001 lodged by the District Beedi Employees Union, alleging that nearly 800 beedi workers were denied provident fund benefits. According to the complaint, these workers were engaged through M/s. Rajan Traders but were effectively working for the petitioner company.

It was not in dispute that the petitioner company was covered under the EPF Act. The company’s business model involved procuring unbranded beedis from Rajan Traders, affixing its own brand labels, and marketing them.

Upon enquiry, the Regional Provident Fund Commissioner concluded that Rajan Traders was not an independent entity but a benami unit created to shield the petitioner from statutory liability. The authority found that Rajan Traders lacked proper business registration, carried on transactions exclusively with the petitioner, and functioned merely as an intermediary to source beedis rolled by workers using tobacco supplied through arrangements linked to the petitioner.

The EPF authority held that the beedi rollers were indirectly employed by the petitioner and therefore fell within the definition of “employee” under Section 2(f) of the EPF Act.

Although the Appellate Tribunal initially set aside the order of the EPF authority, the matter did not end there. The Regional Provident Fund Commissioner and the Beedi Workers Union challenged the tribunal’s decision. Eventually, a division bench of the high court held that the tribunal lacked jurisdiction to entertain the appeal against an order passed under Para 26B read with Section 7A.

Before the Single Judge, the petitioner argued that there was no nexus between the company and the beedi rollers. It relied on findings in Central Excise proceedings and a criminal case, where it was observed that the workers were not on the rolls of Rajan Traders. According to the petitioner, the rollers were independent workers selling beedis in the open market and not employees under the EPF Act.

The EPF authorities, however, maintained that documentary and oral evidence established effective control and supervision by the petitioner. Specifications regarding the rolling of beedis were allegedly dictated by the company, and the finished products were sold exclusively under its brand.

Court reiterated that in proceedings under Article 226 of the Constitution, it would not reappreciate evidence unless the findings were based on no evidence, suffered from misapplication of law, or violated principles of natural justice.

After examining the impugned order, court found that adequate opportunity had been afforded to the petitioner and that the authority had recorded detailed findings regarding the supply chain and the nature of the arrangement.

Holding that the view taken by the EPF authority was reasonable and plausible, court declined to interfere. It sustained both the 2003 and 2004 orders and dismissed the writ petitions, thereby affirming the company’s liability to pay provident fund contributions in respect of the beedi rollers.

Case Title: M/s. Seyadu Beedi Company vs. The Regional Provident Fund Commissioner, Employees Provident Fund Organization

Order Date: February 13, 2026

Bench: Justice K. Surender