Eagle Cement Pipes Company vs Regional Provident Fund ...
2001 Latest Caselaw 909 Bom

JUDGMENT

P.S. Patankar, J.

1. The short question involved in this petition is whether the petitioner is covered under Section 16(l)(d) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereafter referred to as the Act of 1952), so that it can claim immunity from making contribution to employees provident fund for five years. The said Section 16(l)(d) reads as under:

"16. Act not to apply to certain establishments.-(I) This Act shall not apply -

(a).........

(b) .........

(c) .........

(d) to any other establishment newly setup, until the expiry of a period of three years from the date on which such establishment is, or has been, set up."

2. The Regional Provident Fund Commissioner by his order dated December 13, 1989 has come to the conclusion that the petitioner is not covered under Section 16(1)(d) and the Act is applicable to the petitioner since January 1, 1981 itself and the claim made by the petitioner that it is not covered till January 1, 1986 cannot be accepted. The said order is challenged here.

3. At the outset we may note the reasoning given by the Regional Provident Fund Commissioner in his order. He has considered the fact that the oral evidence was adduced at the time of Section 1- A inquiry and it shows that the petitioner is carrying on the same business and under the same trade mark. The other facilities with the old business establishment were continued. The production carried on was identical in nature. It was sold under the same brand name. The whole exercise of division of the erstwhile firm was a matter of convenience for the partners. Therefore, creation of petitioner did not disrupt the functional integrality (sic). Inspite of dissolution of the erstwhile partnership the new establishments were having the original character and they cannot be considered as new establishments. It is nothing but continuation of the erstwhile establishment. He has also noted that even the branch is covered under Section 2-A of the Act of 1952 and it cannot qualify for as separate establishment and get infancy protection under Section 16 of the Act of 1952.

4. There is no dispute that a firm in the name of Eagle Cement Pipes & Concrete Works was run. It was having two units at Kolhapur and Sangli. A Deed of Dissolution, came to be entered into between the partners. It was dated November 9, 1980. It mentions about 3 groups of partners. One group i. e. Laljibhai group got a unit at Sangli. Mohanlal group got Kolhapur unit. Jayantilal group started the petitioner Eagle Cement Pipes Co. (a firm) on January 1, 1981 at Kolhapur. The question is whether this unit at Kolhapur of Jayantilal group is a new establishment or not.

5. The learned counsel for the petitioner invited our attention to the Deed of Dissolution and pointed out that in view of what was given to the said group, it can be said that it is a new establishment. He further submitted that in the application it has been mentioned that structure of the factory shed including certain tanks are newly constructed, machinery is newly purchased, new employees are employed, new factory licence is obtained from November 24, 1981, new sales-tax number was given, new income-tax registration certificate was given, the factory came to be included as a small scale industry, on November 6, 1981, the State Bank of India, Kolhapur Branch has advanced loan of Rs. 1,00,000/- for construction of new building and factory shed and buying tiles, machinery and new E.S.I. Code was given to the factory. Therefore, he contended that petitioner should be treated as a new establishment. It is not possible to accept this contention. It is first to be noted that the authority has rightly pointed out that Jayantilal group under the Deed of Dissolution got (i) the office building and the structures standing thereon at Kolhapur factory; (ii) it got the same telephone connections Nos. 3868 and 4455; (iii) it also got the cement and other quota rights, tangible and intangible rights of the tiles manufacturing unit No. II at Kolhapur; (iv) it got the right to use the machinery and plant meant for the tiles unit; (v) it also got 25 HP connection of the factory premises of the erstwhile partnership unit at Kolhapur and the tenancy rights of the showroom situated at 1531-C, Laxmipuri, Kolhapur. Further there is nothing to show except the bare assertions that structure of the factory shed including the tanks were newly constructed or that the machineries were purchased. No bills or no evidence whatsoever has been shown in that respect. Having new employees or training them or having obtained the new factory licence obtaining the new sales-tax number and new income-tax registration or petitioner registering as a small scale industry are not irrelevant for finding out whether petitioner is a new establishment or not. They were the inevitable consequences of registration of new firms. Further, merely because the Bank of India, Kolhapur Branch had advanced a loan of Rs. 1 lakh for construction of the factory shed and for buying machinery does not mean that this new investment has been made in that respect by the petitioner, as the petitioner has failed to show anything in that respect. Similarly, giving of new E.S.I, number is also not relevant. This was only paperwork. Therefore, the Regional Provident Fund Commissioner was right in concluding that the petitioner cannot be construed as a new establishment as contemplated by Section 16(l)(d) of the Act of 1952. Even the explanation to Section 16(1) makes it clear that an establishment shall not be deemed to be newly set up merely because there is change of location. Similarly, Section 2-A says that establishment includes all departments and the branches. The provisions of the Act of 1952 are required to be interpreted in favour of employees as this is a piece of progressive social legislation enacted for the benefit of the employees and to give them the maximum benefit of the provident fund legislation.

6. Therefore, we find no substance in this petition. Rule discharged.