Hindustan Udyog Ltd. Previously ... vs Assistant Provident Fund ...
2021 Latest Caselaw 14748 Bom

J-LPA-406-11                                                                       1/13


                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                          NAGPUR BENCH, NAGPUR.

                    LETTERS PATENT APPEAL NO.406 OF 2011
                                      IN
                         WRIT PETITION NO.5672 OF 2010


Hindusthan Udyog Ltd.
(Previoiusly known as ACC Nihon Castings Ltd.)
A-1/2 Butibori Industrial Area
District Nagpur
Through its General Manager                              ... Appellant

-vs-

Assistant Provident Fund Commissioner,
132-A, Ridge Road, Raghuji Nagpur
Nagpur                                                   ... Respondent


Shri R. B. Puranik, Advocate for appellant.
Shri H. N. Verma, Advocate for respondent.

CORAM : A. S. CHANDURKAR AND G. A. SANAP, JJ.

Arguments were heard on : September 02, 2021 Judgment is pronounced on : October 08, 2021

Judgment : (Per : A. S. Chandurkar, J.)

This Letters Patent Appeal filed under Clause-15 of the Letters

Patent Appeal raises a challenge to the judgment of learned Single Judge

dated 07/07/2011 in Writ Petition No.5672/2010. By that judgment the

writ petition preferred by the respondent herein has been allowed and after

setting aside the order passed by the Employees Provident Fund Appellate

Tribunal, New Delhi, the proceedings have been remanded to the said

Tribunal to consider the matter afresh in accordance with law.

J-LPA-406-11 2/13

2. The facts giving rise to the present proceedings are that ACC

Nihon Castings Ltd. (for short, ANCL) is a Company incorporated under

Companies Act, 1956. Pursuant to an order passed on 01/04/2008 by the

Calcutta High Court, ANCL stood merged with Hindustan Udyog Ltd., the

present appellant. It is the case of ANCL that it is a subsidiary Company of

Associated Cement Companies Ltd. (for short, ACCL) which deals in

manufacture and sale of cement. ANCL was incorporated on 10/02/1992.

ACCL is one of the shareholders in the equity capital of ANCL. ANCL

constructed and erected its plant at Butibori in the year 1992-93. The trial

production of Alloy Steel Castings started from 24/11/1993 and its

commercial production started from 12/04/1994.

3. The Regional Provident Fund Commissioner on 02/12/1996

informed ANCL that the provisions of the Employees Provident Fund and

Misc. Provisions of Act, 1952 (for short, the Act of 1952) would be applicable

to the establishment from 01/11/1996 on completion of infancy period

under Section 16(1)(d) of the Act of 1952. ANCL was accordingly issued a

Code number for complying with the provisions of the Act of 1952. On

02/12/1999 the Regional Provident Fund Commissioner issued a show cause

notice to ANCL stating therein that being a subsidiary Company of ACCL

which was exempted under para 27-A of the Employees Pension Scheme,

1952, it was likely that the subsidiary concern was enjoying unity of

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ownership, management control, functional integrality and general unity of

employment with ACCL. According to the said Authority there was ground

to believe that the establishment should be covered from the date of

commencement of production which was 24/11/1993 in view of provisions

of Section 2-A of the Act of 1952. Hence ANCL was called upon to show

cause as to why its establishment should not be covered under Section 2-A of

the Act of 1952 from 24/11/1993. ANCL was accordingly called upon to

show cause to the aforesaid.

4. ANCL submitted its reply to the aforesaid show cause notice and

stated that it was wrong to conclude that ANCL and ACCL would constitute

"one establishment" under the Act of 1952. Various factors required for

determining the integrality of business were absent. Manufacture of Alloy

Steel Castings undertaken by ANCL was not connected with the cement

manufacturing activity of ACCL. Recruitment of employees was distinct and

separate and so were the terms and conditions of service, amenities and

benefits of employees of ANCL. Both establishments were independent and

there was no supervisory control nor any functional integrality between the

two Companies. It was further stated that ANCL was maintaining separate

balance-sheet and books of accounts. It was thus stated that in absence of

any unity in the business, management and control, ANCL and ACCL could

not be treated to be "one establishment". It was thus stated that the

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provisions of the Act of 1952 were applicable to ANCL from 01/11/1996 and

not from 24/11/1993.

5. The Assistant Provident Fund Commissioner in proceedings under

Section 7A of the Act of 1952 and after considering the submissions made on

behalf of ANCL held that ANCL was a subsidiary Company of ACCL. The

Provident Fund Rules of ACCL were applied to the employees of ANCL. The

Annual Report of ANCL for the year 1995-96 indicated that ACCL and NCC

Japan had invested an amount of Rs.8 Crore in the equity capital of ANCL.

It had also appointed one Shri K. K. Pathak who was earlier associated with

ACCL as Managing Director of ANCL for a period of five years from

01/02/1993. After noting the payment of provident fund bills from 1992-93

it was observed that there was unity of ownership, management of control,

finance, unity of employment and functional integrality between ANCL and

ACCL. On that premise an order under provisions of Section 7A of the Act of

1952 making the provisions applicable from the date ANCL started its

manufacturing process in the month of November 1993. ANCL was

accordingly called upon to pay provident fund contribution for the period

from November 1993 to October 1996 in respect of employees excluding

those who had been exempted under the Scheme by the Competent

Authority. The payment was directed to be made within a period of fifteen

days.

J-LPA-406-11 5/13

An application for review preferred by ANCL came to be rejected

by the Assistant Provident Fund Commissioner on 20/12/2001.

6. ANCL being aggrieved by the aforesaid order filed an appeal

under provisions of Section 7-1 of the Act of 1952 before the Employees

Provident Fund Appellate Tribunal. The Tribunal found that the only link

found by the Enquiry Officer in Section 7-A proceedings under the Act of

1952 was that ANCL was a subsidiary Company of ACCL. There was no

material or evidence discussed to establish the fact of unity of finance or

employment between the two establishments. The tests for clubbing two

establishments as one under provisions of Section 2-A of the Act of 1952

were not satisfied. On this premise the Tribunal held that the conclusion

arrived at by the Assistant Provident Fund Commissioner while clubbing

ANCL with ACCL was not in consonance with law and hence not sustainable.

On this count the appeal was allowed and the order dated 13/11/2001

passed by the Assistant Provident Fund Commissioner was set aside.

7. Being aggrieved, the Assistant Provident Fund Commissioner

challenged this order by filing Writ Petition No.567/2010. The learned

Single Judge held that the dominant and real test to be adopted to hold that

two or more units form part and parcel of the same establishment would

depend upon the facts and circumstances of each case. It was not necessary

J-LPA-406-11 6/13

that in all cases the dominant test would be of functional integrality. In

absence of functional integrality the other tests such as unity of management

and control, unity of finance, unity of labour and employment would gain

significance. Reference was thereafter made to the aspect of entitlement to

infancy period as stipulated by Section 16(1)(d) of the Act of 1952.

Referring to the order passed by the Assistant Provident Fund Commissioner

the learned Single Judge found that reliance had been placed on the contents

of the annual report of ANCL and the Provident Fund Rules of ACCL. It was

then found by the Assistant Provident Fund Commissioner that ANCL was an

expansion of the activity of ACCL and thus covered by the provisions of

Section 2-A of the Act of 1952. This disentitled it to any infancy period of

three years as such benefit had been availed by ACCL. It was then found that

the Tribunal had failed to consider these relevant aspects and its findings

suffered from non-application of mind to the material available on record.

On that premise the order passed by the Tribunal was set aside and the

proceedings were remitted to the Tribunal to reconsider the appeal afresh in

accordance with law and in the light of observations made in the order.

Being aggrieved by the aforesaid judgment, ANCL which is now Hindustan

Udyog Ltd. has come up in appeal.

8. Shri R. B. Puranik, learned counsel for the appellant submitted

that the learned Single Judge was not justified in setting aside the order

J-LPA-406-11 7/13

passed by the Appellate Tribunal and remanding the proceedings for fresh

adjudication to it. According to him the Tribunal had found from the record

that except the fact that ANCL was a subsidiary Company of ACCL, there was

no further material on record to establish the fact of unity of finance or

employment between the two. The requirements as prescribed for clubbing

both the establishments under provisions of Section 2-A of the Act of 1952

were also found to be absent and hence the order passed by the Assistant

Provident Fund Commissioner was rightly set aside. Referring to the

material considered by the Assistant Provident Fund Commissioner it was

submitted that said material would not establish unity of ownership or

functional integrality between ANCL and ACCL. Merely because both

establishments shared a common registered office with the same address or

the fact that employees of ANCL were members of the Provident Fund

Scheme with ACCL, it would not lead to a conclusion that there was unity of

ownership or functional integrality between them. On the contrary both the

establishments were independent entities and had separate existence. ANCL

was not dependent upon ACCL in view of the fact that ANCL was engaged in

Alloy Steel Castings while ACCL was in the business of cement. Placing

reliance on the decision in Regional Provident Fund Commissioner and ors. vs.

ABS Spinning Orissa Ltd. And anr 2008 III CLR 580 it was submitted that ANCL

despite being a subsidiary Company had an independent existence and that

aspect would be of no relevance in the present proceedings. He referred to

J-LPA-406-11 8/13

the tests that were required to be satisfied for determining the true

relationship between ANCL and ACCL by relying upon the decisions in The

Associated Cement Companies, Ltd., Chaibasa Cement Works, Jhinkpani, vs. Their

Workmen AIR 1960 SC 56, Management of Pratap Press, New Delhi vs. Secretary,

Delhi Press Workers's Union Delhi Air 1960 SC 1213 and Isha Steel Treatment,

Bombay vs. Association of Engg. Workers, Bombay and Anr. 1987(1) CLR SC 232.

Both the establishments being independent and separate they could not be

termed to be different departments of the same establishment which was a

material fact as held in Sunder Transport and ors. vs. The Regional Provident

Fund Commissioner 1992 (2) CLR 977. He also placed reliance on the

decisions in Regional Provident Fund Commissioner and anr. vs. Dharmasi Morarji

Chemical Co. Ltd. (1998) 2 SCC 446 and Noor Niwas Nursery Public School vs.

Regional Provident Fund Commissioner and ors. (2001) 1 SCC 1 . It was thus

submitted that no useful purpose would be served by remanding the

proceedings for fresh adjudication before the Tribunal. He also referred to

the order passed in the Letters Patent Appeal on 18/11/2011 by which

liberty was granted to the respondent to hold a fresh enquiry under Section

7-A of the Act of 1952 and the fact that despite that liberty the respondent on

24/07/2012 did not proceed further with those proceedings. Thus it was

submitted that taking an overall view of the matter the order passed by the

Appellate Tribunal ought to be restored by setting aside the judgment of the

learned Single Judge.

J-LPA-406-11 9/13

9. On the other hand Shri H. N. Verma, learned counsel for the

respondent supported the judgment of the learned Single Judge. According

to him no prejudice was caused to the appellant by the order passed by the

learned Single Judge in view of the fact that the proceedings had been

remanded to the Tribunal and the contentions now sought to be raised by the

appellant could be raised before the Tribunal. He referred to the

memorandum of appeal preferred before the Tribunal to indicate various

points raised by the respondent in the said appeal as well as the material

available on record. According to him the fact that ANCL and ACCL had a

common registered office and the fact that an amount of Rs. 8 Crore was

invested by ACCL and NCC, Japan in ANCL indicated a unity of ownership.

The fact that contribution towards provident fund was made by ACCL was

also reflected in the Annual Report of the year 1995-96. This indicated that

despite availability of sufficient material on record the Tribunal failed to

examine that material and allowed the appeal. This aspect was noticed by

the learned Single Judge and hence the proceedings were remanded for fresh

adjudication. In that regard the learned counsel placed reliance on the

decision in M/s L. N. Gadodia and Sons and Anr vs Regional Provident Fund

Commissioner AIR 2012 SC 273 and submitted that no interference with the

judgment of the learned Single Judge was called for.

10. In reply it was submitted by the learned counsel for the appellant

J-LPA-406-11 10/13

that the notice issued under Section 7-A of the Act of 1952 did not make any

mention to contribution being made by some employees of ANCL to the

provident fund account with ACCL. The notice was also silent on the aspect

of preponement of applicability of the provisions of the Act of 1952 to ANCL.

Mere fact that the two establishments shared a common address for their

registered office did not make any difference nor did the Annual Reports

show financial inter dependence between the two.

11. We have heard the learned counsel for the parties at length and

we have perused the material placed on record in the proceedings. At the

outset it may be noted that by the impugned judgment, the learned Single

Judge after finding that the Tribunal in exercise of appellate jurisdiction had

failed to take into consideration various relevant factors and had also failed

to consider the material on record concluded that the findings of the Tribunal

suffered from non-application of mind to the material available on record. It

is on that premise that the order passed by the Tribunal has been set aside

and after keeping all questions open including the question as to whether

ANCL was part and parcel of ACCL remanded the proceedings. While

examining the correctness of the order of remand, the reasons for remanding

the proceedings would be required to be kept in mind. If the reasons that

prompted the Court to remand the proceedings are found to be justified

coupled with the fact that the order impugned is one of open remand, the

J-LPA-406-11 11/13

appellate Court would be slow to interfere with such order. On the other

hand if it is found that the Court was not at all justified in remanding the

proceedings in view of the fact that the material on record was already

considered by the Court to which the proceedings have been remanded,

there would be scope to interfere with such order of remand. Further, only if

it is found that the order of remand was unwarranted would the question of

examining the merits of the dispute arise. Keeping these broad aspects in

mind we have perused the material on record in the light of the observations

made in the judgment of the learned Single Judge. We are satisfied that

remand of the proceedings to the Tribunal was justified in view of the fact

that the material placed on record of the Tribunal was not considered by it

thus warranting re-consideration of the matter.

12. The order passed by the Assistant Provident Fund Commissioner

in proceedings under Section 7-A of the Act of 1952 indicates that it was

found that ANCL was a subsidiary Company of ACCL. ANCL and ACCL had a

common registered office, the Provident Fund Scheme of ACCL as per its

Provident Fund Rules was applicable to the employees of ANCL and the

Annual Reports of ANCL indicated deposit of provident fund bills with ACCL.

It is on the basis of aforesaid material that the Assistant Provident Fund

Commissioner while upholding the applicability of the provisions of the Act

of 1952 to ANCL directed payment of provident fund dues from November

J-LPA-406-11 12/13

1993 onwards.

In the appeal preferred by the appellant the aforesaid material

was referred to to urge that ANCL was a distinct establishment and it was not

liable to be clubbed with ACCL. When the order of the Tribunal is perused it

can be seen that in paragraph 4 thereof the only observation made was that

ANCL was a subsidiary Company of ACCL. It has thereafter been observed

that there was no material or evidence on record considered by the Assistant

Provident Fund Commissioner to establish the facts of unity of finance or

employment between ANCL and ACCL. Except this observation the material

available on record and relied upon by the Assistant Provident Fund

Commissioner has neither been referred to and therefore not considered.

The grounds now raised in appeal by the appellant were also raised before

the learned Single Judge and after considering the same it was found that

relevant material was not considered by the Tribunal thus vitiating its order.

We find that the learned Single Judge was justified in holding so and

thereafter remanding the proceedings to the Tribunal for fresh consideration.

It is a clear case of non-consideration of material on record by the Tribunal

while deciding the statutory appeal. We therefore find that there is no

reason to interfere with the order of remand.

13. Though the learned counsel for the appellant by relying upon

various decisions of the Honourable Supreme Court sought to urge that the

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order passed by the Assistant Provident Fund Commissioner was even

otherwise not sustainable in law, we find that as the learned Single Judge

while remanding the proceedings has kept all questions open including the

question as to whether ANCL was a part and parcel of ACCL, all aspects can

be considered by the Tribunal in the statutory appeal. We have therefore

not examined the applicability of the ratio of the decisions relied upon by the

learned counsel for the parties and that effort can be made before the

Tribunal. We also find that nothing much would turn on the fact that despite

liberty being granted to the respondent to hold a fresh enquiry under Section

7-A of the Act of 1952, the respondent decided to wait for the outcome of the

present proceedings. In any event the said aspect would not resurrect the

order of the Tribunal.

14. In view of aforesaid we do not find any reason to interfere with

the order of remand passed by the learned Single Judge. By clarifying that

observations made in the order passed by the learned Single Judge or in the

present appeal would not come in the way of either of the parties while

pursuing the proceedings before the Tribunal and keeping all questions open,

the Letters Patent Appeal stands dismissed. The parties shall bear their own

costs.

                               JUDGE                        JUDGE

Asmita