Mohan Brothers vs Regional Provident Fund ...
2003 Latest Caselaw 462 Del

JUDGMENT

Mukundakam Sharma, J.

1.Being aggrieved by the order dated 23.5.1983 passed by the respondent under the provisions of Section 7-A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, the present petition was filed in this court by the petitioner praying for setting aside and quashing the aforesaid order.

2.By the aforesaid order it was held by the Regional Provident Fund Commissioner that there is unity of management, supervision and control, unity of finance, unity of financial integrality and geographical proximity to justify M/s. Jai Narain Subhash Chand and tailoring department run by the tailor master as department of the petitioner establishment and that it constitute one establishment in the light of the decision of the Supreme Court in ASSOCIATED CEMENT CO. LTD. VS. ITS WORKMEN .

3.The Regional Provident Fund Commissioner initiated a proceeding under Section 7-A of the Employees Provident Fund and Misc. Provisions Act, 1952 (hereinafter called the Act) on the ground that M/s. Mohan Brothers, the petitioner herein, failed to comply with the provisions of the Act. In the said proceeding notices were issued to the petitioner upon which the petitioner entered appearance. The aforesaid case was, however, kept in abeyance by the Regional Provident Fund Commissioner as Section 7-A of the Act was declared by this Court as ultra vires to the Constitution of India. However, as subsequently the Supreme Court stayed the operation of the said order, the Regional Provident Fund Commissioner decided to proceed with the matter, during the course of which the parties led their evidence. The General Secretary of the Delhi Karamchari Sangh was also made party to the enquiry at their request. After receiving the aforesaid evidence adduced by the parties the Regional Provident Fund Commissioner proceeded to decide the matter and passed the impugned order, which is now under challenge in this writ petition.

4.It was contended by Mr. Jagat Arora, learned counsel appearing for the petitioner that the provisions of the Act are not applicable as the petitioner and M/s. Jai Narain Subhash Chand and the tailoring shop are separate partnership firms and are separately registered under the Shops and Establishments Act. It was also contended that they are separately assessed under the Income Tax Act. It was vehemently submitted by the counsel that there is no unity of the petitioner and that of the tailoring shop and M/s. Jai Narain Subhash Chand , which deals with sarees and that they are separate and independent entities altogether and carrying on their business on the first floor whereas the petitioner is carrying on its business in the ground floor. It was also submitted by him that the petitioner firm is separately registered and assessed under the Income Tax Act and it has no control functional integrality or financial control over M/s. Jai Narain Subhash Chand, which is dealing with sarees alone and that the petitioner has no tailoring department and that Sh. Prem Shankar is carrying on his own business of tailoring at the first floor and has no connection whatsoever with the petitioner.

5.The case of the department/respondent is , however, that all the three units constitute one establishment as sale of cloth is carried on at the ground floor whereas sale of sarees and shawls is carried on at the first floor along with a tailoring shop, which is done through a contractor which is also carried on from the first floor of the said premises. The Regional Provident Fund Commissioner examined various documents placed on record including those which were submitted by the workmen. On appreciation thereof it was held that the entire expenditure of the three units is borne by the petitioner establishment. It found that the entire sale of sarees and shawls is being done in the name of and on the cash memo of the petitioner and the wages to the workers towards stitching charges are being paid directly by the petitioner and debited to tailoring wages account and that cash memos issued by the tailoring department are also in the name of the petitioner. It was also held that on the ground floor various sign-boards are hanging on the walls such as "quality tailoring work undertaken" and "our sarees and shawls department upstairs", which proves that the petitioner who is carrying on business from the ground floor is also doing quality tailoring work and is also having a sarees and shawls department in the same building. The aforesaid findings were recorded by the Regional Provident Fund Commissioner on appreciation of the evidence on record. The aforesaid findings are essentially findings of fact.

6.During the course of his submissions, learned counsel appearing for the petitioner submitted that there is violation of principles of natural justice in contending the enquiry under Section 7-A of the Act inasmuch as the report submitted by the Inspector was not given to the petitioner. In support of the aforesaid submission, he relied upon the decision of this Court in "GLAMOURS" - PROPRIEtorS SETH HASSARAM AND SONS (INDIA) PVT.LTD. VS. THE REGIONAL PROVIDENT FUND COMMISISONER reported in 1975 LAB I.C.954, which was upheld by the Division Bench in REGIONAL PROVIDENT FUND COMMISSIONER, NEW DELHI VS. GLAMOUR - PROPRIEtor SETH HASSARAM AND SONS (INDIA) PVT. LTD. reported in 1982 LAB. I.C. 1787.

7.I have carefully considered the aforesaid submission in the light of the aforesaid decisions of this Court. In the aforesaid decision of this Court in "Glamours" - Proprietors (supra), there was no enquiry held by the Regional Provident Fund Commissioner under Section 7-A of the Act. A bare reference to paragraph 7 of the said judgment delivered by the Single Judge would make the aforesaid position clear. It was held in the said paragraph that the petitioner in the said case did not have the opportunity to meet the allegations made against them in the report submitted by the Inspector since no enquiry was admittedly held by the Regional Provident Fund Commissioner under Section 7-A of the Act, which could be accorded a finality. It was held that the investigation made by the Inspector or the report submitted by him was no substitute for a quasi-judicial enquiry envisaged by Section 7-A. In the light of the aforesaid facts it was held that since the aforesaid report of the Inspector was not given to the petitioner, there was violation of the principles of natural justice. In the present case a detailed enquiry was held by the Regional Provident Fund Commissioner under Section 7-A of the Act. The petitioner was given all opportunities to adduce its evidence and also to make its contentions and submissions during the course of the aforesaid proceedings. The said report was a part of the records before the Commissioner, which were available to the petitioner In that view of the matter, I am of the considered opinion that the ratio of the Single Judge decision of this Court in "Glamour"- Proprietors (supra) is not applicable as the facts are clearly distinguishable. Therefore, the first contention of the counsel appearing for the petitioner that the proceeding is required to be set aside and quashed being in violation of the principles of natural justice, is found to be without merit and rejected. Such a grievance was also not raised by the petitioner before the Regional Provident Fund Commissioner . The letter dated 28.7.82 of the Labour Commissioner was made available to the petitioner and , therefore, there is no violation of the principles of natural justice on that count also.

8.It was next contended by the learned counsel appearing for the petitioner that all the three units were differently registered under the Shops and Establishments Act and also in the Registrar of Firms and that they were also separately assessed under the Income Tax Act and that their nature of business was also different. It was also submitted that the partners of the petitioner and M/s. Jai Narain Subhash Chand are also distinctly different and they have no inter-connection. In support of the aforesaid contention the counsel for the petitioner referred to the partnership deeds of the petitioner and M/s. Jai Narain Subhash Chand, which are placed on record.

9. Counsel for the petitioner in the light of the aforesaid facts submitted that there was no inter-connection between the petitioner and the other units and there was no financial integrality and commonness between the three units as all the three units were having different accounts of business and, therefore, it cannot be said that they are a single establishment only because they are doing business in the same place. In support of the aforesaid submission counsel relied upon a decision of the Karnataka High Court in BELLS CONTROLS LTD. VS. REGIONAL PROVIDENT FUND COMMISISONER, BANGALORE reported in Vol.73 FJR 221. In the said decision, it was held by the Karnataka High Court that in order to determine whether several businesses constitute one establishment, the test to be applied is of integrality and commonness and that a person having different kinds of business in the same place, cannot be deemed to have a single establishment employing one set of employees. It was further held that if each business stands aloof and is not necessary or ancillary to the other, then each of them will be an independent establishment. The Single Judge of the Karnataka High Court in his judgment referred to another decision in P.S.N.S. AMBALAVANA CHETTIAR AND CO. PVT. LTD. VS. THE REGIONAL PROVIDENT FUND COMMISSIONER, MADRAS reported in {1971} 39 FJR 369. In the said decision it was held that whether any integrality exists between one set up and another, i.e. between two different alleged units or departments, would have to be seen and if such integrality exists, only then both of them would constitute one establishment. In the case of P.S.N.S. Ambalavana Chettiar (supra) it was held that a garment manufacturer might have different departments such as purchasing section, tailoring section and a selling section and that in such cases, it might not be proper to separate the different sections, as each one of them is an integral part of the main business. It was also held that a factory might have different departments involving purchase of raw material, process of manufacturing, maintenance of accounts and sale of finished goods and they might be located at different places but all these departments discharge various functions, which are part of a single integrated activity.

10.Counsel appearing for the petitioner also referred to a decision of the Bombay High Court in METAZINA PVT.LTD. VS. R.M. GANDHI reported in 1991 (63) FLR 30 wherein the Bombay High Court has held that where the workers of two units are different and when neither unit is feeder or dependent upon the other and that there is mere consolidation of accounts and other information, the same cannot bring about functional integrality. In coming to the aforesaid conclusion, the Bombay High Court referred to the decision of the Supreme Court in the case of Pratap Press vs. Its own Workers . The aforesaid ratio in the decision in Pratap Press (supra) was applied by the Bombay High Court in the aforesaid decision in the case of Metazina Pvt. Ltd. (supra) and it held thus:-

Where an entrepreneur is engaged in several activities each of which comes within the definition of "industry" no hard and fast rule can be laid down for the decision of the question whether the form part of one single industry for the calculation of the surplus profits for distribution of bonus to workmen in one of the units. Each case has to be decided on its own peculiar facts. In some cases the several activities each of which by itself comes within the definition of industry are so closely linked together that no reasonable man would consider them as independent industries. There may be other cases where the connection between the two activities is not by itself sufficient to justify an answer one way or the other, but the employer's own conduct in mixing up or not mixing up the capital, staff and management may often provide a certain answer.

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 The most important test is that of functional integrality meaning thereby such of finance, employment and labour.  The Court is to consider how far there is 'functional integrality' meaning thereby such functional interdependence that one unit cannot exist conveniently and reasonably without the other and on the further question whether in matters of finance and employment the employer has actually kept the two units distinct or integrated".  
 

 11.             Reference was also made to the decision of the Karnataka High Court in DEVESH SANDEEP ASSOCIATES & OTHERS vs. REGIONAL PROVIDENT FUND COMMISSIONER, BANGALORE, reported in 1997 (1) LLJ 1167. In the said decision it was held that the mere fact of common ownership of the two units and mere location of the two units in common premises by itself was not sufficient  to satisfy the test of functional integrality which could be tested on the ground as to whether the second unit would  survive in the absence of the first unit or when the first unit was closed   whether the second unit would continue to do its business activity.  I have considered the aforesaid judgments very carefully.   
 

 12.      In view of the aforesaid position, in my considered opinion, the decision of the Supreme Court in the case of Pratap Press (supra) and  in M/S.RAJASTHAN PREME KRISHAN GOODS TRANSPORT CO. VS. REGIONAL PROVIDENT FUND COMMISISONER  reported in 1997 LAB.IC. 146,  REGIONAL PROVIDENT FUND COMMISISONER , JAIPUR VS. NARAINI  UDYOG AND OTHERS    and in  NOOR NIWAS NURSERY PUBLIC SCHOOL VS.  THE REGIONAL PROVIDENT FUND COMMISSIONER AND OTHERS  reported in  2001 LAB.I.C. 323 are applicable to the facts and circumstances of this case.   Discussion is made regarding the said judgments also  in CWP 1009/83 - HAMDARD (WAKF) LAB. INDIA VS.  K.L.SEHGAL, REGIONAL PROVIDENT FUND COMMISISONER    decided on 24th April, 2003.    In the said decision the  Supreme Court has held that when two units are run by the same society and they are located at one and the same address thereby establishing geographical proximity, the same would clearly point out to one factor that the two units constitute one single establishment.  The ratio of the aforesaid decision is squarely applicable to the facts of the present case.      
 

13. The sum and substance of the aforesaid decisions , therefore, casts a burden on the Court to find out and ascertain whether there is any unity of management, supervision and control, unity of finance and unity of functional integrality and geographical proximity between the three units . If such factors exist, in that event it could be held that all the three units are part of one establishment. There cannot be any denial to the fact that there is definitely a geographical proximity amongst all the three units as they are located in the same building. The petitioner is functioning from the ground floor whereas the other two units, namely, M/s. Jai Narain Subhash Chand and the tailoring shop are functioning in the first floor of the same building . Although the partners of the two partnership firms are shown to be different, yet the supervision, control and unity of finance and unity of financial integrality between the three units are proved and established from the fact that the entire premises belong to the petitioner. M/s. Jai Narain Subhash Chand has been carrying on the business of sale of sarees in the first floor. The said sales are also done under the name and style of the petitioner and cash memo is issued in the name of the petitioner. The work of M/s. Jai Narain Subhash Chand was also to be supervised by the representatives of the petitioner. The rent , electricity and water charges etc. even for the other two units were paid by the petitioner. On the ground floor where the petitioner is located there are various sign boards hanging on the walls indicating that "quality tailoring is also undertaken here" i.e from the same premises and that " the sarees and shawls department of the petitioner is upstairs". Therefore, the petitioner itself indicated that it has a tailoring and sarees shop in the same premises. The workers have also placed on record copies of the cash memo of the tailor master, Prem Shankar, which is in the name of the petitioner. They have also place on record a cash memo of M/s. Jai Narain Subhash Chand, which is again in the name of the petitioner. All the payments which are received by the tailoring shop are entered in the account books of the petitioner. It is also one of terms and conditions that in case there be any dispute of the tailor master with any customer the decision of the petitioner was final and binding.

14. The aforesaid evidence on record very clearly proves and establishes that there is unity of management, supervision control and unity of finance, unity of financial integrality and geographical proximity between the petitioner and the other two units and, therefore, they could be clubbed as one establishment for all practical purposes.

15. In ANDHRA UNIVERSITY S. R.P.F. COMMISSIONER OF A.P reported in 1986 LAB. I.C. 103, it was held by the Supreme Court that the aforesaid Act is beneficent piece of social welfare legislation aimed at promoting and securing the well being of the employees and the Court will not adopt a narrow interpretation which will have the effect of defeating the very object and purpose of the Act. In the said decision it was held that where the Department of Publications and Press of the University was running a printing press where the work of printing of text books, journals and magazines for the various constituent and affiliated colleges as well of various items of stationery such as admission forms to colleges, hostels and examination forms etc. was carried out and about 100 persons were employed in connection with the said activity in the said Department , the establishment, namely, the Department of Publications and Press could be said to be a factory as such activities clearly constitute manufacture within the meaning of the said expression and it was held that since more than 20 persons were employed in concerned establishment, the establishment would be liable for coverage under the Act.

16. All these facts, which are mentioned hereinabove, definitely and essentially prove and establish that there is inter-linking and inter-dependence of the three units. There is also functional integrality and geographical proximity. Therefore, the findings recorded by the Regional Provident Fund Commissioner are found to be legal and justified. In that view of the matter, I find no merit in this petition and the petition is dismissed but without any cost.