Ashok Yatri Niwas Now ... vs Uoi (Union Of India) And Anr.
2006 Latest Caselaw 62 Del

JUDGMENT

Mukul Mudgal, J.

1. Admit. With the consent of the counsel for the parties, the appeal is taken up for final hearing.

2. This appeal challenges the order dated 20th April, 2004 dismissing the civil writ petition No. 2062/89 filed by the successors entitled 'M/s Indraprastha Hotel'- a unit of Hotel Queen Road Pvt. Ltd., who had taken over the property, right and powers of M/s India Tourism Development Corporation Ltd.(in short the `ITDC') in Hotel Ashok Yatri Niwas, now known as 'Hotel Indraprastha'- which was then a unit of ITDC by the Scheme of Arrangement dated 8th October, 2002. The learned Single Judge has followed the judgment in a companion Writ Petition No. 1881/1982 entitled 'Hotel Jaipur Ashok and Anr. v. Ms. KP Sarojni and Ors., raising issues similar to those raised in the present writ petition No. 2062/1989 The dues in the present case relates to the dues of provident fund sought to be recovered by the respondent No. 2, Regional Provident Fund Commissioner, New Delhi(in short the `RPFC') from the Ashok Yatri Natri Niwas now known as 'Hotel Indraprastha'- and the issue of show cause notice on the basis of the applicability of the Employees Provident Funds & Miscellaneous Provisions Act, 1952(hereinafter referred to as the `EPF Act') was challenged in this Court & further proceedings stayed.

3. The learned counsel for the appellant, Ms. Suruchi Aggarwal sought the benefit of Section 16(1)(b) of the EPF Act which reads as follows:-

16. (1) This Act shall not apply -

(a) xx xx xx xx xx

(b) to any other establishment employing fifty or more persons or twenty or more, but less than fifty persons until the expiry of three years in the case of the former and five years in the case of the latter, from the date on which the establishment, is, or has been, set up.-

Ms. Aggarwal contended that the appellant which was at the relevant times Ashok Yatri Niwas, was entitled to the 3 years exemption from the set up of the establishment of Ashok Yatri Niwas.

4. She has relied upon the following observations of the learned Single Judge of the Karnataka High Court in Bells Controls Ltd. v. Regional Provident Fund Commissioner, Bangalore reported as (1987) 4 SLC 38 which reads as follows:-

...The real purpose of these tests is to find out the true relation between the parts, branches, units, etc. If in their true relation they constitute one integrated whole, we say that the establishment is one; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit. How the relation between the units will be judged must depend on the facts proved, having regard to the scheme and object of the statute which gives the right of unemployment compensation and also prescribes a disqualification therefore. Thus, in one case the unity of ownership, management and control may be the important test; in another case functional integrality or generally unity may be the important test; and in still another case, the important test may be the unity of employment. Indeed, in a large number of cases several tests may fall for consideration at the same time. The difficulty of applying these tests arises because of the complexities of modern industrial organisation; many enterprises may have functional integrality between factories which are separately owned; some may be integrated in part with units or factories having the same ownership and in part with factories or plants which are independently owned. In the midst of all these complexities it may be difficult to discover the real thread of unity.

...From these decisions, I infer that an 'establishment'- connotes bringing into existence at a place, a new and a distinct activity. It shall have an independent commercial or industrial personality. It ought to be an independent 'set up'-; it functions by its own force; its activities are not integrated to the activities of another unit or concern. It is a part of or ancillary to another larger establishment (or concern). Bearing in mind the strict construction to be applied to an exemption provision and the need to liberally construe the beneficial provisions of Act one has to take a practical approach, to solve the problem posed in a given case.

5. While we are not bound by the aforesaid judgment of the learned Single Judgment of the Karnataka High Court in Bells Controls Ltd.'s case (supra) nevertheless we are taking into account the view laid down above and are of the view that the tests for determining the independent establishment were laid down and it was held that the true relationship between the part, branch, units etc., was required to be found. It was also held that no specific tests can be laid down to judge the relationship between the various units because of the complexities of the modern industrial organisation thus various factors germane to the factual situation are required to be taken into account. We are of the view that the tests in above judgment do not apply to the facts of the present case. At the relevant time the Ashok Yatri Niwas(now Hotel Indraprastha) could not be stated as a totally independent set up which functioned by its own force and its activities could not be said not to be integrated to the activities of another unit or concern and it could not be said that its activities were not part of or ancillary to another larger establishment i.e., ITDC.

6. The learned Single Judge in Para 27 of the impugned judgment held as follows:-

27. Applying these principles laid down by the Supreme Court, it is clear from the records of this case that the Hotel was set up pursuant to the aims and objects of ITDC. There is, therefore, a clear unity of ownership and, therefore, a unity of management. The specimen copy of one of the appointment letters shows that the control over the employees is exercised by ITDC, which has power to transfer employees from one unit to another. The probation period can be extended by ITDC and permission of the Chairman and Managing Director of ITDC is required before an employee can indulge in any trade or other activity. The Central Government has found that the Hotel is in the control, supervision and management of ITDC. These are facts that ought not to be lightly interfered with and nothing substantial has been shown by learned counsel for the Petitioners to upset these findings of fact. Financial control of ITDC over the Hotel is quite obvious because even though the balance sheet and profit and loss accounts of the Hotel are independently maintained they form a part of the balance sheet and profit and loss accounts of ITDC as reflected in its Annual Report. Maintaining separate accounts, as held by the Supreme Court in Transport Corporation of India, may be for accounting purposes and this does not by itself show that two units are independent of each other. From the records of CW No. 2062 of 1989, it has been pointed out, and this has not been denied by the Petitioners, that the units of ITDC make sales tax free purchases on the strength of a registration certificate granted to ITDC under the Delhi Sales Tax Act, 1975 and the Central Sales Tax Act, 1956. These units of ITDC are considered as one establishment along with ITDC. Even the land on which the hotel in CW No. 2062 of 1989 is located is either owned by ITDC or taken on lease by ITDC.'

7. The learned Single Judge has noticed that (a) the employees of the appellant are transferable by the ITDC from one unit to another (b) the probationary period could be extended by the ITDC and the permission of the Chairman and Managing Director of ITDC was required to be obtained before any employee can indulge in any trade or other activity (c) the financial control of the ITDC over the hotel was also deduced as the balance sheet and profit and loss accounts of the Hotel though independently maintained nevertheless formed a part of the balance sheet and profit and loss accounts of ITDC as reflected in its Annual Report.

8. The learned Single Judge has also found that the units of ITDC including Ashok Yatri Niwas make sales tax free purchases on the strength of a registration certificate granted to ITDC under the Delhi Sales Tax Act, 1975 and the Central Sales Tax Act, 1956. The learned Single Judge by implying the tests set out by the Hon'ble Supreme Court in several judgments has concluded that for all practicable purposes there is no difference between the petitioner hotel/appellant and the establishment of ITDC. Once the appellant was held to be a part of ITDC due to the above findings of the learned Single Judge, we are not inclined to interfere with the above reasoning of the learned Single Judge and we in fact affirm the view of the learned Single Judge that the appellant's unit being a part of the establishment of ITDC due to the above finding. Thus there is no merit in this appeal. Consequently the appeal is dismissed with no order as to costs. All interim orders stand vacated.