2010(3) ALL MR 119
IN THE HIGH COURT OF JUDICATURE AT BOMBAY

B.H. MARLAPALLE AND V.K. TAHILRAMANI, JJ.

Mumbai Mazdoor Sangh Vs. Regional Provident Fund Commissioner Maharashtra & Goa & Ors.

Appeal No.168 of 2000,Writ Petition No.1834 of 1994

3rd February, 2010

Petitioner Counsel: Mr. S. M. DHARAP
Respondent Counsel: Mr. SURESH KUMAR,Mr. ADITYA CHITALE,Mr. RAHUL NERLEKAR

Employees' Provident Fund and Miscellaneous Provisions Act (1952), S.2A - Establishment - Test of functional integrality - Partnership firm engaged in business of selling umbrellas is scheduled industry - It diversified its business by starting umbrella factory - Claim made that factory should be treated as branch/department of trading firm - Trading firm and factory have different business, set of workers, account books, locations - Transfer of employees between two units have never taken place - Supervision and control is done by different management teams - Two units have common ownership and financial accounts are consolidated for sake of income tax - Functional integrity not established - Hence factory can not be held as branch/department of trading and selling firm - Directions issued to Provident Fund Commissioner to conduct survey and take steps for updating list of scheduled industries. (1998)2 SCC 446, 2007 ALL SCR 1965, 1960(I) LLJ 497 - Followed. (Para 11)

Cases Cited:
Pratap Press Etc. Vs. Their Workmen, 1960(I) LLJ 497 [Para 5,9,10]
Western India Match Company Ltd. and Their Workmen, 1963(II) LLJ 497 [Para 5]
Noor Niwas Nursery Public School Vs. Regional Provident Fund Commissioner, 2001(I) CLR 598 SC [Para 5]
Hotel Jaipur Ashok Vs. Miss. K. P. Sarojni, 2004(II) CLR 1047 [Para 5]
Regional Provident Fund Commissioner Vs. Nath Traders, 2007(II) CLR 124 [Para 5]
Regional Provident Fund Commissioner Vs. Moti Warping Factory, 2007(III) CLR 1040 [Para 5]
Regional Provident Fund Commissioner Vs. Dharamsi Morarji Chemical Co. Ltd., (1998)2 SCC 446 [Para 6,10]
Regional Provident Fund Commissioner Vs. Raj's Continental Exports (P) Ltd., 2007 ALL SCR 1965 : (2007)4 SCC 239 [Para 6,10]
Metazine Pvt. Ltd. Vs. Mr. A. M. Gandhi, the Regional Provident Fund Commissioner, 1992(II) LLJ 647 [Para 9]
Allana Sons Pvt. Ltd. Vs. Regional Provident Fund Commissioner of Maharashtra, (1991)I CLR 743 [Para 9]
Ebrahim Currim and Sons Vs. Regional Provident Fund Commissioner, 1994(I) LLJ 364 [Para 9]


JUDGMENT

B. H. MARLAPALLE, J. :- This writ appeal is directed against the Judgment and Order dated 27th/28th October, 1999 rendered by the learned Single Judge in Writ Petition No.1834 of 1994. While dismissing the said petition, the learned Single Judge was pleased to confirm the order passed by the respondent no.1 on 11/3/1994 thereby holding that respondent no.3 is not a branch or department of respondent no.2.

2. Respondent No. 2 is a partnership firm engaged in the business of trading and selling of umbrellas and in the said name and style it has been in existence for the last about 140 years. It decided to diversify its business activities and, therefore, established a factory for the manufacture of umbrellas some time in the year 1940 and respondent no.3 is the said factory. Respondent No. 2 was brought within the purview of the Act, as a scheduled industry with effect from 1/5/1962 but respondent no.3 was not included as a scheduled industry under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (the P.F. Act for short). It appears on 25/1/1988 respondent no.1 passed an order holding that respondent no.2 was bound to comply with the provisions of the P.F. Act with effect from 1/5/1962 in respect of the employees working in its factory known as "M/s. National Umbrella Factory" (respondent no.3). This order came to be challenged in Writ Petition No. 727 of 1988 and the petition was allowed on 4/2/1993 by remanding a de novo inquiry to be conducted by respondent no.1 so as to decide whether respondent no.3 is a branch or department of respondent no.2, as envisaged under Section 2-A of the P. F. Act. On remand, the parties appeared before the respondent no.1, filed their statement of claims/Written Statements and by his order dated 11/3/1994, the respondent no.1 held that respondent no.3 cannot be called as part and parcel or an integral part of respondent no.2 nor could it be considered as a contractor exclusively engaged by respondent no.2. The findings recorded by the respondent no.1 in the said order are reproduced as under:-

"The fore-going facts and figures would establish that there is nothing common except ownership and consolidation of final accounts between the establishments and there is hardly any inter-dependency for their survival. This fact is clear as even when the factory remained closed there was no disruption in the activity of the establishments. A mere fact of common ownership and consolidation of final accounts cannot be substantive factor for considering two separate establishments as one integral whole for the purpose of extending the Provident Fund benefits. In the instant case there is total absence of financial dealing between the establishments and transferability of employees which could be the most important entities for the purpose of considering them as a composite unit."

3. This order dated 11/3/1994 passed by the respondent no.1 came to be challenged in Writ Petition No.1834 of 1994, which petition came to be dismissed by the impugned order passed by the learned Single Judge. The learned Single Judge was pleased to hold that the claim made by the petitioner - Union for treating respondent nos.2 and 3 as one unit within the meaning of Section 2-A of the P.F. Act could not be accepted and the test of the functional integrality between the two units was not established. The arguments advanced by the petitioner - Union that the respondent no.2 was admittedly the owner of respondent no.3 and was also supplier of raw materials were not accepted to hold that respondent no.3 is part and parcel or a branch/department of respondent no.2.

4. Hence, in this appeal the only question that falls for consideration is, whether the findings recorded by the learned Single Judge that respondent no.3 is not a branch/department of respondent no.2 are sustainable.

5. Section 2-A of the P.F. Act reads as under:-

"2-A. Establishment to include all departments and branches:- For the removal of doubts, it is hereby declared that where an establishment consists of different departments or has branches, whether situated in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment."

Shri. Dharap, the learned counsel for the appellant-Union, has referred to the submissions made before the respondent no.1 by the respective parties and submitted that respondent no.2 is not only the owner of respondent no.3 but it had the supervisory, financial as well as administrative control on all affairs of respondent no.3 and, therefore, respondent no.3 ought to be held as a branch/department of respondent no.2 and if so held, the provisions of the P. F. Act and the scheme thereunder could be applicable to the employees of respondent no.3 with effect from 1/5/1962. As per Shri Dharap, respondent no.1 in his inquiry, on remand, has not applied his mind to the relevant facts and more particularly on the issue of supervision and control and, therefore, having regard to the law laid down by the Supreme Court in the case of Pratap Press Etc. Vs. Their Workmen [1960(I) LLJ 497], Western India Match Company Ltd. and Their Workmen [1963(II) LLJ 497] and Noor Niwas Nursery Public School Vs. Regional Provident Fund Commissioner [2001(I) CLR 598 SC], it ought to be held that there was a functional integrality between respondent nos.2 and 3 and the concurrent view taken in this regard in the earlier two adjudications is unsustainable. Shri. Dharap also relied upon the award passed by the Industrial Tribunal at Mumbai on 3/8/1966 in Reference (IT) No. 53 of 1965 in support of his contentions that so far as the workmen were concerned, it was respondent no.2 as the employer, in fact, and not respondent no.3 who is only a department or branch of respondent no.2. Shri. Dharap has also relied upon the following decisions:

(a) Hotel Jaipur Ashok & Ors. Vs. Miss. K. P. Sarojni & ors., [2004(II) CLR 1047].

(b) Regional Provident Fund Commissioner Vs. Nath Traders and ors. [2007(II) CLR 124].

(c) Regional Provident Fund Commissioner & Anr. Vs. Moti Warping Factory [2007(III) CLR 1040].

6. Shri. Suresh Kumar, the learned counsel appearing for respondent no.1 referred to the provisions of Section 2-A of the P.F. Act and submitted that the same section was incorporated in the Act by way of an amendment brought into force from 31/12/1960 so as to provide for a clarification that where an establishment consists of different departments or has branches, whether situated in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. As per him this was necessary because there were some branches and different departments some times located in different places and employing less than 20 employees and were being deprived of the benefits of the Act and the scheme thereunder, though main establishment and the employees working thereunder were covered under the scheme. He submitted that for an industry which is not a scheduled industry under the Act, the Union representing the employees of such an industry cannot take support of Section 2-A and claim that the benefits of the Act and the scheme thereunder is required to be extended to all of them on the basis that the owner establishment, though a different industry, has already been covered under the Act. Shri Chitale, the learned counsel appearing for the respondent no.2, by referring to the submissions made before respondent no.1, on remand, submitted that respondent no.2 trades and markets the umbrellas manufactured by not only respondent no.3 but in deed many other manufacturers all over the country and whose names are listed in Schedule A, B and C etc. along with the written statement submitted before the respondent no.1. He also stated that in the same way, the respondent no.3 was not obliged to supply all its produce to respondent no.2 alone and other traders were also buying umbrellas from respondent no.3. He also submitted that the only ground of ownership and supply of material cannot be a reason to hold that respondent no.3 is the department or branch of respondent no.2 and it was also pointed out that these are not only the tests to determine the functional integrality so as to decide whether respondent no.3 is the branch/department of respondent no.2. As per Shri. Chitale the concurrent findings recorded by the respondent no.1 as well as the learned Single Judge are based on the record and there is no error on the face of the record in the impugned order passed by the learned Single Judge while confirming the order of respondent no.1. In support of these submissions Shri Chitale placed reliance on the following decisions:

(a) Regional Provident Fund Commissioner and anr. Vs. Dharamsi Morarji Chemical Co. Ltd. [(1998)2 SCC 446].

(b) Regional Provident Fund Commissioner Vs. Raj's Continental Exports (P) Ltd. [(2007)4 SCC 239] : [2007 ALL SCR 1965].

7. Shri. Nerlekar, the learned counsel for the respondent no.3, while adopting the arguments of Shri Chitale, the learned counsel for respondent no.2, has also pointed out that at no point of time there was any inter transfers of employees between the two units and the grounds of ownership and supply of material which are reiterated by Shri. Dharap in support of his contentions were, in fact, discarded by the learned Single Judge in the earlier round i.e. Writ Petition No.727 of 1988 while remanding the case to be decided afresh by respondent no. and, therefore, the said grounds cannot be re-agitated.

8. The order dated 11/3/1994 passed by the respondent no.1 referred to the order passed by this court for remand and in the said order this court (Single Bench) had considered the following issues:-

(i) Whether National Umbrella Factory is a seperate and distinct establishment or is merely a branch or department of M/s. Ebrahim Currim & Sons?

(ii) Whether there is a functional integrality between the two units so as to constitute the two units as a single composite establishment?

(iii) Whether the respondent no.1 has applied the relevant tests for purposes of deciding the above referred questions including the test as to whether the National Umbrella Factory can conveniently or substantially exist even if M/s. Ebrahim Currim & Sons (the trading unit) is closed?

(iv) If not, whether the impugned order suffers from misdirecting in Law and the impugned order is liable to be quashed and set aside with liberty to pas fresh order on remand in accordance with law.

8-A. The respondent no.1, on considering the arguments advanced by both the parties as well as the statement of claim and the statement of defence placed before it, recorded the findings that,

(a) respondent no.2 is the owner of respondent no.3;

(b) respondent no.2 used to supply raw material for manufacture of umbrellas to respondent no.3 in the same manner as it used to supply such material to other umbrella manufacturers as well;

(c) there was no transferability of employees from respondent no.2 to respondent no.3 or vis-à-vis;

(d) the respondent no.3 - factory was closed from 20/11/1963 to 20/4/1964;

(e) respondent no.2 had originally nine partners but after consent decree was passed in Civil Suit No.392 of 1963 by this court for dissolution of partnership on 11/3/1963, only five partners joined and formed the reconstituted partnership;

(f) both the establishments are located in different premises i.e. the factory is located at Ray Road and respondent no.2 is located at Princess Street, Kalbadevi;

(g) respondent no.2 was issued a factory licence by the Bombay Municipality on 12/5/1943 and it has also registered as a small scale industry in the State of Maharashtra as per the certificate dated 23/6/1986 issued by the Directorate of Industries. It also has separate licence under the Central and State Sales Act. It has also been allotted importer/exporter code number by the Ministry of Commerce;

(h) each of the establishments is maintaining separate books of accounts and have separate set of employees. At the same time, the accounts of both the establishments are consolidated for the purpose of income tax;

(i) the documents regarding purchase of raw material and invoices for supply indicated that the price for material supplied was being adjusted from the amount payable to the respondent no.3 towards supply umbrellas to respondent no.2;

(j) the settlement copies placed on record also indicated that the wages of the employees of respondent no.3 were fixed according to the rates applicable to the Umbrella Manufacturers and Traders Association;

(k) respondent no.2 is a trading and marketing firm, whereas the respondent no.3 is engaged in the manufacture of umbrellas. At the same time, respondent no.2 is a scheduled industry, where as respondent no.3 has not been impleaded in the schedule to the Act so as to bring it under the coverage of the Act.

9. The learned Single Judge considered the findings recorded by the respondent no.1 and the decisions of this court rendered earlier in the case of M/s. Kerula Rubber Company Pvt. Ltd. Vs. Regional Provident Fund Commissioner [Special Civil Application No.198 of 1978] as well as Metazine Pvt. Ltd. Vs. Mr. A. M. Gandhi, the Regional Provident Fund Commissioner [1992(II) LLJ 647] and Allana Sons Pvt. Ltd. Vs. Regional Provident Fund Commissioner of Maharashtra [(1991)I CLR 743] as well as the remand decision in the instant case i.e. Ebrahim Currim and Sons Vs. Regional Provident Fund Commissioner and anr. [1994(I) LLJ 364] and held that though respondent no.2 is the owner of respondent no.3, there was no other material which could be said to indicate that respondent no.3 is the branch/department of respondent no.2. The learned Single Judge while upholding the findings recorded by respondent no.1 observed thus, by referring to the decision in the case of Pratap Press Vs. Delhi Press Workers' Union (Supra),

"If this ratio is applied to the determination of the question in the instant case, it would be seen that the two units are located at different places, have different sets of workers engaged in different kind of activities and have separate books of accounts. It is true that there is a common owner of both the units and there is consolidation of accounts of both the units at the year's end. But there is no bar to a company establishing more than one unit. In deed, in this case, respondent no.2 decided to establish a factory after carrying trading activity for several years. The mere fact that respondent No.2 ultimately consolidated the accounts of the two units, for the purposes of the Companies Act and the Income-tax Act, cannot result in a conclusion that, therefore, the two units constitute one establishment. It is not unknown that where one and the same company establishes separate, distinct and different factories at different places with each having its own separate accounts, consolidation is annually effected for the purposes of the Companies Act and the Income-tax Act. In these circumstances, the petitioners claim for treating the two units as one establishment for the purposes of Section 2-A of the Act cannot be accepted."

10. The above observations made by the learned Single Judge are supported also by the following observations made by the Apex Court in the case of Dharamsi Morarji Chemical Co. Ltd. (Supra):

"It is true that if an establishment is found, as a fact, to consist of different departments or branches and if the departments and branches are located at different places, the establishment would still be covered by the net of Section 2-A and the branches and departments cannot be said to be only on that ground not a part and parcel of the parent establishment. However, on the facts of the present case, the only connecting link which could be pressed in service by the learned counsel for the appellant was the fact that the respondent-Company was the owner not only of the Ambarnath factory but also of Roha factory. On the basis of common ownership it was submitted that necessarily the Board of Directors could control and supervise the working of Roha factory also and, therefore, according to the learned counsel, it could be said that there was interconnection between Ambarnath factory and Roha factory and it could be said that there was supervisory, financial or managerial control of the same Board of Directors. So far as this contention is concerned the finding reached by the High Court, as extracted earlier, clearly shows that there was no evidence to indicate any such interconnection between the two factories in the matter of supervisory, financial or managerial control. Nothing could be pointed out to us to contraindicate this finding. Therefore, the net result is that the only connecting link which could be effectively pressed in service by the learned counsel for the appellant for culling out interconnection between Ambarnath factory and Roha factory was that both of them were owned by a common owner, namely, the respondent - Company and the Board of Directors were common. That by itself cannot be sufficient unless there is clear evidence to show that there was interconnection between these two units and there was common supervisory, financial or managerial control. As there is no such evidence in the present case, on the peculiar facts of this case, it is not possible to agree with the learned counsel for the appellant that Roha factory was a part and parcel of Ambarnath factory or it was an adjunct of the main parent establishment functioning at Ambarnath since 1921."

In the above case as well, the Company had established a new concern at Roha in Kolaba District of Maharashtra State on 9/7/1977, while it had an existing factory at Ambarnath in Thane District right from the year 1921 and it was held that the new unit at Roha could not be held to be a branch or department of the Company at Ambarnath within the meaning of Section 2-A of the P.F. Act. A similar view was taken by the Supreme Court in the case of Raj's Continental Exports (P) Ltd. [2007 ALL SCR 1965] (Supra) by relying upon the earlier decision in the case of Pratap Press. In the case of Pratap Press (Supra), the Supreme Court held,

"The question whether the two activities in which the single owner is engaged are one industrial unit or two distinct industrial units is not always easy of solution. No hard-and-fast rule can be laid down for the decision of the question and each case has to be decided on its own peculiar facts. In some cases the two 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."

11. In the instant case, as noted earlier, there was no inter transfer of the staff between two units and in addition there was no evidence to point out that the supervision and control was done by a common management team or by a common manager of both the units. The employees of respondent no.3 were appointed by it alone and they were subject to the disciplinary action by the manager of that unit. We, therefore, do not find any material to hold that the concurrent findings recorded earlier suffer from any error on the face of the record so as to cause interference in this intra court appeal and the findings of facts recorded by the respondent no.1 to hold that the respondent no.3 is not a branch/department of respondent no.2 have been confirmed by the learned Single Judge and rightly so.

12. However, before we part with this judgment, we have noted with concern that the list of scheduled industries has not been updated for a considerably long time. Some of the industries like respondent no.3 or the IT industries employ a large workforce and still they do not find place in the schedule to the Act and the employees working therein and who are eligible to be given the benefits of the Act and the scheme thereunder are deprived of the such benefits. Section 4 of the Act empowers the Central Government by notification in the Official Gazette to add to Schedule-I any other industry in respect of the employees whereof it is of opinion that a Provident Fund Scheme should be framed under the Act and thereupon the industry so added shall be deemed to be an industry specified in Schedule-I for the purposes of the Act. It would be, therefore, necessary for respondent no.1 to undertake a survey of all such non scheduled industries in the State of Maharashtra and take appropriate steps to submit its recommendations to the Central Government through the Ministry of Labour. We hope that such an exercise would be undertaken as expeditiously as possible and a report thereof is submitted to the Central Government along with a copy to be submitted to the Registry of this Court.

13. In the premises, this appeal fails and the same is hereby dismissed. The parties to bear their own costs.

14. Shri. Suresh Kumar the learned counsel for respondent no.1 to forward a copy of this order to respondent no.1 and invite his attention to the observations made by us on the necessity to update the list of scheduled industries in the Act.

Ordered accordingly.