Companies Act Case Law Regional Provident Fund Commissioner, Jaipur Vs Naraini Udyog And Ors.

Appeal (civil) 9490-93 of 1996



DATE OF JUDGMENT: 08/07/1996



1996 Supp(3) SCR 202
The Order of the Court is as follows

1. Though Respondents 1 and 2, namely, M/s. Naraini Udyog, Kota and M/s.
Modern Steels, Kota were served, they are not appearing either in person or
through counsel. Leave granted. In these appeals, we are concerned only
with the legality of the order of the Division Bench of the Rajasthan High
Court in Writ Petitions Nos. 120-121 of 1990 etc. etc. made on 7-7-1993. As
regards the aforesaid two concerns, their functional integrity was found by
the Commissioner in his report as under

“The fact of common Head Office at New Delhi, a common branch at
Bombay, common telephone at Kota for residence and factories has also
been not denied by Shri Krishan Kumar in his evidence. At the same time
assertion that the Head Office though located in the same building but
is separate lacks credibility. The letterheads of the two firms do not
give any such indication. The stand of the establishment, that the two
are registered separately under the Factories Act, the Sales Tax Act,
the ESIC Act, are located at a distance of 3 kms apart, have separate
Central Excise Nos., are registered as separate small-scale industries
etc. and, therefore, the two should be treated as separate
establishments is devoid of merit. As already analysed earlier, the
concept of an establishment for the purposes of the Act is wide enough
to include more than one factory and as such the factors relied upon by
the management do not cut across that concept. The purpose of each Act
is (sic) entities for those Act is immaterial so far the Employees
Provident Funds and Miscellaneous Provisions Act, 1952 is concerned.
The statement by the Provident Fund Inspector that he had seen some
workers of M/s. Naraini Udyog working in M/s. Modern Steel has been
denied by the employer but it is not very crucial to the point at
issue. The submission on behalf of the department that the office of
M/s. Modern Steel is situated in the premises of M/s. Naraini Udyog and
accounts of the two are maintained by the same set of clerks has not
been controverted by the employer. Thus, taking into account the
totality of the factors, the conclusion that the two firms in reality
constituted a single establishment for the purpose of the Act is
inescapable. This is fully supported by the provision of Section 2-A of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952 as
also the case-laws laid down by the Supreme Court mentioned in para 4

2. On the basis thereof, the appellant has called upon them to contribute
the amount under Section 7-A of the Employees Provident Funds and
Miscellaneous Provisions Act, 1952 (for short ‘the Act’) holding that the
above two concerns are establishments within the meaning of Section 1(3)(a)
of the Act. The Division Bench in the impugned order had held that they
were registered under the Companies Act as two different individual
identities, though they are represented by the members of the same family.
Therefore, they are two independent companies. Both cannot be clubbed
together for the purpose of levying contribution under Section 7-A of the
Employees Provident Funds and Miscellaneous Provisions Act, 1952. We have
gone through the reasoning given by the High Court. We find that the High
Court is wholly unjustified in reaching the above conclusion. It is true,
as found by the High Court, that they are registered as two independent
units and represented separately by the members of a Hindu Undivided Joint
Family. Nonetheless the Commissioner recorded, as a fact, the functional
unity and integrality between the two concerns. Consequently, the
definition of ‘establishment’ which was widely defined would encompass
within its ambit the two units as an establishment for the purpose of the
Act. Accordingly, the High Court had not considered in proper perspective
the provisions of the Act which is a beneficial legislation to provide
healthy security to the workmen. In the ultimate analysis the employer gets
maximum out-turn of his production by ensuring health insurance to its
employees which is the fundamental right to the latter

3. The appeals are accordingly allowed. The order of the High Court is set
aside and that of the Commissioner stands confirmed to the above extent. No

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