IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 25.04.2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.NO.33971 of 2005 and W.P.M.P.No.36893 of 2005 M/s.Bhuwalka Steel Industries Ltd., Melambi Village, Kanchipuram, Chengalpattu District Tamil Nadu represented by Mr.M.H.Sait, General Manager. ...Petitioner Vs. 1.The Registrar, Employees Provident Fund Appellate Tribunal, New Delhi-110 019. 2.The Regional Provident Fund Commissioner, Employees Provident Fund Organization, Vellore. 3.The Enforcement Officer, RPFO, Vellore Division, 31, Filter Bed Road, Vellore-632 001. ...Respondents This writ petition is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorarified mandamus to call for the records relating to the order dated 01.06.2005 passed by the first respondent in No.ATA-383(13)/2000 and quash the same and consequently to direct the second respondent to declare the Kanchipuram Factory as an independent establishment is eligible for infancy period as provided under Section 16(1)(d) of the EPF Act. For Petitioner : Mr.Jayesh B Dolia for M/s.Aiyar & Dolia For Respondents : Ms.V.J.Latha for RR2 and 3 O R D E R
The petitioner is an employer. He has filed the present writ petition seeking to challenge an order passed by the first respondent Employees Provident Fund Appellate Tribunal in ATA-383(13)/2000 dated 01.06.2005.
2. The writ petition was admitted on 24.10.2005. Pending the writ petition, an interim injunction was granted. Though the petitioner sought for an interim stay, in view of the statement made by the learned counsel for the petitioner, the stay application was dismissed.
3. On notice from this Court, on behalf of the respondents 2 and 3, a counter affidavit dated 18.03.2011 was filed.
4. The petitioner establishment was issued with a notice under Section 7-A of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 dated 29.05.2000, calling upon them to comply with the provisions of the Act with reference to their unit at Kanchipuram with effect from 20.11.1995. The petitioner filed an appeal before the first respondent Tribunal under Section 7-I of the Act. The contention raised by the petitioner was that they had set up six factories at different places in India with their registered office at Bangalore. The main company was a covered establishment with a code number KN/11027. A new establishment, according to the petitioner was entitled to get infancy protection for a period of three years in terms of Section 16(1)(d) of the Act. The said provision was deleted from the Act with effect from 01.09.1997. Since their Kanchipuram factory commenced its activities with effect from 20.11.1995, it claimed infancy protection from the Act for a period of three years. But after the deletion of the said provision viz, 16(1)(d) of the Act with effect from 01.09.1997, the Kanchipuram factory started complying with the provisions of the Act from the date of the deletion.
5. The only question that arose for consideration before the Tribunal was whether during the period from 20.11.1995 till 01.09.1997 they were covered by the provisions of the Act and they are entitled to get infancy protection.
6. Before the Tribunal, the second respondent contended that the factory at Kanchipuram was set up for expansion of their business and the Bangalore office was having supervisory and managerial control over the Kanchipuram factory and all the decisions were taken by the Board of Directors of the Company. The terms and conditions of the employees including release of issuance of additional capital were taken by the company. The technology adopted by the company was used in all the factories.
7. The stand of the petitioner was that the factories set up by the company were separately registered with the statutory authorities and are maintaining separate accounts. Each factory was managed by a separate Managing Director and separate set of employees. While the Bangalore Unit was manufacturing steel, Kanchipuram factory was manufacturing angles and channels. There was no financial dependency between Kanchipuram Unit and Bangalore Unit. The Kanchipuram factory was set up by release of public issue of shares and by raising loan from the Canara Bank at Kanchipuram. Even without the Unit at Bangalore, Kanchipuram Unit can exist on its own. Therefore, the unit was entitled for infancy protection.
8. The respondents Provident Fund Department contended that annual report for the year 1994-95 of the company showed that the Kanchipuram factory was established for expanding the business. A common balance sheet was maintained in respect of all the factories and no separate company was registered to set up a factory at Kanchipuram. The shares were issued only in the name of the company and not for the Kanchipuram factory. The Managing Director of the factory at Kanchipuram was only managing the day-to-day affairs and major policy decisions were taken at Bangalore factory and same products were manufactured in both places.
9. The Tribunal while rejecting the appeal filed by the petitioner company vide order dated 01.06.2005 quoted a portion from the Director’s report to show that the projects at Kanchipuram and Wada were established to increase the installed capacities. It also found that the judgment cited by the petitioner company was not appropriate to the case on hand. The funds generated by the company was invested in their factories. Only working capital was generated at Kanchipuram. Since both are having common Board of Directors and a common annual report and there is inter dependency between one unit and other, provisions of Section 2-A of the Act was attracted to the case on hand. In that view of the matter, the appeal was dismissed. Aggrieved by the same, the writ petition came to be filed.
10. Mr.Jayesh B.Dolia learned counsel appearing for M/s.Aiyar and Dolia contended that in the appeal before the Tribunal, they had raised several grounds to show that there was no functional integrality between Bangalore Unit and the Kanchipuram Unit. All the grounds raised by them were rejected by the Tribunal by considering that the Kanchipuram factory was set up as an expansion of the business. The Tribunal did not go into the issues raised before it.
11. In this context, learned counsel for the petitioner placed reliance upon the judgment of the Supreme Court in Regional Provident Fund Commissioner and another v. Dharamsi Morarji Chemical Co. Ltd., reported in 1997 (1) LLJ 1060. He contended that in that case the Supreme Court found that the factories at Ambarnath and Roha were owned by the same owner and by itself it did not mean they were covered by Section 2-A of the EPF Act. Reliance was placed upon the following passage found in paragraph 4, which is as follows:-
“4.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 contra this finding. Therefore, the net result is that 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 that both of them were owned by a common owner, namely, the respondent company, the board of Directors were common. That 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.”
12. In the counter affidavit filed by the respondents it was stated that Section 2A of the EPF Act declared that if any establishment consists of different departments or has branches, even if they were situated in the same place or at different places, all such departments and branches should be treated as part of the same establishment. Since already the company was functioning with an unit at Bangalore, certainly the unit at Kanchipuram cannot be considered as a separate unit.
13. However, the first respondent Tribunal did not advert all the aspects of the case as well as the grounds urged by the petitioner. It merely went by the ground that the Kanchipuram unit was started by way of work expansion and since the Board of Directors were the same and a common balance sheet was being made and held that Section 2A of the Act was attracted.
14. On the other hand, as found from the decision of the Supreme Court in Dharamsi Morarji Chemical’s case (cited supra), the Supreme Court had categorically held that even if two factories were owned by the same company and the Board of Directors were common that by itself was not sufficient to attract Section 2A of the Act. There must be interconnection between two units in terms of common supervisory, financial or managerial control. Since the Tribunal had not adverted to these aspects in rendering a finding to sustain the order passed under Section 7A, this Court is obliged to interfere with the impugned order.
15. Accordingly, the impugned order made in ATA-383(13)/2000 dated 01.06.2005 stands set aside and the matter is remitted to the first respondent Tribunal for fresh consideration in accordance with law. The Writ petition stands allowed to the extent indicated above. The Tribunal shall dispose of the matter after due notice and after affording opportunity to the parties, within a period of six months from the date of receipt of a copy of this order. No costs. Consequently, connected miscellaneous petition stands closed.
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To
1.The Registrar,
Employees Provident Fund Appellate Tribunal,
New Delhi-110 019.
2.The Regional Provident Fund Commissioner,
Employees Provident Fund Organization,
Vellore.
3.The Enforcement Officer,
RPFO, Vellore Division,
31, Filter Bed Road,
Vellore 632 001