IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 3332 of 1997(V)
1. SHEVEROY ESTATES LTD, M.THOMAS JACOB
... Petitioner
Vs
1. THE REG.PROVIDENT FUND COMMISSIONER, EKM
... Respondent
For Petitioner :SRI.E.K.NANDAKUMAR
For Respondent :SRI.JOHN VARGHESE, ASSISTANT SG
The Hon'ble MR. Justice V.K.MOHANAN
Dated :09/06/2009
O R D E R
V.K.MOHANAN, J.
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O.P.No. 3332 of 1997
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Dated this the 9th day of June, 2009
J U D G M E N T
The petitioner is a public limited company
registered under the Companies Act, 1956 and its
head quarters is at Egmore in Chennai and has
preferred this writ petition challenging Exts.P12 and
P14 orders issued by the respondents by which the
petitioner is denied the benefit of ‘infancy protection’
under Section 16(1)(d) of the Employees’ Provident
Funds and Miscellaneous Provisions Act,1952
(hereinafter referred to, for short as ‘the Act’ only).
2. The case of the petitioner is that the
company is engaged in the business of plantation
activities and according to the petitioner, the object
clause in the Memorandum of Association authorises
the company to engage itself in multifarious
activities. The company has decided to set up a new
industrial undertaking in the Cochin Export
Processing Zone for the manufacture of tissue culture
plants, cut flowers and value added plants and
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accordingly, an application dated 10.7.1987 was
submitted to the Ministry of Commerce, Government of
India for permission for the above purpose. As per
Ext.P1, permit was given to the petitioner as sought for.
According to the petitioner, the new concern is a new
establishment and industrial undertaking in the Cochin
Exporting Processing Zone and the same has no
functional integrality with the other establishments
owned by the petitioner. It is the further case of the
petitioner that as per Ext.P4 issued by the first
respondent, infancy protection was granted to the
petitioner’s establishment started at the Cochin Export
Processing Zone on the basis of Ext.P1 permit.
According to the petitioner, as per Ext.P4, the petitioner
was informed that the coverage of the employees under
the Act would commence with effect from October,
1991. Thus, according to the petitioner, inasmuch as
the Bio-tech Division was accepted as an independent
and a new establishment established by the
petitioner/company and under such circumstances, it
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was accorded the benefit of infancy protection under
Section 16(1)(d) of the Act.
3. It is the further case of the petitioner that after
one year from the date of Ext.P4 granting infancy
protection, the first respondent issued Ext.P5 order by
which the first respondent reversed Ext.P4 order of
exemption and shifted the date of coverage of the
establishment to 31.10.1988. Against Ext.P5, the
petitioner submitted Ext.P6 letter reiterating its right to
get exemption from coverage for a period of three years
as provided under Section 16(1)(d) of the Act.
Thereafter, the first respondent issued Ext.P7 rejecting
the contention of the petitioner raised as per Ext.P6, on
the ground that the activities of Tissue Culture Division
is part of the main objectives of the company and the
Plantation Division at Madras and the Bio-tech Division
at Cochin are two divisions of the same establishment.
With reference to Ext.P7, the petitioner again sent a
letter as per Ext.P8, reiterating its stand. Thereafter,
the first respondent issued Ext.P9 directing the
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petitioner to comply with the provisions of the Act with
effect from 11/88 onwards. Again, the petitioner sent
Exts.P10 and P11 clarifying the stand of the petitioner
and claiming the infancy protection.
4. According to the petitioner, all representations
and letters were rejected by the first respondent and
Ext.P12 was issued by which the first respondent
concluded and directed the petitioner to implement the
provisions of scheme with effect from 31.10.1988. As a
statutory remedy, aggrieved by Ext.P12, the petitioner
had filed a petition under Section 19A of the Act before
the second respondent, a copy of the said petition is
produced along with this original petition and marked as
Ext.P13 whereby the petitioner has tried to apprise the
second respondent the factual and legal grounds in
support of its claim for exemption. According to the
petitioner, without proper application of mind and
without consideration of the legal and factual grounds
taken by the petitioner, the second respondent has
issued an order upon Ext.P13 dismissing the same.
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Ext.P14 is the said order. Thus, the petitioner preferred
this writ petition praying inter alia to issue a writ of
certiorari quashing Exts.P12 and P14 orders and also
with a prayer to issue a writ of mandamus or other
appropriate writ, order or direction directing the first
respondent to grant the benefit of infancy protection to
the petitioner under the Act.
5. Denying the contentions and averments
raised in the writ petition, the first respondent has filed
a detailed counter affidavit. According to the
respondent, the petitioner-company owns two
plantations in Tamil Nadu, covering the Act. On the
strength of the memorandum and Articles of Association
and in expansion of its business, the petitioner-company
established and started the Bio-tech Division in Cochin
Export Processing Zone and started functioning in
October, 1988. The respondents have not disputed the
fact that initially the infancy protection of three years
was allowed and Code No.KR/13454 was also issued in
favour of the petitioner. But, according to the
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respondents, at the time of granting the infancy
protection, the Area Enforcement Officer was also
directed to examine the feasibility of extending the Act
to the division from the date of starting, invoking
Section 2A of the Act as the branch unit of Sheveroy
Estates Limited. Accordingly, the Enforcement Officer
conducted a detailed examination and it is reported that
the Bio-tech Division is a branch unit of the petitioner-
company and has recommended that the coverage be
shifted to the date of starting of the unit. Thus,
according to the respondents, since the petitioner
challenges the above move of the respondents and
claims infancy protection, an enquiry was conducted
under Section 7A of the Act and the competent authority
examined the case in detail and heard the petitioner also
and evidence was also taken and accordingly, on the
basis of six points mentioned in the counter affidavit, it
was held that the petitioner is not entitled to get the
benefit especially, in the light of the Supreme Court
decision reported in Associated Cement Company Ltd.
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v. their Workmen (1960(1) LLJ 1) and the judgment of
this Court in Eddy Current Controls (India) v. The
Regional Provident Fund Commissioner and another
(1993(2) KLJ 628). Thus, the sum and substance of the
contentions of the respondents is that the Bio-tech unit
owned and established by the petitioner-company is a
department or branch of the petitioner-company and it is
not a new establishment and therefore, the petitioner-
company is not entitled to get the benefit. To
substantiate the above contention, along with the
counter affidavit, the respondent has produced Ext.R1
(a), appointment order issued by the petitioner-company
in favour of one Mrs.Mini Elizabeth Chacko whereby it is
stated that during the period of her service, she is liable
to be transferred to any of the branches. Thus,
according to the respondents, the Bio-tech Division in
CEPZ is a branch or division of the petitioner-company
and not a new establishment so as to avail the benefit
under Section 16(1)(d) of the Act.
6. I have heard Sri.E.K.Nandakumar, learned
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counsel for the petitioner as well as the learned
Assistant Solicitor General, appearing for the
respondents.
7. At the outset, it is to be noted that the actual
beneficiaries of the Act, viz., the workers are not seen
raised any claim or dispute regarding the contribution
payable by the petitioner- employer. Though the present
establishment was started to function with effect from
31.10.1988, no documents are produced or referred
connecting with such dispute preferred by the workers
at any date after 31.10.1988 or even after passing
Exts.P12 and P14 orders till this date.
8. To settle the controversy, the only question to
be considered and answered is whether the Bio-tech
Division established by the petitioner in Cochin Export
Processing Zone is coming under the purview of the
establishment as defined in Section 2A of the Act or
whether it is a part and parcel of the establishment of
the petitioner-company. Relying upon the documents
referred in the writ petition, the learned counsel for the
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petitioner submits that at no stretch of imagination, it
can be said that the Bio-tech Division in CEPZ is part of
the establishment of the petitioner-company and
therefore, the said establishment is entitled to get
infancy protection. In support of the above submission,
the learned counsel invited my attention to the decision
reported in Regional Provident Fund Commissioner
and Another v. Dharamsi Morarji Chemical Co.Ltd.
(1998 (1) L.L.J.1060). According to learned counsel for
the petitioner, the Supreme Court has laid down the test
in the said decision, which is applicable to decide the
question as to whether the unit of the petitioner will
come under separate establishment or part of the
company. On the other hand, the learned Assistant
Solicitor General submits that on the basis of the
enquiry conducted by the Area Enforcement Officer, it is
found that the Bio-tech Division of the petitioner-
company in CEPZ is a branch or unit of petitioner-
company. Further, it is also the case of the respondent
that a detailed enquiry was conducted under Section 7A
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of the Act and after hearing the arguments and also
examining the evidence, the petitioner’s establishment
at CEPZ is not a new establishment and in order to
substantiate the above point, the learned counsel argued
and elaborated six points mentioned in their counter
affidavit.
9. The Hon’ble Apex Court in its decision in
Dharamsi Morarji Chemical Co.’s case (cited supra)
held in para 4 which runs 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 would
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 andOP NO.3332 of 1997
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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 contradict 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 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 and
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.”
(emphasis supplied)
In that case, the company has established a factory to
manufacture organic chemicals at Ambarnath in Thane
District and the same was running from 1921 onwards.
It is the said company established a new concern at
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Roha in Kolaba District of Maharashtra State during the
month of July, 1997. It is also relevant to note that in
the said Ambarnath factory, the products were heavy
inorganic chemicals and mainly fertilizers, while the
Roha factory manufactures only organic chemicals.
Thus, the products manufactured in these two factories
are thus separate, distinct and different. After
considering the materials on record in that case and the
facts involved therein, the Apex Court had held that
though both factories were owned by a common owner
and the Board of Directors, who were running the two
establishments, were also 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.
10. Now let me examine the facts and
circumstances involved in the case in the light of the test
laid down by the Apex Court through the decision
referred above. From the facts which are beyond
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dispute, it can be seen that even at the time of issuing
Ext.P1 permit, the Central Government has accepted the
proposal of the petitioner as per the setting up of the
new industrial undertaking in the Cochin Export
Processing Zone. The contention of learned counsel for
the petitioner that newly set up establishment cannot be
considered as a branch or department of the petitioner-
company cannot be ruled out. According to learned
counsel for the petitioner, Bio-tech unit in CEPZ is a new
establishment and the same has nothing to do with the
company though the ownership of the Bio-tech division
is vested with the company. According to the learned
counsel, in the Bio-tech unit, separate employees were
appointed and there is no functional integrality.
According to the petitioner’s counsel, the petitioner-
company can have more than one establishment and
therefore, the new establishment cannot be treated as
part of the factory establishment which is already
started by the company. It is pointed out that the main
business of the establishment in CEPZ is tissue culture
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and it is an independent division and the same has
nothing to do with the plantation division owned and
managed by the petitioner-company. The learned
counsel submits that the new establishment has got
separate profit and loss account and balance sheet, but
the company has a whole consolidated balance sheet and
profit and loss account which is also prepared as per the
provisions of the Companies Act. It is also the point
stressed by learned counsel for the petitioner that
though in Ext.R1(a), there was a clause for transfer, that
is not sufficient to hold that the establishment is a part
of the other establishments of the petitioner-company.
According to the counsel, the employees were appointed
in the Bio-tech Division and they are liable to be
transfered only in the branches of Bio-tech Division and
they are trained in tissue culture or Bio-tech Division
who cannot be transferred and posted in other divisions.
So, the employees in the above division cannot be
transferred to the plantation division. Learned counsel
further argued that none of the above grounds are made
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in Exts.P12 and P14.
11. Though I have repeatedly perused Exts.p12
and P14, the above aspect is not considered properly
and no finding is arrived at. The only material produced
before this Court by the respondents to show that the
Bio-tech Division of the petitioner-company is part and
parcel of the petitioner’s establishment is Ext.R1(a)
appointment order issued by the petitioner-company.
Simply, on the basis of a clause in Ext.R1(a) that the
appointee is liable for transfer, it cannot be said that the
Bio-tech Division at Cochin is part and parcel of the
petitioner-company or another unit or factory of the
petitioner’s concern. As indicated above, though the
evidences were collected, no materials is cited or
examined to show that there is financial, managerial and
functional integrality between the Cochin Division of
Bio-tech and other establishment or division of the
petitioner-company. It is also relevant to note that there
is no discussion or materials produced to show the
products of the various unit of the petitioner-company
OP NO.3332 of 1997
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and how the unit at CEPZ depends on other unit for its
function. In short, there is no finding that the present
devision cannot exist without the other. It is also
relevant to note that Section 2A deals with the
establishment to include all departments and branches.
The above section does not refer to the “employer” or
“owner” of the different departments or branches. If
that be so, the actual test laid down by the Apex Court
as indicated above is not satisfied in this case. In the
present case, no material or document is produced or
considered by the respondents to hold that there was
inter-connection between the Bio-tech division
established in CEPZ or other factory or establishments
owned by the petitioner-company and there was
common supervisory financial or managerial control.
On the above matrix, in the absence of such
evidence or materials, though the petitioner is the owner
of the Bio-tech Division and the Plantation Division and
based upon such common ownership, it cannot be said
that there is interconnection so as to draw inference of
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common supervisory financial and managerial control.
Therefore, I have no hesitation to hold that the Bi-tech
Division of the petitioner-company in Cochin is a new
establishment and not a part and parcel of the
petitioner-company and its other establishment for the
purpose of Section 16(1)(d) of the Act.
In the result, the Original Petition is allowed
quashing Exts.P12 and P14.
V.K.Mohanan,
Judge
MBS/
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V.K.MOHANAN, J.
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O.P.NO. 3332 OF 1997
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J U D G M E N T
DATED: 9-6-2009
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