# M/S Sachan Nursing Home & another v. Regional P.F. Commissioner and another

- **Citation:** (2012) 3 ILRA 1245
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2012-10-19
- **Case number:** Civil Misc. Writ Petition No. 2922 of 2000
- **Bench:** B. Amit Sthalekar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-sachan-nursing-home-another-v-regional-p-f-commissioner-and-another-42388
- **Pages:** 5

## Headnote

Sri S.Chaturvedi
Sri Amit Daga
S.C.
Sri D.K. Pandey
Sri P.K. Pandey

Employees
Provident
Fund
Act
&
Miscellaneous
Provisions
Act-1952Section 2(f)-petitioner running nursing
home-liability of Provident Fund amount
fixed-with strength of 20 employees-out
of there 3 employees are partner of the
Firm-whether status of such partner
drawing salary became an employee or
as master?-held-even drawing salary
status partner will remain as owner and
not employee-hence in view of law laid
down by Apex Court in "Ramanuja" case
order fixing liability of contributory fundillegal, without jurisdiction.

Held: Para 18

In fact the facts of the case of Ramanuja
Match Industries are identical to the
facts of the present case, inasmuch as in
that case also the magical figure of 20 to
1246 INDIAN LAW REPORTS ALLAHABAD SERIES [2012
bring the partnership firm within the
ambit of the Employees State Insurance
Act, could be arrived at only if the three
partners of the firm were treated as
employees and added to the employees'
strength as observed by the Supreme
Court in para 2 of the Ramanuja
Judgment (supra).
Case Law discussed:
AIR 1985 SC 278; (1998) 1 SCC 86

## Text

3 All] M/S Sachan Nursing Home & another V. Regional P.F. Commissioner and another 1245

6.

The
term
"Public
Sector
Corporation" has been defined in Section
3(p) of Act, 1972 and reads as under:

"(p)
"Public
sector
corporation"
means any corporation owned or controlled
by the Government and includes any
company as defined in Section 3 of the
Companies Act, 1956, in which not less
than fifty percent of the paid up share
capital is held by the Government."

7. Admittedly petitioner's Cooperative
Society is not a Company registered under
Companies Act, 1956. In order to qualify to
be a Corporation owned or controlled by
Government there is not even a whisper in
the entire writ petition that petitioner's
Cooperative
Society
satisfy
the
said
requirement.

8. In para 3 of objection filed by
petitioner before RCEO (Annexure-3 to the
writ petition) it has only said that petitioner
is a Central Cooperative Store, deals with
commercial transactions with consumers
and is a commercial establishment. It
nowhere even mention that it is controlled
or owned by Government in any manner.
On the contrary, learned counsel for the
petitioner, during the course of argument,
states that members of Cooperative Society
are individuals. In these circumstances, the
order impugned in the writ petition cannot
be faulted and it cannot be said that
petitioner-Cooperative Society satisfies the
requirement
of
exempted
categories
mentioned in Section 21(8) of Act, 1972.

9. The writ petition is lacks merit. It is
accordingly dismissed with cost of Rs.
10,000/-.
---------

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 19.10.2012

BEFORE
THE HON'BLE B. AMIT STHALEKAR, J.

Civil Misc. Writ Petition No. 2922 of 2000

M/S Sachan Nursing Home & another

 ...Petitioner
Versus
Regional P.F. Commissioner and another

 ...Respondents

Counsel for the Petitioner:
SriD.P.Singh
Sri Siddharth Singh
Sri Ravindra Kumar Jaiswal
Sri Naveen Sinha
Sri Devesh Rathore

Counsel for the Respondents:
Sri S.Chaturvedi
Sri Amit Daga
S.C.
Sri D.K. Pandey
Sri P.K. Pandey

Employees
Provident
Fund
Act
&
Miscellaneous
Provisions
Act-1952Section 2(f)-petitioner running nursing
home-liability of Provident Fund amount
fixed-with strength of 20 employees-out
of there 3 employees are partner of the
Firm-whether status of such partner
drawing salary became an employee or
as master?-held-even drawing salary
status partner will remain as owner and
not employee-hence in view of law laid
down by Apex Court in "Ramanuja" case
order fixing liability of contributory fundillegal, without jurisdiction.

Held: Para 18

In fact the facts of the case of Ramanuja
Match Industries are identical to the
facts of the present case, inasmuch as in
that case also the magical figure of 20 to
1246 INDIAN LAW REPORTS ALLAHABAD SERIES [2012
bring the partnership firm within the
ambit of the Employees State Insurance
Act, could be arrived at only if the three
partners of the firm were treated as
employees and added to the employees'
strength as observed by the Supreme
Court in para 2 of the Ramanuja
Judgment (supra).
Case Law discussed:
AIR 1985 SC 278; (1998) 1 SCC 86

(Delivered by Hon'ble B. Amit Sthalekar, J.)

1. By this writ petition, the petitioners
are
challenging
the
order
dated
25/26.10.1999, passed by the Regional
Provident Fund Commissioner, Varanasi.

2. The facts of the case, in brief, are
that the petitioner is a nursing home and is
functioning as a partnership firm. It was
established as a clinic in 1984, and
thereafter converted into a nursing home. In
Para 6 of the writ petition it is stated that the
required strength at any given point of time
is not more than 14-15 regular employees
including
doctors,
nurses,
sweeper,
chaukidar and accountant; sometimes even
substitutes as casual labour are engaged. On
31.8.1996, at about 4 P.M,. 5 officials of the
Employees Provident Fund Department
came and inspected the attendance register
and the petitioner no.2 was asked to fill up a
form which was done by him. The
contention is that by the impugned order
dated 25/26.10.1999, a liability of an
amount of Rs. 1,04,022/- has been fastened
upon
the
petitioners'
firm
towards
employees provident fund.

3. Hence the present writ petition.

4. I have heard Sri Naveen Sinha,
learned senior counsel assisted by Sri
Devansh Rathor for the petitioners and Sri
D.K. Pandey for the respondents.

5. The submission of Sri Naveen
Sinha is that at any given point of time the
employees in the petitioners' firm has never
exceeded 20, and therefore, The Employees'
Provident
Fund
and
Miscellaneous
Provisions Act, 1952 was not applicable to
the petitioner. He has particularly referred to
para 4 of the impugned order, wherein, the
findings have been recorded by the
respondents that as per records on
17.8.1996, the employees' strength was 17
but since there were three partners, namely
Sri R.C. Sachan, Sri V.P. Sachan and Smt.
Reeta
Sachan,
therefore,
the
total
employees' strength comes to 20 by
including the partners as employees of the
petitioners' firm.

6. He has referred to the provisions of
Section 1, subsection (3) clause (b) of the
Employees'
Provident
Funds
and
Miscellaneous Provisions Act, 1952 which
read as follows:-

"1.

Short
title,
extent
and
application.-[(1) This Act may be called the
Employees'
Provident
Funds
and
Miscellaneous Provisions Act, 1952.]

(2).............

[(3) Subject to the provisions
contained in section 16, it applies-

(a).............

(b) to any other establishment
employing [twenty] or more persons or
class of such establishments which the
Central Government may, by notification in
the Official Gazette, specify in this behalf:

Provided that the Central Government
may, after giving not less than two months'
notice of its intention so to do, by
3 All] M/S Sachan Nursing Home & another V. Regional P.F. Commissioner and another 1247
notification in the official Gazette, apply the
provisions of this Act to any establishment
employing such number of persons less than
[twenty] as may be specified in the
notification]."

7. The submission of the learned
counsel for the petitioners is that the
partners of a firm are the owners of the
partnership firm and a partnership firm
unlike a Company does not have a separate
legal entity, and therefore, the partners of
the firm cannot be treated to be the
employees of the partnership firm.

8. The term "Employee" is defined in
Section 2(f) of the Act, 1952 and means:-

"2. Definitions.- In this Act, unless the
context otherwise requires,-

[(a)........................

(b)........................

(c)........................

(d)........................

(e)........................

(f) "employee" means any person who
is employed for wages in any kind of work,
manual or otherwise, in or in connection
with the work of [an establishment], and
who gets, his wages directly or indirectly
from the employer, [and includes any
person,-

(I) employed by or through a
contractor in or in connection with the work
of the establishment;

(ii) engaged as an apprentice, not
being an apprentice engaged under the
Apprentices Act, 1961 (52 of 1961), or
under
the
standing
orders
of
the
establishment;]"

9. Reference has been made to a
decision of the Supreme Court, reported in,
AIR 1985 SC 278 (Regional Director,
Employees State Insurance Company
Versus Ramanuja Match Industries),
wherein, it has been held that liability to pay
employees provident fund contribution
arises only when 20 or more employees are
engaged.

10. The facts of the case are more or
less identical to the facts of the present case.
In the case before the Supreme Court also
the employees' strength was 17 and in para
2 of the judgment the Supreme Court has
held that unless the three partners are
included, the basic number of 20 is not
reached and no liability under the Act
accrues.

11. The question as to whether the
partners of a firm can be said to be
employees of the firm so as to attract the
provisions
of
the
Employees
State
Insurance Act or not has been discussed in
para 4 of the said judgment which reads as
follows:

"4. It is appropriate that at this stage
we refer to the position of a partner qua the
firm. Section 4 of the Partnership Act, 1932
defines 'partnership' and one of the
essential requisites of a partner ship is that
there must be mutual agency between the
partners. A Full Bench of the Patna High
Court in Seth Hira Lal & Anr. v. A Sheikh
Jamaluddin, 221 rightly emphasised upon
the position that an important element in the
definition of partnership is that it must be
carried on by all or any one of the partners
acting for all. Section 18 of the Partnership
1248 INDIAN LAW REPORTS ALLAHABAD SERIES [2012
Act statutorily declares every partner to be
an agent of the firm for the purposes of the
business of the firm and Section 19 states
that an act of a partner which is done to
carry on, in the usual way, business of the
kind carried on by the firm, binds the firm.
A partnership firm is not a legal entity. This
Court in Champaran Cane Concern v. State
of Bihar, pointed out that in a partnership
each partner acts an agent of the other. The
position of a partner qua the firm is thus not
that of a master and a servant or employee
which concept involves an element of
subordination but that of equality. The
partnership business belongs to the partners
and each one of them is an owner thereof.
In common parlance the status of a partner
qua the firm is thus different from
employees working under the firm, it may
be that a partner is being paid some
remuneration for any special attention
which he devotes but that would not involve
any change of status and bring him within
the definition of employee."

12. Thus on a reading of para 4, it is
beyond doubt that a partnership firm is not a
legal entity and even if some remuneration
is being paid to the partners that would not
involve any change of status and bring him
within the definition of an employee.

13. Reference has also been made to a
decision of the Supreme Court reported in
(1998) 1 SCC 86 (Employees' State
Insurance Corporation Versus Apex
Engineering Pvt Ltd.)

14. In that case the respondent was a
Company registered under the Companies
Act, 1956 and reliance was placed before
the Supreme Court on the case of Ramanuja
Match Industries judgment (supra) in
support
of
the
contention
that
the
Directors/Managing
Directors
of
the
Company were not an employee of the
company.

15. Repelling the contention of the
respondent company in that case the
Supreme Court reiterated and reaffirmed its
judgment in the case of Ramanuja Match
Industries (supra) and in para 9 of the said
judgment held that the position of a partner
qua afirm is not that of a master and servant
or an employer and employee. The
partnership business belongs to the partners
and each one of them is an owner thereof.
Para 9 of the said judgment reads as
follows:

"9. The aforesaid decision of this
Court clearly rules that the Managing
Director while acting as such can have dual
capacity both as Managing Director on the
one hand and as servant or employees of
the company on the other. The Division
Bench in the impugned judgment with
respect was in error in bypassing the ratio
of the aforesaid decision of this Court by
observing that it was a judgment rendered
under the Income Tax Act and, therefore, it
had no bearing on the scheme of the present
Act. We also find that the Division Bench
was equally in error when it placed reliance
for its decision on the judgment of this court
in the case of Regional Director ESI
Corporation v. Ramanuja Match Industries.
In the said decision a Bench of two learned
Judges of this Court held that a partner of a
firm receiving salary is not an employee
within the meaning of Section 2 sub-section
(9) of the Act. Ranganath Misra, J. (as he
then was), speaking for this court held that
the partners cannot be held employees of
the partnership firm. A partnership firm is
not a legal entity and in a partnership firm
each partner acts as an agent of the other.
The position of a partner qua the firm is
thus not that of a master and a servant or
3 All] S.K. Agarwal V. Centarl Bureau of Investigation Delhi
1249
employer and employee which concept
involved an element of subordination and
not that of equality. The partnership
business belongs to the partners and each
one of them is an owner thereof. In common
parlance the status of a partner qua the firm
is thus different from employees working
under the firm. It may be that a partner is
being paid some remuneration for any
special attention which he devotes but that
would not involve any change of status and
bring
him
within
the
definition
of
employee."

16. Sri D.K. Pandey, learned counsel
for the respondents on the other hand
submitted that from the records, it will be
seen that the three partners of the
petitioners' firm had drawn salary, and
therefore, they would fall within the
definition of the term 'employee', as defined
in Section 2(f) of the Act, 1952 and
therefore, there was no illegality or infirmity
in the impugned order dated 25/26.10.1999.

17.

Having
considered
the
submissions of the learned counsel for the
parties with reference to the provisions of
the Act, 952 quoted above and the two
judgments of the Supreme Court referred to
by the learned counsel for the petitioners,
there is absolutely no doubt that even if a
partner or partners of the firm draw some
remuneration from the partnership firm that
would not convert their status from that of
owner to an employee of the partnership
firm. A partner/partners of a partnership
firm is the owner of the firm and there is no
relationship of master and servant or
employer and employee between him and
the partnership firm has held in the
Ramanuja Match Industries (supra).

18. In fact the facts of the case of
Ramanuja Match Industries are identical to
the facts of the present case, inasmuch as
in that case also the magical figure of 20
to bring the partnership firm within the
ambit of the Employees State Insurance
Act, could be arrived at only if the three
partners of the firm were treated as
employees and added to the employees'
strength as observed by the Supreme
Court in para 2 of the Ramanuja
Judgment (supra).

19. In view of the above discussion
and the facts of the present case, and the law
settled by the Supreme Court the impugned
order dated 25.10.1999 is absolutely illegal
and without jurisdiction and is accordingly
quashed.

20. The writ petition is allowed. There
shall be no order as to cost.
---------
APPELLATE JURISDICTION
CRIMINAL SIDE
DATED: ALLAHABAD 19.10.2012

BEFORE
THE HON'BLE ASHOK SRIVASTAVA, J.

Criminal Appeal No. - 3871 Of 2012

S.K. Agarwal

 ...Appellant
Versus
Centarl Bureau of Investigation Delhi

 ...Opposite Party

Counsel for the Petitioner:
Sri Rajiv Gupta
Sri Dileep Kumar
Sri Rajrshi Gupta
Sri Shristi Gupta

Counsel for the Respondents:
A.G.A.
Sri Pranay Krishna

Prevention of Corruption Act-Section 13
(1) (d), 13 (2)-Suspension of sentenceduring
pendency
of
appeal
against