# M/S. SHREE VISHAL PRINTERS LTD., JAIPUR v. REGIONAL PROVIDENT FUND COMMISSIONER, JAIPUR & ANR

- **Citation:** [2019] 12 S.C.R. 146
- **Court:** Supreme Court of India
- **Decided:** 2019-09-12
- **Case number:** Civil Appeal No.4474 of 2010
- **Bench:** Sanjay Kishan Kaul, K. M. Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-shree-vishal-printers-ltd-jaipur-v-regional-provident-fund-commissioner-33141
- **Pages:** 20

## Headnote

Employees' Provident Funds and Miscellaneous Provisions
Act, 1952:
ss. 16, 7A - Act not to apply to certain establishments - On
facts, three establishments sought exemption u/s. 16(1)(d) that the
Act will not apply to their establishments - Order by the Regional
Provident Fund Commissioner that establishments not entitled to
exemption on the ground that they are effectively part of the same
parent establishment - Said order upheld by the Appellate tribunal
as also Single Judge and the Division Bench of the High Court -
On appeal, held: Findings qua all the three establishment satisfy
the functional integrality and the general unity of purpose test, and
the same are met in the facts of the instant case - They may be
different legal entities, an arrangement may have been made to have
different directors and shareholders, but the nature of control and
integrality of functionality, between the three entities is quite
apparent from the facts set out - Each one of the facts by itself may
not be conclusive, but taken as a whole, the conclusion arrived at
by the Regional Provident Fund Commissioner is upheld -
Furthermore, exact amount of liability of each of the establishments
is to be determined and would be co-extensive with the parent
company - Costs is imposed on all the three establishments, but of
varying amounts - Industrial Disputes Act, 1947 - s. 2A.
Nature of - Exemption from the aegis of Act - Object of -
Held: Act is a beneficial legislation - Object of excluding the infancy
period of five years which was later reduced to three years from the
rigours of the Act, was only to provide to new establishments, a
period to establish their business, and not to permit different kinds
of routes to be created to evade the liability under the Act.
 [2019] 12 S.C.R. 146
146
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Dismissing the appeals, the Court
HELD: 1.1 Civil Appeal No.4475/2010 is by BCCL, Jaipur,
which is not a separate legal entity but was really claimed to be
an establishment of the parent company, albeit set up in Jaipur.
The counsels appearing for the appellants were of the belief that
it was facts of this case which had caused confusion in the mind of
the Regional Provident Fund Commissioner as, in their
perspective, exemption could not have been really sought within
the provisions of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952. This is so, as BCCL, Jaipur
was not a separate legal entity, but, part of the parent company
directly. The case would, thus, be fully covered by the provisions
of Section 2A of the said Act and mere location of departments
and branches in other cities would not have extended the benefit
of the exemption to this company. [Para 4, 11][153-B; 157-C-D]
1.2 As regards Civil Appeal No. 4476/2010, the agreement
dated 25.7.1986 between the two parties, which gave rise to the
Provident Fund Commissioner to initiate proceedings, was in
supersession of an earlier agreement dated 13.12.1985. The
business reason stated for entering into this agreement was the
commencement of publication of the Jaipur edition of the daily
newspapers of BCCL, Mumbai, i.e., The Times of India and
Navbharat Times. The agreement records that TPHL had opened
an office in Jaipur, where it had equipped itself with trained and
experienced staff and all infrastructural, secretarial,
administrative and marketing facilities. Since 23.9.1985, it had
been providing various services to BCCL, Mumbai, including
office space for use and occupation, accounting facilities,
stenographers, typing, and so on. The services which were now
further sought to be provided to BCCL, Mumbai included
marketing, development work, realisation of dues, adequate office
space, accounting facilities, infrastructure, packing/bundling of
daily newspapers (at the cost of BCCL, Mumbai), etc. BCCL,
Mumbai was to pay to TPHL an amount calculated @ 5% as
commissions on Net Advertisement Revenue and Net Circulation
Revenue. [Para 12, 13, 14][157-E-H; 158-A, D]
M/S. SHR

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M/S. SHREE VISHAL PRINTERS LTD., JAIPUR
V.
REGIONAL PROVIDENT FUND COMMISSIONER, JAIPUR
& ANR.
(Civil Appeal No.4474 of 2010)
SEPTEMBER 12, 2019
[SANJAY KISHAN KAUL AND K. M. JOSEPH, JJ]
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952:
ss. 16, 7A - Act not to apply to certain establishments - On
facts, three establishments sought exemption u/s. 16(1)(d) that the
Act will not apply to their establishments - Order by the Regional
Provident Fund Commissioner that establishments not entitled to
exemption on the ground that they are effectively part of the same
parent establishment - Said order upheld by the Appellate tribunal
as also Single Judge and the Division Bench of the High Court -
On appeal, held: Findings qua all the three establishment satisfy
the functional integrality and the general unity of purpose test, and
the same are met in the facts of the instant case - They may be
different legal entities, an arrangement may have been made to have
different directors and shareholders, but the nature of control and
integrality of functionality, between the three entities is quite
apparent from the facts set out - Each one of the facts by itself may
not be conclusive, but taken as a whole, the conclusion arrived at
by the Regional Provident Fund Commissioner is upheld -
Furthermore, exact amount of liability of each of the establishments
is to be determined and would be co-extensive with the parent
company - Costs is imposed on all the three establishments, but of
varying amounts - Industrial Disputes Act, 1947 - s. 2A.
Nature of - Exemption from the aegis of Act - Object of -
Held: Act is a beneficial legislation - Object of excluding the infancy
period of five years which was later reduced to three years from the
rigours of the Act, was only to provide to new establishments, a
period to establish their business, and not to permit different kinds
of routes to be created to evade the liability under the Act.
 [2019] 12 S.C.R. 146
146
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Dismissing the appeals, the Court
HELD: 1.1 Civil Appeal No.4475/2010 is by BCCL, Jaipur,
which is not a separate legal entity but was really claimed to be
an establishment of the parent company, albeit set up in Jaipur.
The counsels appearing for the appellants were of the belief that
it was facts of this case which had caused confusion in the mind of
the Regional Provident Fund Commissioner as, in their
perspective, exemption could not have been really sought within
the provisions of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952. This is so, as BCCL, Jaipur
was not a separate legal entity, but, part of the parent company
directly. The case would, thus, be fully covered by the provisions
of Section 2A of the said Act and mere location of departments
and branches in other cities would not have extended the benefit
of the exemption to this company. [Para 4, 11][153-B; 157-C-D]
1.2 As regards Civil Appeal No. 4476/2010, the agreement
dated 25.7.1986 between the two parties, which gave rise to the
Provident Fund Commissioner to initiate proceedings, was in
supersession of an earlier agreement dated 13.12.1985. The
business reason stated for entering into this agreement was the
commencement of publication of the Jaipur edition of the daily
newspapers of BCCL, Mumbai, i.e., The Times of India and
Navbharat Times. The agreement records that TPHL had opened
an office in Jaipur, where it had equipped itself with trained and
experienced staff and all infrastructural, secretarial,
administrative and marketing facilities. Since 23.9.1985, it had
been providing various services to BCCL, Mumbai, including
office space for use and occupation, accounting facilities,
stenographers, typing, and so on. The services which were now
further sought to be provided to BCCL, Mumbai included
marketing, development work, realisation of dues, adequate office
space, accounting facilities, infrastructure, packing/bundling of
daily newspapers (at the cost of BCCL, Mumbai), etc. BCCL,
Mumbai was to pay to TPHL an amount calculated @ 5% as
commissions on Net Advertisement Revenue and Net Circulation
Revenue. [Para 12, 13, 14][157-E-H; 158-A, D]
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR
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1.3 Once that is conceded that BCCL, Jaipur was really
only a part of BCCL, Mumbai. The connection of the other two
establishments with BCCL, Mumbai or, for that matter, BCCL,
Jaipur would, thus, not cause an intrinsic fallacy in the order of
the RPFC. [Para 18][159-C]
1.4 In the instant case, a branch or a unit of BCCL, Mumbai
is not dealt with. Thus, a test of unity of ownership, management
and control may not really be applicable, but the test would be of
functional integrality or general unity of purpose, in the given
factual situation. There is no direct unity of employment. In any
case, it is the test of functional integrality or general unity of
purpose which would have to be applied in the present facts if
the two establishments have to be clubbed for the purposes of
the provisions of the said Act. [Para 20][159-G; 160-A]
1.5 It was submitted that the two companies were
functionally dependent. Practically all three companies were
working from the same building, albeit on different floors, and
the office of TPHL was open for the use of BCCL, Mumbai
employees. It was also sought to be contended that the Manager
of BCCL, Mumbai was signing papers relating to TPHL and
notices relating to the closure of offices of the two on
Mahashivratri and Holi. However, a perusal of the documents in
question shows that they were really endorsements to TPHL,
which would be natural considering that there would be no
requirement of work to be sourced in case the office of BCCL,
Mumbai itself was closed, and no editing, marketing work was
required to be carried out. On the issue of security staff, since
the building was one, logically common directions were possible.
The executive of TPHL was using the letterpad of BCCL,
Mumbai. Furthermore, the nature of the agreement provided for
both the space and the staff to be made available by TPHL for the
benefit of BCCL, Mumbai. The expenses of the establishment,
electricity bill, maintenance costs, etc., were to be borne by
TPHL. If the said facts are analysed on the touchstone of
functional integrality or general unity of purpose, it is difficult, if
not impossible, to disagree with the reasoning of four forums.
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Thus there is no doubt in rejecting the case of TPHL.
[Para 22-24, 28][160-D-H; 161-A, F]
1.6 SVPL for the relevant period of time, was carrying out
exclusive work only for BCCL, Mumbai, it was pleaded that there
was no commonality of directors and shareholders of the two
companies, nor was there a cross shareholding, an aspect for
which charts have been filed. The subsequent fact was also that,
at some stage, it got merged with another company. As regards
the agreement with BCCL, Mumbai, dated 1.10.1985, BCCL,
Mumbai, having commenced publication of the Jaipur edition of
the two newspapers is stated to have approached SVPL for
printing the said newspapers on a contract basis. SVPL was to
employ the necessary personnel for carrying out various tasks
and had to print the newspapers. The remuneration was payable
by BCCL, Mumbai to SVPL at Rs.24,000/- per day, for the two
daily newspapers. The printing press was elsewhere, but the
business office of SVPL was also located in the same building as
BCCL, Jaipur, albeit stated to be at a different floor. There was
'Non-Exclusivity Clause' in the agreement between the two
parties. The emphasis was on the two companies being separate
legal entities, there being no commonality of directors or
shareholders, or direct financial control. The balance sheet and
profit and loss accounts were also separate. Another aspect
emphasized was that the printing press of SVPL was located at a
different premises from where the business was really being
carried on, though naturally, the control of the business would be
from the office located in the same premises as BCCL, Mumbai.
It is not, however, disputed that SVPL had, at its own cost, given
adequate covered area adjacent to the printing press to BCCL,
Mumbai for storing the newspaper/printing. The consideration,
which was being paid to SVPL for printing included the cost of
making available the said space for packaging and storage
operations.[Para 32, 33, 35][162-F-H; 163-A-B, D-F]
1.7 Respondent sought to emphasise the functional
dependence between the companies. The aspect of the Manager
of BCCL signing papers relating to SVPL was emphasised,
including notices of closure. The common factor, again, is of
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR
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BCCL, Mumbai issuing orders on the letter pad of SVPL. In
fact, the nature of communications and orders issued do suggest
that all three were working towards the common object of bringing
out a newspaper. The said would not have been sufficient by itself,
but for the application of the functional integrality test, which
linked them to be part of the same establishment. [Para 3637][163-F-H]
1.8 In the impugned orders, it is not very clear as to whether
the reference is being made to BCCL, Mumbai or to BCCL,
Jaipur. However, the same is not of much consequence for the
reason that BCCL, Jaipur is admittedly a branch office of BCCL,
Mumbai. In the complete conspectus of facts, after divorcing
different aspects of the three establishments, the conclusion
different from the one which has come to for TPHL cannot be
arrived at. The very nature of the working of SVPL and the other
two entities show the functional integrality test to be satisfied.
They may be different legal entities, an arrangement may have
been made to have different directors and shareholders, but the
nature of control and integrality of functionality, between the three
entities is quite apparent from the facts set out. Each one of the
facts by itself may not be conclusive, but taken as a whole, there
can be no other conclusion, than the one arrived at by the RPFC.
This is done, quite conscious of the fact that there is undoubtedly
some jumbling which has arisen in the order of the RPFC, which
has been affirmed throughout. But then, the case of the appellants
was built on the principle that all these three entities have really
no functional integrality vis-à-vis BCCL, Mumbai. As it emerged
subsequently, and was conceded before; there is little doubt that
BCCL, Jaipur is a unit of BCCL, Mumbai, and the other two
units have linkages and are controlled by BCCL, Jaipur in a
manner which would satisfy the functional integrality test.
[Para 38, 40]
1.10 The said Act being a beneficial legislation, the object
of excluding the infancy period of five years (later reduced to
three years) from the rigours of the Act, was only to provide to
new establishments, a period to establish their business, and not
to permit different kinds of routes to be created to evade the
liability under the said Act. [Para 41][164-G]
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1.11 The findings qua all the three appellants satisfy the
functional integrality and the general unity of purpose test, and
the same are met in the facts of the instant case. [Para 42]
[164-H; 165-A]
1.12 The appellants are getting away lightly on the issue of
such liability, the exact amount of which is to be determined. The
liability of each of these establishments would be co-extensive
with BCCL, Mumbai. The costs is imposed on all the three
appellants, but of varying amounts. As there was no case
whatsoever of BCCL, Jaipur, appellant in CA No. 4475/2010,
the appeal is dismissed with costs of Rs.50,000/-, while imposing
costs on the other two appellants of Rs.20,000/- each. [Para 43,
44][165-D-E]
L.N. Gadodia& Sons and Anr. v. Regional Provident
Fund Commissioner (2011) 13 SCC 517; Management
of Pratap Press, New Delhi v. Secretary, Delhi Press
Workers' Union, Delhi & Its Workmen AIR 1960 SC
1213; Associated Cement Companies Limited, Chaibassa
Cement Works, Jhinkpani v. Workmen AIR 1960 SC
56 - referred to.
Case Law Reference
(2011) 13 SCC 517
referred to
Para 1
AIR 1960 SC 1213
referred to
Para 8
AIR 1960 SC 56
referred to
Para 8
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4474
of 2010
From the Judgment and Order dated 11.04.2008 of the High
Court of Rajasthan, Jaipur Bench in D.B. Civil Special Appeal (Writ)
No. 1229 of 2007
With
Civil Appeal Nos. 4476, 4475 of 2010.
Dhruv Mehta, Jay Deep Gupta, Sr. Advs., Manish Kumar
Srivastava, Ms. Niharica Khanna, Praveen Agrawal, K. Datta, Ashish
Verma, Praveen Agarwal, Arnav Sanyal, Ms. Anandita, Keshav Mohan,
Rishi K. Awasthi, Prashant Kumar, Piyush Choudhary, Ms. Tarini Sinha,
Santosh Kumar - I, Surender Kumar Gupta, Bharat Singh, Raj Bahadur
Yadav, Arun Kumar Yadav, Advs. for the appearing parties.
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR
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The Judgment of the Court was delivered by
SANJAY KISHAN KAUL, J.
1. Welfare economics, enlightened self-interest and the pressure
of trade unions led larger factories and establishments to introduce
schemes that would benefit their employees, including schemes like that
of the provident fund.1 However, with an increasing number of small
factories and establishments coming into the market, the employees of
such fledgling units remained deprived of these benefits. In order to
diffuse such benefits in establishments across the market, the legislature
promulgated the Employees' Provident Funds and Miscellaneous
Provisions Act, 1952 (hereinafter referred to as the 'said Act'). The
said Act was enacted with the avowed object of providing for the security
of workers in organised industries, in the absence of any social security
scheme prevalent in our country. To avoid any hardship to new
establishments, a provision was made for exempting them from the aegis
of the said Act, for a period of five years. This period was reduced to
three years in 1988 and the exemption provision was completely removed
from 22.9.1997.
2. The relevant provision of the said Act is reproduced hereinunder:
"16. Act not to apply to certain establishments. - (1) This
Act shall not apply-
....
....
....
....
....
....
(d) to any other establishment newly set up, until the expiry of a
period of three years from the date on which such establishment
is, or has been, set up.
Explanation: For the removal of doubts, it is hereby declared that
an establishment shall not be deemed to be newly set up merely
by reason of a change in its location."
3. The present appeals are concerned with this exemption provision
as the three establishments in question claimed exemption in respect of
application of this provision of the said Act.
4. The three appeals filed before us are by three limited companies
(two separate legal entities and one, an establishment of the parent
1 L.N. Gadodia & Sons and Anr. v. Regional Provident Fund Commissioner, (2011) 13
SCC 517
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company), though the question of their exemption has been dealt with by
a common order of the Regional Provident Fund Commissioner, Rajasthan
(for short 'RPFC'). This is so, as all the three establishments are sought
to be denied exemption on the ground that they are effectively part of
the same parent establishment, being M/s. Bennett, Coleman & Company
Limited (for short 'BCCL'), Mumbai. Civil Appeal No. 4475/2010 is by
BCCL, Jaipur. We may note that the said Company is not a separate
legal entity but was really claimed to be an establishment of the parent
company, albeit set up in Jaipur. Civil Appeal No. 4476/2010 is by M/s.
Times Publishing House Limited, Jaipur (for short 'TPHL, Jaipur') while
Civil Appeal No. 4474/2010 is by M/s. Shree Vishal Printers Limited,
Jaipur (for short 'SVPL, Jaipur').
5. Before we proceed with the factual matrix as to how the
controversy arose, it would be appropriate to examine the contours within
which this aspect would have to be examined. It would be appropriate to
take note of another provision, Section 2A of the said Act, which was
inserted by Act 46 of 1960, w.e.f. 31.12.1960. We may note that there is
no definition of an "establishment" under the said Act, and thus, the
jurisprudence that developed resorted to the provisions of the Industrial
Disputes Act, 1947 (for short 'ID Act') for the said purpose. Section 2A
of the said Act reads as under:
"2A. 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 situate in the same place or in different places, all such
departments or branches shall be treated as parts of the same
establishment."
6. The aforesaid provision was introduced so as to obviate the
chances of creation of different departments and branches by an
establishment and then seek exemptions on the basis of the same being
new establishments.
7. There is really no dispute on the jurisprudential aspect, as all
the learned counsels for the parties, i.e., Mr. Joydeep Gupta, learned
senior counsel in Civil Appeal Nos. 4475/2010 and 4476/2010 and Mr.
Dhruv Mehta, learned senior advocate in Civil Appeal No. 4474/2010,
as well as the counsel for the Department, Mr. Keshav Mohan, Advocate
have relied upon the same set of judicial pronouncements. To put the
legal perspective at the threshold would, thus, be appropriate.
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR [SANJAY KISHAN KAUL, J.]
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8. The first judgment is in Management of Pratap Press, New
Delhi v. Secretary, Delhi Press Workers' Union, Delhi & Its
Workmen2. The dispute was one under the ID Act and also dealt with
the publication of a newspaper as in the present case. Pratap Press was
sought to be treated as part of the same industrial unit as Vir Arjun and
Daily Pratap. The tests are taken from an earlier judgment, in Associated
Cement Companies Limited, Chaibassa Cement Works, Jhinkpani
v. Workmen3, and it was observed in para 5 as under:
"5. In Associated Cement Co., Ltd. v. Workmen, this Court had
to consider the question whether the employer's defence to a
claim for lay-off compensation by the workers of the Chaibasa
Cement Works that the laying off was due to a strike in another
part of the establishment, viz., limestone quarry at Rajanka was
good. In other words the question was whether the limestone
quarry of Rajanka formed part of the establishment known as the
Chaibasa Cement Works within the meaning of Section 25E(iii)
of the Industrial Disputes Act. While pointing out that it was
impossible to lay down any one test as an absolute and invariable
test for all cases it observed that the real purpose of these tests
would be to find out the true relation between the parts, branches,
units etc. This court however mentioned certain tests which might
be useful in deciding whether two units form part of the same
establishment. Unity of ownership, unity of management and
control, unity of finance and unity of labour, unity of employment
and unity of functional "integrality" were the tests which the Court
applied in that case. It is obvious there is an essential difference
between the question whether the two units form part of one
establishment for the purposes of Section 25E(iii) and the question
whether they form part of one single industry for the purposes of
calculation of the surplus profits for distribution of bonus to
workmen in one of the units. Some assistance can still nevertheless
be obtained from the enumeration of the tests in that case. Of all
these tests the most important appears to us to be that of functional
"integrality" and the question of unity of finance and employment
and of labour. Unity of ownership exists ex hypothesi. Where two
units belong to a proprietor there is almost always likelihood also
of unity of management. In all such cases therefore the Court has
2 AIR 1960 SC 1213
3 AIR 1960 SC 56
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to consider with care how far there is "functional integrality"
meaning thereby such functional interdependence that one unit
cannot exist conveniently and reasonably without the other and
on the further question whether in matters of finance and
employment the employer has actually kept the two units distinct
or integrated."
9. The second judgment relied upon for this purpose is in L.N.
Gadodia & Sons and Anr. v. Regional Provident Fund
Commissioner4. This case dealt with the said Act and the question which
arose was whether two sister concerns, having different dates of
incorporation, could be treated as two separate establishments. The
judgments in Associated Cement Companies Limited5 and
Management of Pratap Press, New Delhi6 were referred to for the
said purpose. In para 16 of this case, the observations qua the Associated
Cement Companies7 in para 11, insofar as relevant is extracted as under:
"...11. ... What then is 'one establishment' in the ordinary
industrial or business sense? ... It is, perhaps, impossible to lay
down any one test as an absolute and invariable test for all cases.
The real purpose of these tests is to find out the true relation
between the parts, branches, units, etc. If in their true relation
they constitute one integrated whole, we say that the establishment
is one; if on the contrary they do not constitute one integrated
whole, each unit is then a separate unit. How the relation between
the units will be judged must depend on the facts proved, having
regard to the scheme and object of the statute which gives the
right of unemployment compensation and also prescribes a
disqualification therefor. Thus, in one case the unity of ownership,
management and control may be the important test; in another
case functional integrality or general unity may be the important
test; and in still another case, the important test may be the unity
of employment. Indeed, in a large number of cases several tests
may fall for consideration at the same time. The difficulty of
applying these tests arises because of the complexities of modern
industrial organization; many enterprises may have functional
4 (2011) 13 SCC 517
5 (supra)
6 (supra)
7 (supra)
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR [SANJAY KISHAN KAUL, J.]
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integrality between factories which are separately owned; some
may be integrated in part with units or factories having the same
ownership and in part with factories or plants which are
independently owned."
10. Thereafter, while discussing some subsequent judgments, the
following observations were made:
"18. Accordingly, depending upon the facts of the particular case,
in some cases the units concerned were held to be the part of
one establishment whereas, in some other cases they were held
not to be so. Regl. Provident Fund Commr. v.. Dharamsi Morarji
Chemical Co. Ltd. reported in [(1998) 2 SCC 446] and Regl.
Provident Fund Commr. v. Raj's Continental Exports (P) Ltd.
reported in [(2007) 4 SCC 239] are cases where the two units
were held to be independent. In Dharamsi Morarji (supra), the
appellant company was running a factory manufacturing fertilizers
at Ambarnath in District Thane, Maharashtra since 1921. The
appellant established another factory at Roha in the adjoining
district in the year 1977 to manufacture organic chemicals with
separate set of workers, separate profit and loss account, separate
works manager, plant superintendents and separate registration
under the Factories Act. The two were held to be separate for
the purposes of coverage under the Provident Funds Act. In Raj's
Continental Export (supra), Dharamsi Morarji was followed
since the two entities had separate registration under the Factories
Act, 1948, Central Sales Tax Act, 1956, Income Tax Act, 1961,
Employees' State Insurance Act, 1948 separate balance sheets
and audited statements and separate employees working under
them.
19. As against that in Rajasthan Prem Krishan Goods Transport
Co.v. Regl. Provident Fund Commr. reported in [(1996) 9 SCC
454] and Regl. Provident Fund Commr., v. Naraini Udyog
reported in [(1996) 5 SCC 522] the concerned units were held to
be the units of the same establishment. In Rajasthan Prem
Krishan Goods Transport Co. (supra) the trucks plied by the
two entities were owned by their partners, ten out of thirteen
partners were common, the place of business was common, the
management was common, the letter-heads bore the same
telephone numbers. In Naraini Udyog (supra) the two entities
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were located within a distance of three kilometers as separate
small-scale industries but were represented by the members of
the same Hindu Undivided Family. They had a common head office
at New Delhi, common branch at Bombay and common telephone
at Kota. The accounts of the two entities were maintained by the
same set of clerks. Separate registration under the Factories Act,
the Sales Tax Act and the ESI Act were held to be of no relevance
and the two units were held to be one establishment for the purpose
of the Provident Funds Act."
11. Now turning to the facts of the cases before us, we may note
at the inception itself, Civil Appeal No.4475/2010 was not really argued
before us. In fact, the impression we got was that the counsels appearing
for the appellants were of the belief that it was facts of this case which
had caused confusion in the mind of the RPFC as, in their perspective,
exemption could not have been really sought within the provisions of the
said Act in this case. This is so, as BCCL, Jaipur was not a separate
legal entity, but, part of the parent company directly. The case would,
thus, be fully covered by the provisions of Section 2A of the said Act and
mere location of departments and branches in other cities would not
have extended the benefit of the exemption to this company. Thus, this
appeal, in any case, has to fail.
12. Insofar as Civil Appeal No. 4476/2010 is concerned, learned
senior counsel sought to refer to the provisions of the agreement in
question, between the two parties, which gave rise to the Provident Fund
Commissioner to initiate proceedings. This agreement is dated 25.7.1986.
It appears that this agreement was in supersession of an earlier agreement
dated 13.12.1985. The business reason stated for entering into this
agreement was the commencement of publication of the Jaipur edition
of the daily newspapers of BCCL, Mumbai, i.e., The Times of India and
Navbharat Times.
13. The agreement records that TPHL had opened an office at 89, Anupam Chambers, Tonk Road, Jaipur, where it had equipped itself
with trained and experienced staff and all infrastructural, secretarial,
administrative and marketing facilities. Since 23.9.1985, it had been
providing various services to BCCL, Mumbai, including office space for
use and occupation, accounting facilities, stenographers, typing, and so
on. The services which were now further sought to be provided to BCCL,
Mumbai included marketing, development work, realisation of dues,
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR [SANJAY KISHAN KAUL, J.]
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adequate office space, accounting facilities, infrastructure, packing/
bundling of daily newspapers (at the cost of BCCL, Mumbai), etc. Clause
1(g) of the agreement states as under:
"1. "TPH" shall render the following services effective from 1st
August, 1986 to "Bennett":-
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(g) All staff employed by "TPH" will carry out the instructions
given by "Bennett" and in case of working problems; "TPH" shall
at the request of "Bennett" remove the problems. The staff
employed by TPH shall not be considered as employees of
"Bennett" but they will remain the staff of "TPH" and "TPH"
shall be responsible to the employees."
14. BCCL, Mumbai was to pay to TPHL an amount calculated
@ 5% as commissions on Net Advertisement Revenue and Net
Circulation Revenue.
15. On all the three establishments being called upon to comply
with the provisions of the said Act, all three of them sought exemption
under Section 16(1)(d) of the said Act. In view thereof, the RPFC initiated
proceedings under the said Act, and issued a notice under Section 7A of
the said Act, dated 28.10.1987. The proceedings were held thereafter,
and the RPFC passed a common order in respect of all the three
establishments on 4.10.1990 opining that they were not entitled to the
exemption. The appeal filed before the Employees' Provident Fund
Appellate Tribunal by all the three establishments also failed, as it was
dismissed on 10.10.1997. The same fate befell all three in the proceedings
before the learned Single Judge, vide order dated 20.12.2006 and the
Division Bench of the High Court, on 11.4.2008. Thus, practically four
forums have scrutinised the cases qua all these three establishments.
16. The learned senior counsel, Mr. Joydeep Gupta, appearing for
TPHL, however, contended that the fallacy which came in the order of
the RPFC was of jumbling of the facts in issue, relating to the three
establishments, and thereafter, there has really been no scrutiny before
any of the forums, other than giving their imprimatur to the said order.
In fact, the High Court effectively refused to look into the matter as two
forums had already gone into that aspect.
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17. Learned senior counsel for the appellant, TPHL, sought to
take us through the order of the RPFC, Rajasthan, as according to him,
that was the material order to show that from the inception, there was a
problem arising from the manner in which the facts relating to the three
establishments were mixed up. He contended that each of these
establishments were required to be connected to BCCL, Mumbai, and,
it was not a case which could have been built on with connectivity with
BCCL, Jaipur, as was sought to be done.
18. We may note at this stage itself that though, in principle, there
can be no dispute on this proposition, it does not really appeal to us for
the reason that it was intrinsically predicated on the ground that BCCL,
Jaipur was a different establishment. Once that is conceded as not so,
BCCL, Jaipur was really only a part of BCCL, Mumbai. The connection
of the other two establishments with BCCL, Mumbai or, for that matter,
BCCL, Jaipur would, thus, not cause an intrinsic fallacy in the order of
the RPFC.
19. Learned senior counsel sought to emphasise the distinctive
features why it could not be said that there was any direct connect
between the two establishments, i.e. BCCL, Jaipur and TPHL. A great
emphasis was laid on the facts that these are two separate registered
companies, under the then Companies Act, 1956, that there is no
commonality of directors or shareholders and no direct financial unity.
The balance sheet as well as profit and loss accounts are separate, and
there were varying figures of independent and separate employees of
the two entities, with there being no transfer of employees inter se BCCL,
Mumbai and TPHL or, for that matter, between BCCL, Jaipur and TPHL.
20. If the aforesaid factual matrix is analysed within the principles
of what would constitute one establishment, as set out in the Associated
Cement Company case,8 it is obvious that there are various parameters
dependent on the factual matrix of each case, which have to be examined.
Undoubtedly we are not dealing, in this case, with a branch or a unit of
BCCL, Mumbai. Thus, a test of unity of ownership, management and
control may not really be applicable, but the test would be of functional
integrality or general unity of purpose, in the given factual situation. There
is no direct unity of employment. In any case, it is the test of functional
8 AIR 1960 SC 56
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR [SANJAY KISHAN KAUL, J.]
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integrality or general unity of purpose which would have to be applied in
the present facts if the two establishments have to be clubbed for the
purposes of the provisions of the said Act.
21. We may note that one of the arguments of learned senior
counsel for the appellant was based on the business model of outsourcing
and it was sought to be suggested that if one aspect of work is outsourced
to another company, the same would not satisfy the aforesaid tests.
However, we did point out to the learned senior counsel that the business
model of outsourcing really does not have history that old or was not
much prevalent in respect of the time period which we are discussing;
but it is a relatively later phenomenon and, thus, that principle would not
really be applicable for testing the nature of linkage, if any, for the time
with which we are concerned.
22. Learned counsel for the respondent sought to emphasise that
the two companies were functionally dependent. In fact, what was
pointed out was that practically all three companies were working from
the same building, albeit on different floors, and the office of TPHL was
open for the use of BCCL, Mumbai employees. It was also sought to be
contended that Mr. Sunil Gupta, Manager of BCCL, Mumbai was signing
papers relating to TPHL and the examples given of the same are notices
relating to the closure of offices of the two on Mahashivratri and Holi.
However, a perusal of the documents in question shows that they were
really endorsements to TPHL, which would be natural considering that
there would be no requirement of work to be sourced in case the office
of BCCL, Mumbai itself was closed, and no editing, marketing work
was required to be carried out. Similarly, on the issue of security staff,
since the building was one, once again, logically common directions were
possible. However, what is also emphasised is that the executive of
TPHL was using the letterpad of BCCL, Mumbai.
23. The important aspect, in our view, which was emphasised by
learned counsel for the respondent was the nature of the agreement
which provided for both the space and the staff to be made available by
TPHL for the benefit of BCCL, Mumbai. The expenses of the
establishment, for example, electricity bill, maintenance costs, etc., were
to be borne by TPHL.
24. If we analyse the aforesaid facts on the touchstone of functional
integrality or general unity of purpose, it is difficult, if not impossible, to
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disagree with the reasoning of four forums, which are sought to be assailed
before us.
25. Learned counsel for the appellant sought to rely upon the
judgment in the Management of Pratap Press case9 to contend that in
the case of similar facts, it was held to the contrary, and the units were
held to be distinct establishments. An examination of the said judgment
would show that though they were all in the same nature of business, the
functions of the press and the newspaper were held not so interdependent
that one could not exist without the other. The activities of the press unit
were found to be independent of the activities of the paper unit, and the
view of the Tribunal, that they are two distinct and separate industrial
units was not found worthy of interference.
26. The aforesaid judgment had emphasized the most important
test to be that of functional integrality and opined that unity of ownership
exists ex hypothesi.
27. We are, however, not able to persuade ourselves to agree
with the submission of the learned senior counsel for the appellant for
the reason that what has effectively been done in the present case,
under the agreement in question, is that TPHL has handed over its office
space, employees and control to BCCL, Mumbai, for all practical purposes,
to the extent that the letter pads are also being used without any due
regard as to which entity the instructions are being issued from. This is
not a case of a singular document being issued, but a number of documents
where this practice has been followed. Just to make an endeavour on
paper to somehow keep these two segregated for various labour law
ramifications would not be an appropriate principle to accept, more so
taking into consideration the very purpose for which the said Act was
enacted.
28. We have, thus, no doubt in rejecting even the case of TPHL.
29. Now turning to Civil Appeal No. 4474/2010 of SVPL, Mr.
Dhruv Mehta, learned senior counsel, while adopting the arguments of
Mr. Joydeep Gupta, learned senior counsel, sought to emphasise the
same, possibly in a different perspective.
30. Learned senior counsel contended that since an "establishment"
was not defined under the provisions of the said Act, as noticed above,
9 (supra)
M/S. SHREE VISHAL PRINTERS LTD., JAIPUR V. REGIONAL PROVIDENT
FUND COMMISSIONER, JAIPUR [SANJAY KISHAN KAUL, J.]
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the provisions of the ID Act were resorted to for the said purpose. In the
context of the approach adopted both, by the learned single Judge, and
the Division Bench of the High Court, it was contended that they ought
not to have merely rejected the petitions on a broad principle of nonrequirement of the relevant facts being looked into, the same having
been dealt with by the RPFC and the appellate authority. It is in this
context that he invited our attention to the judgment in the case of
Associated Cement Company10, more specifically to paras 9 and 11.
The issue of the Industrial Tribunal under the ID Act, being a final court
of facts, was debated in the context of Section 25-E(iii) of the ID Act
while referring to the expression "in another part of the establishment."
In that context it was opined that this question could not be treated as a
pure question of fact as it involved consideration of the tests which should
be applied in determining whether a particular unit is part of a bigger
establishment. It was, thus, said that "indeed, it is true that for the
application of the tests certain preliminary facts must be found; but the
final conclusion to be drawn therefrom is not a mere question of fact."
31. Elucidating the matter further, qua the problem of not having
really specific tests, it was observed in para 11 that there were several
tests which were required to be resorted to especially where the
establishments were in different locations. This paragraph has already
been extracted by us before.
32. On the facts of the case, it was stated that SVPL was
incorporated on 20.6.1984 and entered into the agreement in question on
1.10.1985. It claimed exemption on 31.12.1986 and has been making
provident fund contributions from 24.2.1988. Though it was not disputed
that the said Company, for the relevant period of time, was carrying out
exclusive work only for BCCL, Mumbai, it was pleaded that there was
no commonality of directors and shareholders of the two companies, nor
was there a cross shareholding, an aspect for which charts have been
filed. The subsequent fact was also that, at some stage, it got merged
with another company, i.e., M/s. Raghuvar India Limited.
33. Now examining the agreement with BCCL, Mumbai, dated
1.10.1985, BCCL, Mumbai, having commenced publication of the Jaipur
edition of the two newspapers is stated to have approached SVPL for
printing the said newspapers on a contract basis. SVPL was to employ
the necessary personnel for carrying out various tasks and had to print
10 (supra)
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the newspapers. The remuneration was payable by BCCL, Mumbai to
SVPL at Rs.24,000/- per day, for the two daily newspapers.